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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
--------------------------------
(Mark One)
|x| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from . . . . . . . . . . to . . . . . . . . . .
Commission File Number 0-14786
AUTOINFO, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-2867481
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 Route 208
Fair Lawn, New Jersey 07410
(Address of principal executive offices)
Registrant's telephone number, including area code: (201) 703-0500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock,
Par value $.01
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|
As of March 24, 1997, 8,018,752 shares of the Registrant's common stock were
outstanding. The aggregate market value of the common stock (based upon the
closing price on the Nasdaq National Market System on March 24, 1997 of $2.375)
of the Registrant held by non-affiliates of the Registrant at that date was
approximately $17,050,000.
DOCUMENTS INCORPORATED BY REFERENCE
Part III - Portions of the Registrant's Proxy Statement relating to its 1997
Annual Meeting are incorporated herein by reference.
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PART 1
Item 1: BUSINESS
FORWARD-LOOKING STATEMENTS
Certain statements made in this Annual Report on Form 10-K are "forward-looking
statements" (within the meaning of the Private Securities Litigation Reform Act
of 1995) regarding the plans and objectives of management for future operations.
Such statements involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. The forward-looking
statements included herein are based on current expectations that involve
numerous risks and uncertainties. The Company's plans and objectives are based,
in part, on assumptions involving the continued expansion of business.
Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that its assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the forward-looking statements included in this
Report will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein particularly in view
of the Company's early stage operations, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
General
AutoInfo, Inc. (the "Company") is a consumer finance company specializing
in the business of purchasing, selling and servicing retail automobile
installment contracts ("Contracts") originated by dealers ("Dealers") in the
sale of new and used automobiles, light trucks and passenger vans. Through its
purchases, the Company provides financing to borrowers with limited credit
histories, lower than average incomes or past credit problems ("Non-Prime
Borrowers"). The Company serves as an alternative source of financing for
Dealers, allowing sales to customers who otherwise might not be able to obtain
financing from more traditional sources of automobile financing such as banks,
credit unions or finance companies affiliated with major automobile
manufacturers. The Company employs a regional center approach, as compared to
the branch network or centralized approach utilized by a number of other
non-prime finance companies. Management believes that this approach provides a
necessary presence in its markets, thereby maximizing the Company's ability to
service its dealers and monitor its loan portfolio. In February 1997, the
Company unified its operating centers under the name CarLoanCo. All future
operating centers will operate under this banner.
In December 1995, the Company entered the non-prime automobile finance
market (the "Non-Prime Market") through the acquisition, by a wholly-owned
subsidiary, of the operating assets of Falk Finance Company ("FFC"), a Norfolk,
Virginia based non-prime automobile consumer finance company. During 1996, the
Company expanded on the FFC platform in establishing its Mid-Atlantic regional
service center which services dealers in Delaware, Georgia, Maryland, North
Carolina, South Carolina and Virginia, providing a complete range of automobile
consumer finance services including sales and marketing, credit, servicing and
collection.
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In July 1996, the Company commenced operations of its Northeast Regional
Center in Norwalk, Connecticut to provide its complete range of services to
dealers in the Northeast. This center is presently servicing dealers in
Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, Rhode Island and
Vermont.
The Company's business objective is to maximize the volume of loans it
purchases, securitizes and services, while adhering to its underwriting
guidelines, through the expansion of its regional centers. To achieve this
objective, the Company employs the following strategies:
Emphasis on Dealer Relationships--The Company believes that it is crucial to
identify and meet dealers' financing needs. When presented with a loan
application, the Company attempts to notify the dealer within one hour or less
whether it will approve the automobile loan for purchase from the dealer. The
Company's business hours generally coincide with those of the dealership and, in
some cases, the Company will provide loan processing on the dealer's premises
during dealer promotions. The Company also provides dealers with flexibility in
developing loan structures to accommodate the needs of their customers, such as
extended payment terms or low down-payment requirements when credit quality is
deemed adequate. The Company, through its sales force, maintains frequent
contacts with dealers and recommends service enhancements when warranted. By
employing consistent loan underwriting and purchasing guidelines, the Company
believes that it provides dealers with a reliable and consistent source of
financing.
Expansion of Dealer Network--The Company is constantly undertaking marketing
activities with a view towards expanding its dealer network. These efforts
include offering innovative products and services to its dealer network, such as
CarLoanNet, the interactive internet loan application service recently
introduced by the Company.
Maintenance of Underwriting and Loan Purchasing Guidelines--The Company has
developed a proprietary credit scoring system designed to maintain rigorous
underwriting guidelines for its loan processing operations. The Company's credit
approval system monitors many evaluation criteria, including debt-to-income,
payment-to-income, loan-to-value, bankruptcy score, credit score and stability
factors, and each loan application is reviewed by one of the Company's credit
specialists at a regional center to determine whether the loan should be
approved. To ensure the integrity of the credit approval system, management
tracks on a daily basis the approval rates and delinquency and loss rates.
Funding and Liquidity through Warehousing and Securitizations--The Company funds
the acquisition of automobile loans principally through its warehouse facility.
At December 31, 1996, the Company had a warehouse facility in place with an
aggregate capacity of $100 million, of which approximately $82 million was
available. The Company securitizes the loans purchased by it as asset-backed
securities and uses such securitizations as a cost competitive source of capital
compared to traditional sources of corporate debt financing. Securitization
enables the Company to finance automobile loans on a regular basis, while
retaining the right to receive future servicing fees and excess cash flows, and
to use the proceeds from such securitizations to fund the purchase of additional
automobile loans. The Company securitized $40 million in automobile loans during
1996.
Expansion of Products and Services - The Company is constantly evaluating new
and improved services to offer to its Dealer network to both maximize revenues
and achieve further operating efficiencies.
Expansion of Regional Presence - During 1996, the Company expanded its regional
presence from the Mid-Atlantic region to also include the Northeast region. In
furtherance of its regional approach, the Company will continue to evaluate
further regional expansion. The Company has no currently pending plans for any
additional centers.
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The Non-Prime Auto Finance Industry
The automobile finance industry was estimated to be in excess of $370
billion in 1995 (1996 data is not yet available). The market is generally
divided by the types of automobiles sold (new versus used) and the credit
worthiness of the borrower. Generally, banks, savings and loan associations,
credit unions, large independent finance companies and captive finance companies
such as Ford Motor Credit, GMAC, Chrysler Credit tend to provide financing for
new automobiles purchased by prime customers.
The non-prime segment of this overall market is believed to be
approximately $95 billion and is comprised of both private and publicly traded
companies providing credit availability to consumers who are higher financial
risks and who have limited access to traditional financing sources. These
independent finance companies tend to provide financing for used automobiles
sold through new and used automobile dealerships at higher interest rates
commensurate with the higher risk associated with the non-prime consumer.
The Non-Prime Market has been fueled by the significant increase in the
sale of used automobiles. In 1995, used car sales exceeded 43 million units on
sustained compound annual growth rates of 12 - 13%. This increase is the results
of a number of factors including (i) the high average price of a new car of
$19,819 compared to $8,530 for a used car, (ii) the increased availability of
newer late model used automobiles related, to some extent, to the trend towards
leasing rather than buying of new vehicles, and (iii) availability of financing
alternatives as provided by the growth in the number of independent finance
companies servicing the non-prime segment of the market.
Operations
Dealer Contract Purchase Programs
As of March 15, 1997, the Company was a party to agreements ("Dealer
Agreements") with approximately 1,100 Dealers in 13 states. Most of these
Dealers regularly submit Contracts to the Company for purchase, although such
Dealers are under no obligation to submit any Contracts to the Company, nor is
the Company obligated to purchase any Contracts. For the twelve months ended
December 31, 1996, substantially all of the Contracts purchased by the Company
consisted of financing for used cars.
When a retail automobile buyer elects to obtain financing from a Dealer, an
application is taken for submission by the Dealer to its financing sources.
Typically, a Dealer will submit the buyer's application to more than one
financing source for review. The Company believes the Dealer's decision to
finance the automobile purchase with the Company, rather than other financing
sources, is based primarily upon an analysis of the discounted purchase price
offered for the Contract, the timeliness of response, the cash resources of the
financing source, and any conditions to purchase.
The Company receives loan applications by fax or through CarLoanNet, a state of
the art internet service developed by the Company. Upon receipt of a loan
application from a Dealer, the Company's credit personnel order a credit bureau
report on the applicant to document the buyer's credit history. If, upon review
by a Company credit officer, it is determined that the application meets the
Company's underwriting criteria, a decision is made to purchase the Contract.
When presented with a loan application, the Company attempts to notify the
Dealer within one hour as to whether it intends to purchase such Contract. The
Company buys Contracts directly from Dealers and does not make loans directly to
purchasers of automobiles.
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The Company currently purchases Contracts from Dealers at discounts up to 20% of
the total amount financed under the Contracts, depending on the perceived credit
risk of the Contract. Discounts averaged 14.7% for the twelve months ended
December 31, 1996.
The Company attempts to control Dealer misrepresentation by carefully screening
the Contracts it purchases, by establishing and maintaining professional
business relationships with Dealers, and by including certain representations
and warranties by the Dealer in the Dealer Agreement. Pursuant to the Dealer
Agreement, the Company may require the Dealer to repurchase any Contract in the
event that the Dealer breaches its representations or warranties. There can be
no assurance, however, that any Dealer will have the financial resources to
satisfy its repurchase obligations to the Company.
In conjunction with the acquisition of FFC, the Company entered into a ten year
agreement with Charlie Falk Auto Wholesale, Incorporated ("CFAW"). This
agreement provided and established the basis for conducting business and the
criteria under which the Company purchased contracts from CFAW. Effective
December 31, 1996, the Company and CFAW mutually agreed to and entered into a
termination agreement which, among other provisions, provides for the Company to
continue to purchase contracts which meet established underwriting criteria only
through March 31, 1997. In 1996, approximately 38% of all contracts funded by
the Company were purchased from CFAW.
Contract Purchase Criteria
To be eligible for purchase by the Company, a Contract must have been originated
by a Dealer that has entered into a Dealer Agreement to sell Contracts to the
Company. The Contracts must be secured by a first priority lien on a new or used
automobile, light truck or passenger van and must meet the Company's
underwriting criteria. In addition, each Contract requires the borrower to
maintain physical damage insurance covering the financed vehicle and naming the
Company as a loss payee. The Company or any purchaser of the Contract from the
Company may, nonetheless, suffer a loss upon theft or physical damage of any
financed vehicle if the borrower fails to maintain insurance as required by the
Contract or is unable to pay for repairs to or replacement of the vehicle or is
otherwise unable to fulfill its obligations under the Contract.
The Company believes that its objective underwriting criteria enable it to
evaluate effectively the creditworthiness of Non-Prime Borrowers and the
adequacy of the financed vehicle as security for a Contract. These criteria
include standards for price, term, amount of down payment, installment payment
and add-on interest rate, mileage, age and type of vehicle, amount of the loan
in relation to the value of the vehicle, borrower's income level, job and
residence stability, credit history and debt serviceability, and other factors.
These criteria are subject to change from time to time as circumstances may
warrant. Upon receiving this information with the borrower's application, the
Company's credit department will verify the borrower's employment, residency,
insurance and credit information provided by the borrower by contacting various
parties noted on the borrower's application, credit information bureaus and
other sources. Further, the Company conducts a direct telephonic interview with
the prospective borrower. The Company typically completes its credit review and
consummates its purchase of a Contract within 48 hours of a complete financing
package from the Dealer.
All of the Contracts purchased by the Company are self-amortizing and provide
for level payments over the term of the Contract. For Contracts purchased by the
Company in the twelve months ended December 31, 1996, the retail purchase price
of the related automobiles averaged $10,700. Contracts financing such purchases
had annual percentage rates of interest ("APRs") averaging 22%. The average
original principal amount financed under Contracts purchased in the twelve
months ended December 31, 1996, was approximately $9,000, with an average
original term of approximately 44 months and an average down payment of 16%.
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All Contracts may be prepaid at any time without penalty. In the event a
borrower elects to prepay a Contract in full, the payoff amount is calculated by
deducting the unearned interest (as determined by the "Rule of 78's" method,
where applicable) from the Contract balance.
Each Contract purchased by the Company prohibits the sale or transfer of the
financed vehicle without the secured party's consent and allows for the
acceleration of the maturity of a Contract upon a sale or transfer without such
consent. In most circumstances, the Company will not consent to a sale or
transfer of a financed vehicle unless the related Contract is prepaid in full.
The Company believes that the most important requirements to succeed in the
Non-Prime Market are the ability to control borrower and Dealer
misrepresentation at the point of origination; the development and consistent
implementation of objective underwriting criteria specifically designed to
evaluate the creditworthiness of Non-Prime Borrowers; and the maintenance of an
active program to monitor performance and collect payments.
Collection Procedures
The Company believes that its ability to monitor performance and collect
payments owed from Non-Prime Borrowers is primarily a function of its collection
approach and support systems. The Company believes that if payment problems are
identified early and the Company's collection staff works closely with borrowers
to address these problems, it is possible to correct many of them before they
deteriorate further. To this end, the Company utilizes pro-active collection
procedures, which include making early and frequent contact with delinquent
borrowers; educating borrowers as to the importance of maintaining good credit;
and employing a consultative and customer service approach to assist the
borrower in meeting his or her obligations, which includes attempting to
identify the underlying causes of delinquency and cure them whenever possible.
In support of its collection activities, the Company maintains a computerized
collection system specifically designed to service automobile installment sale
contracts with Non-Prime Borrowers.
The Company typically attempts to make telephonic contact with delinquent
borrowers on the first day after their monthly payment due date. Upon making
contact with the borrower at his home or workplace the collector then inquires
of the borrower the reason for the delinquency and when the Company can expect
to receive the payment. The collector will attempt to get the borrower to make a
promise for the delinquent payment for a time generally not to exceed one week
from the date of the call. If the borrower makes such a promise, the account is
placed on a pending status and is not contacted until the outcome of the promise
is known. If the payment is made by the promise date and the account is no
longer delinquent, the account is routed out of the collection system. If the
payment is not made, or if the payment is made, but the account remains
delinquent, the account is returned to the collector for subsequent contacts.
If a borrower fails to make or keep promises for payments, or if the borrower is
uncooperative or attempts to evade contact or hide the vehicle, a supervisor
will review the collection activity relating to the account to determine if
repossession of the vehicle is warranted. Generally, a decision will occur
between the 45th and 60th day past the borrower's payment due date, but could
occur sooner or later, depending on the specific circumstances. If a decision to
repossess is made by a supervisor, such assignment is given to one of many
licensed, bonded repossession agents used by the Company. When the vehicle is
recovered, the repossession agent delivers it to a wholesale auto auction where
it is kept until it is liquidated, usually within 30 days of the repossession.
Liquidation proceeds are applied to the borrower's outstanding obligation under
the Contract and the borrower is advised of his obligation to pay
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any deficiency balance that remains. The Company uses all practical means
available to collect deficiency balances, including filing for judgments against
borrowers where applicable.
Management Information Systems
The Company maintains sophisticated data processing support and management
information systems. Finance Manager, the Company's custom designed proprietary
software managment system, is updated and maintained by the Company's MIS
Department based in Norfolk, Virginia.
Financing Activity
Warehouse Facilities. The Company uses warehouse facilities with financial
institutions to finance its purchase of loans on a short-term basis pending
securitization. At December 31, 1996, the Company had an aggregate borrowing
capacity of $100 million under a warehouse facility, of which $82 million was
available. The facility provides for borrowing at the LIBOR rate plus 300 basis
points. Amounts outstanding under the warehouse facility are secured by the
automobile loans pledged to the lender as collateral for borrowings under the
facility.
Securitization of Loans. The Company pursues a strategy of securitizing
loans through the sale of asset-backed securities. Securitization is used by
companies as a cost-competitive source of capital compared to traditional
corporate debt financing alternatives. The Company utilizes the net proceeds
from securitizations to purchase additional automobile loans and to pay down
outstanding warehouse facilities. The Company securitized approximately $40
million in automobile loans during 1996.
In a securitization, the Company (through its special purpose wholly-owned
subsidiary, AutoInfo Receivables Company, a Delaware corporation ("ARC")),
transfers automobile loans to newly-formed securitization trusts, which issue
one or more classes of asset-backed securities. The asset-backed securities are
simultaneously sold to investors (except for certain subordinated classes of
securities which may be retained by the Company). Each month, collections of
principal and interest on the automobile loans are used by the trustee to pay
the holders of the related asset-backed securities, to fund spread accounts as a
source of cash to cover shortfalls in collections, if any, and to pay expenses.
The Company continues to act as the servicer of the automobile loans held by the
trust in return for a monthly fee.
To improve the cost effectiveness of its securitization program, the
Company arranges for credit enhancement to achieve a desired credit rating on
the asset-backed securities issued. The credit enhancement for securitizations
generally take the form of financial guaranty insurance policies issued by MBIA
(the "Credit Enhancer"), which insures payments of principal and interest due on
the asset-backed securities.
The spread account for any securitization is generally funded with the
interest collected on the loans that exceeds the sum of the interest payable to
holders of asset-backed securities, the monthly servicing fee and certain other
amounts. Funds are withdrawn from the spread account to cover any shortfalls in
amounts payable on insured asset-backed securities or to reimburse the Credit
Enhancer for draws on its financial guaranty insurance policy. In addition, the
funds on deposit in any spread account for a securitization may be withdrawn to
cover shortfalls in collections or to reimburse the Credit Enhancer for draws on
policies issued in other securitizations. ARC is entitled to receive amounts
from the spread accounts to the extent the amounts deposited exceed
predetermined required minimum levels. The spread accounts cannot be accessed by
the Company or ARC until such levels have been reached or with the consent of
the Credit Enhancer. After such levels are reached, excess cash is will be
distributed to ARC and then transferred to the Company.
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Sales and Marketing
The Company markets its dealer financing programs through a staff of 15 trained
field sales representatives. The main duties of a field representative are to
solicit and enroll new dealers into the program, train the dealers regarding the
specific aspect of the Company's loan acquisition program, encourage additional
contract volume and provide a direct hands on customer contact on a regular
basis. Presently, the Company concentrates its marketing efforts in the
MidAtlantic and Northeast regions.
Competition
The non-prime automotive consumer finance market is both highly competitive and
fragmented. As such, the Company encounters competition in both the MidAtlantic
and Northeastern markets from other local, regional and national consumer
finance companies, many of whom have raised significant capital through equity
offerings, securitization of their loan portfolio and warehouse lines of credit
during the past several years. Other more traditional finance sources, such as
banks and captive automobile finance companies, have not generally serviced the
non-prime segment of the market. Within the last year, several large companies,
including Ford Motor Company, have announced their entry into the non-prime
marketplace. The major competitive factors leading to the dealer's choice of
financing source are the consistency of the application of underwriting
guidelines, the competitiveness of financing terms and dealer fees, the
timeliness of application approval and funding and the financial stability of
the source. The Company believes that it competes favorably on these factors.
Regulation
The Company's business is subject to regulations and licensing under various
federal, state and local statutes and regulations. The Company maintains all
licenses necessary for the lawful conduct of its business and operations. The
Company is not licensed to make loans directly to borrowers. Several federal and
state consumer protection laws, including the Federal Truth-In-Lending Act, the
Federal Equal Credit Opportunity Act, the Federal Fair Debt Collection Practices
Act and the Federal Trade Commission Act, regulate the extension of credit in
consumer credit transactions. These laws mandate certain disclosures with
respect to finance charges on Contracts and impose certain other restrictions on
Dealers. In addition, laws in a number of states impose limitations on the
amount of finance charges that may be charged by Dealers on credit sales. The so
called Lemon Laws enacted by the federal government and various states provide
certain rights to purchasers with respect to motor vehicles that fail to satisfy
express warrantees. The application of Lemon Laws or violation of such other
federal and state laws may give rise to a claim or defense of a borrower against
a Dealer and its assignees, including the Company and purchasers of Contracts
from the Company. The Dealer Agreement contains representations by the Dealer
that, as of the date of assignment of Contracts, no such claims or defenses have
been asserted or threatened with respect to the Contracts and that all
requirements of such federal and state laws have been complied with in all
material respects. Although a Dealer would be obligated to repurchase Contracts
that involve a breach of such warranty, there can be no assurance that the
Dealer will have the financial resources to satisfy its repurchase obligations
to the Company. Certain of these laws also regulate the Company's loan servicing
activities, including its methods of collection. Although the Company believes
that it is currently in compliance with applicable statutes and regulations,
there can be no assurance that the Company will be able to maintain such
compliance. The failure to comply with such statutes and regulations could have
a material adverse effect upon the Company. Furthermore, the adoption of
additional statutes and regulations, changes in the interpretation and
enforcement of current statutes and regulations or the expansion of the
Company's business into jurisdictions that have adopted more stringent
regulatory requirements than those in which the Company currently conducts
business could have a material adverse effect upon the Company.
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Upon the purchase of Contracts by the Company, the original Contracts and
related title documents for the financed vehicles are delivered by the selling
Dealers to the Company.
The Dealer Agreement and related assignment contain representations and
warrantees by the Dealer that an application for state registration of each
financed vehicle, naming the Company as secured party with respect to the
vehicle, was effected at the date of sale of the related Contract to the
Company, and that all necessary steps have been taken to obtain a perfected
first priority security interest in each financed vehicle in favor of the
Company under the laws of the state in which the financed vehicle is registered.
If a Dealer or the Company, because of clerical error or otherwise, has failed
to take such action in a timely manner, or to maintain such interest with
respect to a financed vehicle, neither the Company nor any purchaser of the
related Contract from the Company would have a perfected security interest in
the financed vehicle and its security interest may be subordinate to the
interest of, among others, subsequent purchasers of the financed vehicle,
holders of perfected security interests and a trustee in bankruptcy of the
borrower. The security interest of the Company or the purchaser of a Contract
may also be subordinate to the interests of third parties if the interest is not
perfected due to administrative error by state recording officials. Moreover,
fraud or forgery by the borrower could render a Contract unenforceable against
third parties. In such events, the Company could be required by the purchaser to
repurchase the Contract. In the event the Company is required to repurchase a
Contract, it will generally have recourse against the Dealer from which it
purchased the Contract. This recourse will be unsecured except for a lien on the
vehicle covered by the Contract, and there can be no assurance that any Dealer
will have the financial resources to satisfy its repurchase obligations to the
Company. Subject to any recourse against Dealers, the Company will bear any loss
on repossession and resale of vehicles financed under Contracts repurchased by
it from investors.
Under the laws of many states, liens for storage and repairs performed on a
vehicle and for unpaid taxes take priority over a perfected security interest in
the vehicle. Pursuant to its securitization purchase commitments, the Company
generally warrants that, to the best of the Company's knowledge, no such liens
or claims are pending or threatened with respect to a financed vehicle, which
may be or become prior to or equal with the lien of the related Contracts. In
the event that any of the Company's representations or warranties proves to be
incorrect, the trust or the investor would be entitled to require the Company to
repurchase the Contract relating to such financed vehicle.
The Company, on behalf of purchasers of Contracts, may take action to enforce
the security interest in financed vehicles with respect to any related Contracts
in default by repossession and resale of the financed vehicles. The UCC and
other state laws regulate repossession sales by requiring that the secured party
provide the borrower with reasonable notice of the date, time and place of any
public sale of the collateral, the date after which any private sale of the
collateral may be held and of the borrower's right to redeem the financed
vehicle prior to any such sale and by providing that any such sale be conducted
in a commercially reasonable manner. Financed vehicles repossessed generally are
resold by the Company through unaffiliated wholesale automobile networks or
auctions, which are attended principally by used car dealers.
In the event of a repossession and resale of a financed vehicle, after payment
of outstanding liens for storage, repairs and unpaid taxes, to the extent those
liens take priority over the Company's security interest, and after payment of
the reasonable costs of retaking, holding and selling the vehicle, the secured
party would be entitled to be paid the full outstanding balance of the Contract
out of the sale proceeds before payments are made to the holders of junior
security interests in the financed vehicles, to
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unsecured creditors of the borrower, or, thereafter, to the borrower. Under the
UCC and other laws applicable in most states, a creditor is entitled to obtain a
deficiency judgment from a borrower for any deficiency on repossession and
resale of the motor vehicle securing the unpaid balance of such borrower's motor
vehicle loan. However, some states impose prohibitions or limitations on
deficiency judgments. If a deficiency judgment were granted, the judgment would
be a personal judgment against the borrower for the shortfall, and a defaulting
borrower may often have very little capital or few sources of income available
following repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment against a borrower or, if one is obtained, it may be settled
at a significant discount.
Patents, Trademarks and Copyrights
"AUTOINFO" is a registered trademark and service mark of the Company.
Employees
The Company currently has 125 full-time employees. None of the Company's
employees are represented by a labor union. The Company considers its
relationship with its employees to be good.
Item 2: PROPERTIES
The Company's MidAtlantic Regional Center leases approximately 8,000 square feet
of space at 863 Glenrock Road, Norfolk, Virginia. The lease runs through April
2001 and provides for an annual rent of $96,000. The Company's Northeast
Regional Center leases approximately 10,000 square feet of space at 444 Westport
Avenue, Norwalk, Connecticut. The lease runs through May 2001 and provides for
an annual rental of $107,500. The Company maintains an operational facility of
approximately 800 square feet at 6818 Grover Street, Omaha, Nebraska. The lease
for such facility runs through June 1997 at an annual rent of $10,000. The
Company rents approximately 2,900 square feet of space at 1600 Route 208, Fair
Lawn, New Jersey where it maintains its executive offices. The lease runs
through November 1997 at an annual rental of approximately $44,000, subject to
certain rent escalation provisions. The Company believes that its present
facilities are suitable and adequate for its reasonably foreseeable growth.
Item 3. LEGAL PROCEEDINGS
The Company is not party to any material legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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Part II
Item 5. PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the over-the-counter market and is
quoted through the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") on the National Market System under the symbol AUTO.
The following table sets forth, for the periods indicated, the high and low
closing bid quotations per share for the Company's Common Stock as reported by
NASDAQ.
High Low
-------- --------
Year ended December 31, 1995
- --------------------------------------
First quarter 3 59/64 2 3/8
Second quarter 3 13/16 3 1/16
Third quarter 3 1/2 3 1/16
Fourth quarter 3 1/2 3
High Low
-------- --------
Year Ended December 31, 1996
- --------------------------------------
First quarter 3 1/2 3
Second quarter 3 7/16 3 1/16
Third quarter 3 2
Fourth quarter 3 7/8 2 3/4
As of March 24, 1997, the closing bid price per share for the Company's Common
Stock, as reported by NASDAQ was $2.375. As of March 24, 1997, the Company had
approximately 400 stockholders of record.
Dividend Policy
The Company has never declared or paid a cash dividend on its Common Stock. It
has been the policy of the Company's Board of Directors to retain all available
funds to finance the development and growth of the Company's business. The
payment of cash dividends in the future will be dependent upon the earnings and
financial requirements of the Company and other factors deemed relevant by the
Board of Directors.
11
<PAGE>
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following is a summary of selected consolidated financial data relating to
the Company. This summary has been restated to present the businesses sold as
discontinued operations.
<TABLE>
<CAPTION>
Seven
months
Year ended ended
December December Year ended
31, 31, May 31,
------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue $ 13,185 $ 2,232 $ 1,599 $ 2,075 $ 1,903
Operating Expenses (12,092) (1,847) (4,009) (2,283) (2,241)
Provision for credit losses (5,251) -- -- -- --
Unusual item - impairment of long-
lived assets and additional credit
losses on acquired automobile
receivables (19,293) -- -- -- -
-------- -------- -------- -------- --------
Income (loss) from continuing
operations before income tax
benefit (23,451) 385 (2,410) (208) (338)
Benefit from income taxes (4,352) (176) (332) (65) (121)
-------- -------- -------- -------- --------
Income (loss) from continuing
operations (19,099) 561 (2,078) (143) (217)
Income (loss) from discontinued
operations -- (28) 1,519 2,164 1,953
Gain on sale of discontinued
operations -- 296 8,885 -- --
-------- -------- -------- -------- --------
Net income (loss) $(19,099) $829 $ 8,326 $ 2,021 $ 1,736
-------- -------- -------- -------- --------
Net income (loss) per share:
From continuing operations $ (2.41) $ .07 $ (.28) $ (.02) $ (.03)
From discontinued operations -- -- .21 .29 .27
From gain on sale of discontinued
operations -- .04 1.19 -- --
-------- -------- -------- -------- --------
Net income (loss) per share $ (2.41) $ .11 $ 1.12 $ .27 $ .24
-------- -------- -------- -------- --------
Balance Sheet Data:
Net automobile receivables after
allowance for credit losses $ 45,814 $ 25,074 $ -- $ -- $ --
Cash and short term investments 9,199 24,871 8,836 7,509 3,473
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Total assets 74,451 65,795 42,357 26,387 19,975
Total debt 60,405 32,746 4,161 4,784 216
Retained earnings (deficit) (5,071) 14,029 13,199 4,873 2,852
Stockholders' equity 12,327 31,018 30,121 20,857 18,625
</TABLE>
13
<PAGE>
Item #7: Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company, since December 1995, is a specialized consumer finance company that
acquires and services automobile receivables from automobile dealers selling new
and used vehicles to non-prime customers.
Results of Operations
On April 1, 1995, the Company consummated the sale of certain assets, net
of certain liabilities, constituting the operating assets of the Orion Network,
Compass Network, Checkmate Computer Systems, and Insurance Parts Locator
businesses. On July 20, 1995, the Company consummated the sale of the operating
assets of its insurance inspection services business. The Results of Operations
of these businesses have been classified as discontinued operations.
On December 6, 1995, the Company, through a wholly owned subsidiary,
acquired the operating assets of FALK Finance Company (FFC), a Norfolk, Virginia
based specialized financial services company. As a result of this acquisition,
the Company's primary business is to purchase non-prime automobile receivables
from new and used automobile dealers. The Company services these dealers by
providing specialized financing programs for buyers who typically have impaired
credit histories and are unable to access traditional sources of available
consumer credit.
On February 28, 1996, the Company made an election to change its fiscal
year-end from May 31 to December 31. The Company believes this change provides
shareholders with information on a basis more comparable to other public
entities in the specialized automobile finance industry.
The Company's continuing operations consist of its non-prime automobile
finance business and its long distance telephone services business. Except as
otherwise noted, the following discussion of the results of operations is with
respect to the Company's continuing operations.
For the Year Ended December 31, 1996
The Company entered the non-prime automobile finance business in December
1995. The results of operations for the short year (seven months) ended December
31, 1995 include the operation of the Company's non-prime business for only one
month. Certain information for the full year ended December 31, 1996 is not
comparable to the prior year.
Revenues
Revenues for the year ended December 31, 1996 were derived from the
non-prime automobile finance business ($11,789,000), the long distance telephone
service business ($512,000) and investment income ($884,000), respectively.
Net Interest Income on Automobile Receivables
The Company's principal revenue source is the net interest income, or net
spread, earned on its automobile receivables. This net spread is the
differential between interest income received on loans receivable and the
interest expense on related loans payable. The following table summarizes the
pertinent data on the Company's automobile receivables portfolio as of and for
the year ended December 31, 1996 and the seven months ended December 31, 1995:
14
<PAGE>
1996 1995(2)
----------- -----------
Average loans receivable $45,394,000 $31,618,000
----------- -----------
Average debt 37,629,000 30,906,000
----------- -----------
Interest revenue $11,167,000 $ 741,000
Interest expense 3,839,000 284,000
----------- -----------
Net interest income $ 7,328,000 $ 457,000
----------- -----------
Yield on loans 24.6% 28.1%
Cost of funds 10.2% 11.0%
----------- -----------
Net interest spread 14.4% 17.1%
----------- -----------
Net interest margin (1) 16.3% 17.3%
----------- -----------
(1) Net interest margin is net interest income divided by average loans
outstanding.
(2) Average amounts are for the period from December 6, 1995 through
December 31, 1995.
Costs and Expenses
Interest expense for the year ended December 31, 1996 of $3,990,000 was
related to the non-prime automobile financing business and the debt outstanding
under the Company's senior credit facilities ($18.1 million as of December 31,
1996), securitized notes ($31.6 million as of December 31, 1996) and
subordinated debt ($10.2 million as of December 31, 1996).
Operating expenses for the year ended December 31, 1996 of $6,913,000 were
attributable to the Company's non-prime automobile financing business ($5.5
million), the long distance telephone service business ($.4 million) and
corporate expenses ($1.0 million).
Depreciation and amortization expense for the year ended December 31, 1996
of $1,189,000 was primarily attributable to the amortization of goodwill and
other intangible assets associated with the acquisition of FFC in December 1995.
Approximately $784,000 of this amortization was related to the goodwill and
other intangibles written off as of December 31, 1996.
Provisions for Credit Losses and Impairment of Long-Lived Assets
The acquisition of FFC in December 1995 included a portfolio of non-prime
automobile receivables of approximately $31 million of which approximately 80%
had been acquired by FFC from Charlie Falk's Auto Wholesalers, Incorporated
(CFAW"). In addition to the tangible assets acquired, the Company entered into a
Non-Compete Agreement and a 10 year Purchase Agreement with CFAW which, among
other provisions, provided for the continued purchase of automobile receivables
based upon established underwriting criteria at the sole discretion and option
of the Company. During the year ended December 31, 1996, the quality of the
automobile receivables acquired from CFAW, both prior to the acquisition date
and subsequent thereto, as evidenced by the number of repossessions and the
charge-off losses incurred, came into question. The Company determined to cease
acquiring automobile receivables from CFAW and accordingly, effective December
31, 1996, the Company entered into a Modification and Termination Agreement with
CFAW.
As a result of this action and other factors, the Company has deemed a
significant portion of the goodwill associated with the acquisition of FFC as
well as the Non-Compete and Purchase Agreements are of no
15
<PAGE>
continuing value and, accordingly, has taken a charge against operations as of
December 31, 1996 of $11,193,000. Furthermore, the Company recorded additional
credit losses of $8,100,000 on the acquired automobile receivables and has
determined that an additional provision for losses of $5,251,000 is necessary to
provide for the anticipated credit losses associated with automobile receivables
purchased from CFAW and other dealers during 1996, respectively. These are
non-cash charges to income which do not have a direct adverse effect on the
Company's liquidity.
Loss from Continuing Operations and Income Tax Benefit
The loss from continuing operations before income tax benefit of
$23,452,000 is primarily attributable to the write-off of goodwill and other
intangible assets ($11.2 million), the provision for credit losses on the
acquired portfolio ($8.1 million), the current provision for credit losses ($5.3
million) and the costs associated with the start-up of the Company's Northeast
regional center ($.8 million). For the fiscal years ended May 31, 1995, 1994 and
1993, the Company incurred and paid federal tax liabilities of $7,005,000,
$873,000 and $783,000, respectively. As a result of losses incurred, the
Company has recorded an income tax benefit of $4,352,000 related to anticipated
carryback claims for tax years ended December 31, 1996 and prior. No additional
benefit has been recorded for additional carryback available for tax losses
anticipated subsequent to December 31, 1996 for which the provision for credit
losses has been recognized for the year ended December 31, 1996.
Automobile Receivables
The following table provides information regarding the Company's allowance
for credit losses as of December 31, 1996 and 1995:
1996 1995
--------------- ---------------
Allowance for credit losses $ 15,725,000 $ 6,818,000
Percentage of outstanding automobile 25.5% 21.3%
receivables
The following table summarizes the Company's delinquent accounts that were
more than 60 days delinquent as of December 31, 1996 and 1995:
1996 1996 1995 1995
------------- --------- ------------ -------
Amount % Amount %
------------- --------- ------------ -------
60 to 89 days delinquent $3,290,000 4.1% $2,071,000 4.7%
90 days or more delinquent 1,739,000 2.2% 1,387,000 3.1%
Total delinquent loans $5,029,000 6.3% $3,458,000 7.8%
For the Seven Months Ended December 31, 1995
On February 28, 1996, the Company elected to change its fiscal year end to
December 31. This decision is directly related to the acquisition of FFC and the
entry by the Company into the non-prime automobile finance industry. It is the
belief of management that the ability to compare the performance of the Company
against numerous other publicly traded non-prime automobile finance companies
which report the results of operations on a calendar year will provide for more
meaningful dissemination of financial information and is in the best interest of
the public and the Company's shareholders.
16
<PAGE>
Operations for the seven months ended December 31, 1995 include the
operating results of the Company's non-prime auto finance business since
December 6, 1995, the acquisition date.
Revenues
Revenues of $2,232,000 for the seven month period ended December 31, 1995
were derived from the non-prime auto finance business for the month of December
($772,000), the Company's long distance telephone services business ($440,000)
and investment income ($1,020,000).
Costs and Expenses
Interest expense for the seven month period ended December 31, 1995 was
$416,000 and relates to the debt assumed relating to the acquisition of FFC in
December 1995 of approximately $34,000,000 and to the $4,000,000 subordinated
notes issued by the Company in January 1994 and notes payable issued in
connection with an acquisition in January 1994. In September, 1995, the Company
elected to prepay $2,000,000 of the subordinated notes.
Operating expenses for the seven month period ended December 31, 1995 were
$1,346,000 and consisted primarily of corporate office costs and the operating
expenses of the non-prime auto finance business acquired in December 1995.
Depreciation and amortization expense for the seven month period ended
December 31, 1995 was $85,000 and consisted primarily of the amortization of
goodwill and other intangible assets associated with the acquisition of FFC in
December 1995.
Income from Continuing Operations and Income Tax Benefit
Income from continuing operations before taxes for the seven month period
ended December 31, 1995 was $385,000. The income tax benefit for the seven month
period ended December 31, 1995 was $176,000. The Company recorded a tax benefit
as a result of a substantial portion of its investment income being derived from
instruments exempt from federal taxation.
Loss from Discontinued Operations
Loss from discontinued operations for the seven month period ended
December 31, 1995 was $28,000 and was related solely to the operations of the
Company's insurance inspection services business sold in July 1995.
Gain on Sale of Discontinued Operations
The gain on sale of discontinued operations for the period ended December
31, 1995 was $297,000 and was related solely to the sale of the Company's
insurance inspection services business in July 1995.
17
<PAGE>
For the Year Ended May 31, 1995
Revenue
For the year ended May 31, 1995 the Company's revenues were derived from
the sale of long distance telephone services ($1,030,000) and investment income
($568,000). Total revenues for the year ended May 31, 1995 were $1,599,000, a
decrease of 23% or $477,000 compared with total revenues of $2,076,000 for the
prior year. The Company's telephone reseller division experienced a decline in
revenue of $771,000 due primarily to reduced network usage levels and volume
rebates from A T & T ($200,000) received in the prior fiscal year in connection
with the achievement of certain network usage levels. Investment income
increased by $294,000 as a direct result of the investment of the proceeds in
April 1995 from the sale of the assets of the Orion Network, Compass Network,
Checkmate Computer Systems, and Insurance Parts Locator businesses.
Costs and Expenses
Interest expense was $316,000, an increase of $185,000 over $131,000 for
the prior year. This was directly related to the $4,000,000 subordinated notes
issued by the Company in January 1994 and notes payable in connection with an
acquisition in January 1994.
Operating expenses for the year ended May 31, 1995 decreased by 12% to
$1,864,000 from $2,118,000 for the prior year. The decrease was primarily
related to the reduction in direct costs associated with providing the Company's
long distance telephone services and was directly related to the decline in
revenues.
Depreciation and amortization expense for the year ended May 31, 1995
decreased by 25% to $25,000 from $34,000 for the prior year.
Preferred stock investment write-off for the year ended May 31, 1995 was
$1,804,000. As a result of the sale of the Company's businesses providing
computerization and communication services to the automotive industry, the lack
of synergistic business opportunity and the inability to remit management fees
and preferred stock dividends as they became due, the Company has written off
its preferred stock investment in ComputerLogic, Inc.
(See Note 6 to the Consolidated Financial Statements)
Loss from Continuing Operations and Income Tax Benefit
Loss from continuing operations before taxes for the year ended May 31,
1995 was $2,410,000 compared to $207,000 in the prior year, an increase of
$2,203,000. This increase is attributable to the write-off of the Company's
Preferred Stock investment in ComputerLogic, Inc. ($1,804,000) and the impact of
the decline in revenue in the Company's Telephone Reseller Division.
The income tax benefit for the year ended May 31, 1995 was $332,000, or14%
of the loss before income taxes compared to $64,000 or 31% in the prior year.
The decrease in percentage was the result of the write-off of the company's
Preferred Stock investment with no current tax benefit. The net loss from
continuing operations was $2,078,000 for the year ended May 31, 1995 an increase
of $1,935,000 as compared to $143,000 in the prior year.
18
<PAGE>
Income from Discontinued Operations
Income from discontinued operations for the year ended May 31, 1995 was
$1,519,000 as compared to $2,164,000 in the prior year, a decrease of $645,000.
The income for fiscal year 1995 reflects the ten month period up to the date of
sale. In addition, the decrease was caused by lower margins on the sale of
computer systems ($200,000) and the impact of reduced revenues from the sale of
automotive supplies ($60,000).
Gain on Sale of Discontinued Operations
The gain on the sale of discontinued operations for the year ended May 31,
1995 relates solely to the sale of the operating assets of the Company's Orion
Network, Compass Network, Checkmate Computer Systems and Insurance Parts Locator
businesses on April 1, 1995 to ADP Claims Solutions Group, Inc. The gross
proceeds of $30,350,000 in cash resulted in a gain of
$8,886,000 after applicable taxes of $7,659,000.
Trends and Uncertainties
During the year ended May 31, 1995, increased competition had an adverse
impact on the sale of computer systems and the results of operations.
Liquidity and Capital Resources
Since its entry into the Non-Prime Automobile industry in December 1995,
the Company has funded its operations with payments received from automobile
receivables, borrowings under senior credit facilities and the issuance of asset
backed secured notes.
In October 1996, the Company issued $36.3 million of securitized notes
backed by $40.3 million of automobile receivables to a group of institutional
investors in a private placement transaction. These notes were issued in two
classes, $ 34.3 million of 6.53% Class "A" notes rated "AAA" by Standard &
Poor's Rating Group and "Aaa" by Moody's Investors Service and $ 2.0 million of
11.31% Class "B" notes rated "BB" by Standard & Poor's Rating Group. The Class
"A" notes were credit enhanced with an insurance policy issued by MBIA Insurance
Corporation. The proceeds from the securitization were used to fund Cash Reserve
accounts ($5.6 million) and the balance was used to reduce the amount
outstanding under the Company's Senior Credit facility. Among other provisions,
the notes require the maintenance of certain performance standards with respect
to the portfolio of loan contracts securitized and certain overall financial
consideration of the Company as a whole, including not realizing a net loss from
operations in any two consecutive quarters and maintenance of minimum tangible
net worth, as defined, of $7 million. At December 31, 1996, the Company had
approximately $7.7 million of tangible net worth and was in compliance with all
other covenants. The Company expects to maintain compliance with these covenants
through 1997 and beyond.
In December 1996, the Company entered into a financing agreement with a
lender which provides for a $100 million line of credit to be used for the
funding of the acquisition of non-prime automobile receivables. This facility
provides for borrowings at LIBOR plus 300 basis points and replaced the
Company's existing $42 million facility. Among other provisions, this facility
requires the Company to maintain tangible net worth, as defined, of $10 million
and is cancelable in the event of a material adverse change in the Company's
business. At December 31, 1996, the Company had approximately $10.3 million of
tangible net worth and was in compliance with all other covenants. The Company
expects to maintain compliance with these covenants through 1997 and beyond.
The Company has outstanding $10.2 million of subordinated debt. Of this
amount, $8.2 million of 12% notes was included with the liabilities assumed with
the acquisition of Falk Finance Company, Inc. ("FFC") in December 1995 and $2.0
million of 7.55% notes issued by the Company in 1994.
The Company's liquid assets amounted to $9.2 million as of December 31,
1996. In addition, the Company has $6.4 million in Restricted Cash Reserve
accounts established pursuant to the Indenture Agreement executed in conjunction
with the issuance of Securitized Notes issued pursuant to the Private Placement
Memorandum dated October 11, 1996.
19
<PAGE>
The total amount of debt outstanding as of December 31, 1996 and 1995 was
$60.4 million and $32.7 million, respectively. This following table presents the
Company's debt instruments and weighted average interest rates on such
instruments as of December 31, 1996 and 1995, respectively:
1996 1995
---- ----
Weighted Weighted
Average Average
Balance Rate Balance Rate
------- ---- ------- ----
Revolving lines of $18.1 8.75% $20.7 9.75%
credit
Automobile receivable $31.6 6.75% - -
backed notes
Subordinated debt $10.2 11.75% $12.0 12.05%
The Company's ability to continue to acquire automobile receivables as
well as plan for future expansion is directly related to its ability to secure
required capital. The Company has demonstrated the ability to secure warehouse
lines of credit, issue receivable secured notes and obtain subordinated debt.
The Company plans to continue to meet its capital needs through the cash flow
generated from the payment of principal and interest on its outstanding
automobile portfolio, the utilization of its senior credit facility, the
issuance of receivable backed notes and the issuance of subordinated debt
instruments. As of December 31, 1996, $81.9 million is available under the
Company's senior credit facility. The Company believes that it has sufficient
liquid assets and available lines of credit to meet its short and long-term
capital requirements.
The Company is primarily engaged in the acquisition of automobile
receivables. It finances this acquisition program through the utilization of
available lines of credit and other forms of debt. Accordingly, an increase in
the cost of borrowing could adversely impact the results of operations by
impacting the spread between interest earned on existing automobile receivables
and the cost of borrowings which, to some degree, are variable. Inflation and
changing prices had no material impact on revenues or the results of operations
for the year ended December 31, 1996.
Item 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this
Report beginning on page F-1.
Item 9: DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
20
<PAGE>
Part III
Item 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Item 11: EXECUTIVE COMPENSATION
Item 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G, the information required by Part III shall be
incorporated by reference from the Registrant's definitive proxy statement for
the fiscal year ended December 31, 1996 which is to be filed with the Commission
on or before April 30, 1997.
Part IV
Item 14: EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
Financial Statements
The financial statements listed in the accompanying index to financial
statements on Page F-1 are filed as part of this report.
Exhibits
--------
No. 2A Agreement and Plan of Merger between AutoInfo, Inc.
(New York) and AutoInfo, Inc. (Delaware), January 20,
1987 (2)
No. 3A Certificate of Incorporation of the Company. (3)
No. 3B Amended and restated By-Laws of the Company. (11)
No. 4A Specimen Stock Certificate. (4)
No. 4B Rights Agreement, dated as of March 30, 1995 between
AutoInfo, Inc. and American Stock Transfer & Trust
Company, as Rights Agent. (5)
No. 9A Settlement Agreement, dated June 22, 1995, between
AutoInfo, Inc. and Ryback Management Corporation, et
al. (12)
No. 10A 1985 Stock Option Plan. (1)
No. 10B 1986 Stock Option Plan. (3)
No. 10C 1989 Stock Option Plan. (7)
No. 10D 1992 Stock Option Plan. (10)
No. 10E Employment Agreement between AutoInfo, Inc. and Scott
Zecher dated January 1, 1994, as amended by Agreement
dated April 10, 1995. (12)
21
<PAGE>
No. 10F Supplemental Employment Agreement between AutoInfo,
Inc. and Scott Zecher dated as of April 10, 1995.
(12)
No. 10G Employment Agreement between AutoInfo, Inc. and
William Wunderlich dated as of April 10, 1995. (12)
No. 10H Supplemental Employment Agreement between AutoInfo,
Inc. and William Wunderlich as of April 10, 1995.
(12)
No. 10I Form of AutoInfo, Inc. Employee Protection Trust
Agreement dated August 17, 1995. (12)
No. 10J Form of Restricted Stock Grant Agreement between
AutoInfo, Inc. and certain officers, directors and
consultants. (4)
No. 10K Note Agreement dated January 10, 1994 between
AutoInfo, Inc. and certain investors with respect to
issuance of 7.55% Subordinated Notes due January 9,
2000 and Common Stock Purchase Warrants. (6)
No. 10L Asset Purchase Agreement dated January 31, 1995
between ADP Claims Solutions Group, Inc. and
AutoInfo, Inc. (9)
No. 10M Promissory Note and Security and Pledge Agreement
dated April 28, 1995 between AutoInfo, Inc. and Scott
Zecher. (12)
No. 10N Asset Purchase Agreement dated December 6, 1995
between AutoInfo, Inc. and Falk Finance Company,
Inc., et. al. (13)
No. 10O Purchase Agreement dated December 6, 1995 between
AutoInfo Finance of Virginia, Inc. and Charlie Falk's
Auto Wholesaler, Incorporated. (13)
No. 10P Loan Sale Agreement dated October 1, 1996 between
AutoInfo Finance of Virginia, Inc. and AutoInfo
Receivables Company. *
No. 10Q Indenture dated October 1, 1996 among AutoInfo
Receivables Company, as Issuer, Crestar Bank, as
Custodian, and Bankers Trust Company, as Indenture
Trustee. *
No. 10R Servicing Agreement dated as of October 1, 1996 by
and among AutoInfo Finance of Virginia, Inc.,
Servicer, AutoInfo Receivables Company, Issuer,
Bankers Trust, Indenture Trustee and Back-Up Servicer
and Crestar Bank, Custodian. *
No. 10S Common Stock Purchase Warrant Agreement and
Registration Rights Agreement, each dated October 11,
1996, between AutoInfo, Inc. and SunAmerica Life
Insurance Company. *
No. 10T Loan Security and Servicing Agreement, dated as of
December 9, 1996, among AutoInfo Finance of Virginia,
Inc., as Borrower and as Servicer, CarLoanCo.,
22
<PAGE>
Inc., as Borrower and as Servicer, and CS First
Boston Mortgage Capital Corp., as Lender. *
No. 10U Custody Agreement, dated as of December 9, 1996, by
and among CS First Boston Mortgage Capital Corp.,
Lender, AutoInfo Finance of Virginia, Inc., Borrower
and Servicer, CarLoanCo., Inc., Borrower and
Servicer, and Crestar Bank, Custodian. *
No. 10V Common Stock Purchase Warrant Agreement and
Registration Rights Agreement, each dated as of
December 10, 1996, between AutoInfo, Inc. and CS
First Boston Mortgage Capital Corp. *
No. 11A Calculation of earnings per share. *
No. 21 Subsidiaries of the Registrant. *
No. 24A Consent of Arthur Andersen LLP, independent public
accountants. *
No. 27 Financial Data Schedule. *
-----------------------
*Filed as an Exhibit hereto.
(1) This Exhibit was filed as an Exhibit to the Company's Registration
Statement on Form S-18 (File No. 33-3526-NY) and is incorporated herein by
reference.
(2) This Exhibit was filed as an Exhibit to the Company's Current Report on
Form 8-K dated January 6, 1987 and is incorporated herein by reference.
(3) These Exhibits were filed as Exhibits to the Company's definitive proxy
statement dated October 20, 1986 and incorporated herein by reference.
(4) These Exhibits were filed as Exhibits to the Company's Registration
Statement on Form S-1 (File No. 33-15465) and are incorporated herein by
reference.
(5) This Exhibit was filed as an Exhibit to the Company's Registration
Statement on Form 8-A filed April 13, 1995, and is incorporated herein by
reference.
(6) This Exhibit was filed as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended May 31, 1994 and is incorporated herein by
reference.
(7) This Exhibit was filed as an Exhibit to the Company's definitive proxy
statement dated September 25, 1989 and is incorporated herein by
reference.
(8) These Exhibits were filed as Exhibits to the Company's Current Report on
Form 8-K dated December 19, 1991 and are incorporated herein by reference.
(9) This Exhibit was filed as an Exhibit to the Company's definitive proxy
statement dated March 1, 1995 and is incorporated herein by reference.
(10) This Exhibit was filed as an Exhibit to the Company's definitive proxy
statement dated October 2, 1992 and is incorporated herein by reference.
(11) This Exhibit was filed as an Exhibit to the Company's Current Report on
Form 8-K dated March 30, 1995 and is incorporated herein by reference.
(12) This Exhibit was filed as an Exhibit to the Company's Annual Report on
Form 10-K dated May 31, 1995 and is incorporated herein by reference.
(13) This Exhibit was filed as an Exhibit to the Company's Current Report on
Form 8-K dated December 6, 1995 and is incorporated herein by reference.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d), the Securities Exchange Act
of 1934, the registrant has duly caused this Report to be signed on March 25,
1997 on its behalf by the undersigned, thereunto duly authorized.
AutoInfo, Inc.
By: /s/ Scott Zecher
---------------------------------
Scott Zecher, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this Report has been
signed below by the following persons on behalf of the registrant and in the
capacities indicated.
/s/ Andrew Gaspar
------------------------
Andrew Gaspar Director and Chairman March 25, 1997
/s/ Scott Zecher
------------------------
Scott Zecher Director, President,
Chief Executive Officer March 25, 1997
/s/ William Wunderlich
------------------------
William Wunderlich Chief Financial Officer,
Secretary and Treasurer March 25, 1997
(Principal Financial &
Accounting Officer)
/s/ Jason Bacher
------------------------
Jason Bacher Director March 25, 1997
/s/ Robert Fagenson
------------------------
Robert Fagenson Director March 25, 1997
/s/ Howard Nusbaum
------------------------
Howard Nusbaum Director March 25, 1997
/s/ Jerome Stengel
------------------------
Jerome Stengel Director March 25, 1997
24
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants F-2
Consolidated Balance Sheets as of December 31,
1996 and 1995 F-3
Consolidated Statements of Operations for the Year
Ended December 31, 1996, the Seven Months Ended
December 31, 1995 and the Year Ended May 31, 1995 F-4
Consolidated Statements of Stockholders' Equity for
the Year Ended December 31, 1996, the Seven Months
Ended December 31, 1995 and the Year Ended May 31,
1995 F-5
Consolidated Statements of Cash Flows for the Year
Ended December 31, 1996, the Seven Months Ended
December 31, 1995 and the Year Ended May 31, 1995 F-6
Notes to Consolidated Financial Statements F-7
Information required by schedules called for under Regulation S-X is either not
applicable or is included in the Consolidated Financial Statements or Notes
thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AutoInfo, Inc.:
We have audited the accompanying consolidated balance sheets of AutoInfo, Inc.
(a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1996, the seven month period ended
December 31, 1995 and the year ended May 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AutoInfo, Inc. and subsidiaries
as of December 31, 1996 and 1995, and the results of their operations and their
cash flows for the year ended December 31, 1996, the seven month period ended
December 31, 1995 and the year ended May 31, 1995, in conformity with generally
accepted accounting principles.
New York, New York
March 24, 1997
F-2
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Gross automobile receivables $ 81,406,679 $ 44,070,860
Unearned interest (19,867,745) (12,178,807)
------------ ------------
Net automobile receivables 61,538,934 31,892,053
Allowance for credit losses (Note 6) (15,725,390) (6,818,195)
------------ ------------
Net automobile receivables after
allowance for credit losses 45,813,544 25,073,858
Cash 4,307,038 964,842
Restricted cash (Note 8) 6,380,437 --
Short-term investments (Note 5) 4,892,199 23,906,459
Fixed assets, net 1,725,774 256,269
Goodwill and other intangibles, net (Note 12) 2,906,587 14,302,274
Other assets 4,073,502 1,291,674
Income tax refund receivable (Note 9) 4,352,000 --
------------ ------------
$ 74,451,081 $ 65,795,376
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Revolving lines of credit (Note 8) $ 18,082,472 $ 20,679,024
Automobile receivables backed notes (Note 8) 31,611,989 --
Subordinated notes and other debt (Note 8) 10,710,330 12,067,166
Accounts payable and accrued liabilities 1,718,901 2,030,833
------------ ------------
Total liabilities 62,123,692 34,777,023
------------ ------------
Commitments and contingencies (Note 10)
Stockholders' equity
Common Stock - authorized 20,000,000 shares $.01
par value; issued and outstanding 7,954,752 at
December 31, 1996 and 7,777,752 at December 31,1995 79,548 77,778
Additional paid-in capital 18,171,282 17,782,677
Officer note receivable (Note 11) (466,797) (466,797)
Deferred compensation under stock
bonus plan (Note 11) (385,930) (404,092)
Retained earnings (deficit) (5,070,714) 14,028,787
------------ ------------
Total stockholders' equity 12,327,389 31,018,353
------------ ------------
$ 74,451,081 $ 65,795,376
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-3
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996, THE SEVEN MONTHS ENDED
DECEMBER 31, 1995 AND THE YEAR ENDED MAY 31, 1995.
<TABLE>
<CAPTION>
Seven Months
Year Ended Ended Year Ended
December 31, December 31, May 31,
REVENUES 1996 1995 1995
------------ ----------- -----------
<S> <C> <C> <C>
Interest and other finance revenue $ 11,789,130 $ 771,502 $ --
Investment income 884,459 1,020,382 568,267
Long distance telephone services 511,534 439,839 1,030,428
------------ ----------- -----------
Total revenues 13,185,123 2,231,723 1,598,695
------------ ----------- -----------
COSTS AND EXPENSES
Interest expense 3,989,912 415,904 315,908
Operating expenses 6,913,086 1,346,218 1,863,779
Depreciation and amortization 1,189,298 84,889 25,158
Provision for credit losses (Note 6) 5,251,000 -- --
Preferred stock investment write-off -- -- 1,804,256
------------ ----------- -----------
17,343,296 1,847,011 4,009,101
Unusual item - impairment of long-lived assets and additional
credit losses on acquired automobile receivables
(Note 12) 19,293,328 -- --
------------ ----------- -----------
Total costs and expenses 36,636,624 1,847,011 4,009,101
------------ ----------- -----------
Income (loss) from continuing operations before
income tax benefit (23,451,501) 384,712 (2,410,406)
Income tax benefit (4,352,000) (175,960) (332,280)
------------ ----------- -----------
Income (loss) from continuing operations $(19,099,501) 560,672 (2,078,126)
Income (loss) from discontinued operations net of
income tax benefit (Note 4) -- (28,163) 1,518,659
Gain on sale of discontinued operations, net of income
taxes (Note 4) -- 296,839 8,885,688
------------ ----------- -----------
Net income (loss) $(19,099,501) $ 829,348 $ 8,326,221
============ =========== ===========
Per share data:
Income (loss) from continuing operations ($ 2.41) $ .07 ($ .28)
Income from discontinued operations -- -- .21
Gain on sale of discontinued operations -- .04 1.19
------------ ----------- -----------
Net income per share ($ 2.41) $ .11 $ 1.12
============ =========== ===========
Weighted average number of common and
common equivalent shares 7,920,515 7,770,917 7,410,548
------------ ----------- -----------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-4
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996, THE SEVEN MONTHS ENDED DECEMBER 31,
1995 AND THE YEAR ENDED MAY 31, 1995
<TABLE>
<CAPTION>
Shares of Deferred
Common Additional Officer Compensation
Stock Common Paid - In Note Under Stock Retained
Outstanding Stock Capital Receivable Bonus Plan Earnings
---------- ------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance June 1, 1994 7,253,286 $72,533 $16,344,194 $ -- $(432,847) $ 4,873,218
Exercise of stock options 502,966 5,030 1,234,365 -- -- --
Amortization of deferred
compensation -- -- -- -- 18,161 --
Acceleration of vesting rights
of employee stock options -- -- 146,708 -- -- --
Loan to officer for the
exercise of stock options -- -- -- (466,797) -- --
Net income -- -- -- -- -- 8,326,221
---------- ------- ----------- --------- --------- ------------
Balance May 31, 1995 7,756,252 77,563 17,725,267 (466,797) (414,686) 13,199,439
Exercise of stock options 21,500 215 57,410 -- -- --
Amortization of deferred
compensation -- -- -- -- 10,594 --
Net income -- -- -- -- -- 829,348
---------- ------- ----------- --------- --------- ------------
Balance December 31, 1995 7,777,752 77,778 17,782,677 (466,797) (404,092) 14,028,787
Common shares issued 177,000 1,770 388,605 -- -- --
Amortization of deferred
compensation -- -- -- -- 18,162 --
Net (loss) -- -- -- -- -- (19,099,501)
---------- ------- ----------- --------- --------- ------------
Balance, December 31, 1996 7,954,752 79,548 $18,171,282 $(466,797) $(385,930) $ (5,070,714)
========== ======= =========== ========= ========= ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-5
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996, THE SEVEN MONTHS ENDED DECEMBER 31,
1995 AND YEAR ENDED MAY 31, 1995
<TABLE>
<CAPTION>
Seven
Year Ended Months Ended Year ended
December 31, December 31, May 31,
1996 1995 1995
------------ ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(19,099,501) $ 829,348 $ 8,326,221
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization expenses 1,189,298 84,889 413,926
Amortization of deferred compensation 18,162 10,594 18,161
Gain on sale of discontinued operations -- (449,756) (16,544,329)
Preferred stock investment write-off -- -- 1,637,199
Provision for credit losses 5,251,000 -- --
Unusual item-impairment of long-lived assets and
additional credit losses on acquired automobile
receivables 19,293,328 -- --
Changes in assets and liabilities:
Automobile receivables, net (34,290,686) (986,632) --
Other assets (3,081,728) (573,645) 194,760
Income tax refund, receivable (4,352,000) -- --
Accounts payable and accrued liabilities (311,933) (6,625,804) 7,329,083
------------ ------------- ------------
Net cash provided by (used for) continuing operations (35,384,060) (7,711,006) 1,375,021
------------ ------------- ------------
Net cash (used for) discontinued operations -- (105,141) (205,480)
------------ ------------- ------------
Cash flows from investing activities:
Sale of discontinued operations -- 3,750,000 30,350,000
Officer note receivable -- -- (466,797)
Acquisitions -- (4,912,333) --
Capital expenditures (1,797,168) (497,661) (341,861)
Redemption of short-term investments 43,941,466 103,294,353 23,644,168
Purchases of short term investments (24,927,206) (88,886,323) (54,894,966)
------------ ------------- ------------
Net cash provided by (used for) investing activities 17,217,092 12,748,036 (1,709,456)
------------ ------------- ------------
Cash Flows from Financing Activities:
Issuance of notes 36,789,873 -- --
Reduction of borrowings (8,900,272) (4,546,540) (623,096)
Increase in restricted cash (6,380,437) -- --
Exercise of stock options -- 57,625 1,239,395
------------ ------------- ------------
Net cash provided by (used for) financing activities 21,509,164 (4,488,915) 616,299
------------ ------------- ------------
Net increase in cash 3,342,196 442,974 76,384
Cash at beginning of year 964,842 521,868 445,484
------------ ------------- ------------
Cash at end of year $ 4,307,038 $ 964,842 $ 521,868
============ ============= ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-6
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996, SEVEN MONTHS ENDED
DECEMBER 31, 1995 AND YEAR ENDED MAY 31, 1995
Note 1 - Business and Summary of Significant Accounting Policies
Business
On December 6, 1995, AutoInfo, Inc. (the "Company"), through a newly
formed wholly owned subsidiary, acquired the operating assets of Falk Finance
Company ("FFC"), a Norfolk, Virginia based non-prime automobile consumer finance
company, for $5,125,000 in cash and the assumption of liabilities and debt
approximating $34,000,000. As a result of this acquisition, the Company's
primary business is to purchase non-prime automobile retail installment
contracts from independent and franchised used vehicle dealers. The Company
services these dealers by providing specialized financing programs for buyers
who typically have impaired credit histories and are unable to access
traditional sources of available consumer credit.
In conjunction with the acquisition of FFC, the Company entered into a ten
year agreement with Charlie Falk Auto Wholesale, Incorporated ("CFAW"). This
agreement provided and established the basis for conducting business and the
criteria under which the Company purchased contracts from CFAW. Effective
December 31, 1996, the Company and CFAW mutually agreed to and entered into a
termination agreement which, among other provisions, provides for the Company to
continue to purchase contracts which meet established underwriting criteria only
through March 1997 (see Note 12). In 1996, approximately 38% of all contracts
funded by the Company were purchased from CFAW.
In July 1996, the Company commenced operations of its Northeast Regional
Center in Norwalk, Connecticut to provide its complete range of services to
dealers in the Northeast. This center is presently servicing dealers in
Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, Rhode Island and
Vermont.
Prior to December 1995, the Company operated in different business lines.
During the fiscal year ended May 31, 1995 and on July 20, 1995, the Company
sold substantially all of its operating assets for $34,100,000 in
cash in two separate transactions. As a result, the Company's sole operating
business which remained provides long distance telephone communications
services.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany balances and transactions have been eliminated in consolidation.
Automobile Receivables
Automobile receivables represent retail installment sales contracts
purchased from automobile dealers at discounts ranging up to 20%.
Allowance for Credit Losses
The Company established an allowance for credit losses in the FFC acquired
portfolio as of the date of acquisition based upon an evaluation of a number of
factors including prior loss experience, contractual delinquencies, the value of
underlying collateral and other factors. At the time of the purchase of
installment contracts from dealers an allowance for credit losses is established
based on an analysis of similar factors. The allowance is periodically evaluated
for adequacy based upon a review of credit loss experience, delinquency trends,
static pool loss analysis and an estimate of future losses inherent in the
existing finance receivable portfolio. Subsequent to the purchase of loans, a
provision for losses, if any, is charged to income in order to maintain the
allowance at an adequate level. The Company charges the allowance for loss
account at the time a customer receivable is deemed uncollectable. Any reduction
in the required allowance will be amortized to income prospectively as an
adjustment in the yield on the related loans.
The estimate of the allowance for credit losses requires a high degree of
judgement based upon, among other things, the inherent risk associated with the
portfolio of loans being purchased from dealers. Changes in estimates and
additional losses on portfolios could develop in the future based on changes in
economic factors and other circumstances and such changes could be significant.
The Company estimates and records losses as they become apparent, estimatable
and probable.
Concentration of Credit Risks
The Company's primary credit risk relates to lending to individuals who
cannot obtain traditional forms of financing. The Company is currently acquiring
automobile receivables in 13 states and, accordingly, does not believe that its
business is subject to credit risk with respect to geographic concentration.
Repossessed Vehicles Held for Sale
The Company repossesses the collateral when a determination is made that
collection efforts are unlikely to be successful. The value of a repossessed
vehicle is based upon an estimate of the net realizable amount upon liquidation.
As of December 31, 1996, there were 304 repossessed vehicles held for resale
with an aggregate value of approximately $804,000.
F-7
<PAGE>
Revenue Recognition
The Company recognizes interest income from automobile receivables on the
interest method. The accrual of interest income is suspended when a loan is
ninety days contractually delinquent. All discounts on the purchase of
installment contracts from dealers are held in reserve and are considered to
cover future anticipated credit losses.
Short-Term Investments
Short-term investments include common stock and bond funds, money market
instruments and municipal bonds. Investments are carried at cost which
approximates market value (See Note 5).
Fixed Assets
Depreciation of fixed assets is provided on the straight-line method over
the estimated useful lives of the related assets which range from three to five
years.
Goodwill and Other Intangibles
The excess of cost over the fair value of net assets acquired is allocated
to goodwill and other intangibles and is being amortized using the straight-line
method over periods of up to twenty years. In March 1995, the Financial
Accounting Standards Board issued SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets to Be Disposed Of." The pronouncement is effective for fiscal
years beginning after December 16, 1995. This statement requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company
currently uses methods that are consistent with SFAS No.121 to evaluate the
carrying amount of goodwill and other intangibles including comparing estimated
future cash flows identified with each long-lived asset group. For purposes of
such comparison, portions of unallocated excess of cost over net assets acquired
were attributed to related long-lived assets and identifiable intangible assets
based upon the relative fair values of such assets at acquisition. In the fourth
quarter of 1996, the Company determined that certain components of goodwill and
other intangible assets were impaired resulting in a charge to operations (see
Note 12).
Net Income (Loss) Per Share
Net income (loss) per share of common stock is based on the weighted
average number of shares of common stock and common stock equivalents
outstanding during the period. The net income (loss) per share and the weighted
average number of common and common equivalent shares represent primary earnings
per share data. Fully diluted earnings per share is not presented since its
effect is not significant.
Use of Estimates
The preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets, liabilities and contingent liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the periods
presented. Management estimates that are particularly sensitive to change relate
to the determination of the adequacy of the allowance for credit losses on
automobile receivables. The Company believes that all such
F-8
<PAGE>
assumptions are reasonable and that all estimates are adequate, however, actual
results could differ from those estimates.
Income Taxes
Deferred income taxes are recorded in accordance with Statement of
Financial Standard No. 109 "Accounting for Income taxes," by applying enacted
statutory tax rates to temporary differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities. At
December 31, 1996, the Company has net deferred tax assets of approximately $3.2
million, primarily resulting from the differences between financial reporting
and tax bases of goodwill and automobile receivables, which are offset by
valuation allowances due to the uncertainty of their future realizability.
Stock-Based Compensation
The Company accounts for stock-based compensation issued to employees in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". The Company did not adopt the financial reporting
requirements of Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock-Based Compensation," for stock based compensation
granted to employees in accordance with the provisions of SFAS 123 and
accordingly, the Company has disclosed in the notes to the financial statements
the pro forma net loss for the periods presented as if the fair value based
method was used. (See Note 11).
Note 2 - Change in Fiscal Year
On February 28, 1996, the Company changed its fiscal year-end to December
31 from May 31. The Company believes that this change will provide shareholders
with information on a basis more comparable to other public entities in the
specialized automobile finance industry. Accordingly, the accompanying financial
statements reflect the Company's financial position and results of operations as
of and for the seven month period ended December 31, 1995.
Following is selected financial data for the seven month periods ended
December 31, 1995 and 1994:
1994
1995 (Unaudited)
------------- -------------
Revenues $2,231,723 $641,227
------------- -------------
Income (loss) from continuing 560,672 (186,225)
operations
Income (loss) from discontinued (28,163) 1,072,913
operations
Gain on sale of discontinued 296,839 -
operations
------------- -------------
Net income $829,348 $886,688
------------- -------------
Per share data:
From continuing operations $.07 $(.03)
From discontinued operations - .15
From gain on sale .04 -
------------- -------------
Net income $.11 $.12
------------- -------------
F-9
<PAGE>
Note 3 - Business Acquisitions
On December 6, 1995, the Company, through a newly formed wholly owned
subsidiary, acquired the operating assets of Falk Finance Company (FFC), a
Norfolk, Virginia based specialized financial services company, for $5,125,000
in cash and the assumption of liabilities and debt approximating $34,000,000.
The results of operations of this business have been consolidated with the
Company since December 6, 1995.
The following unaudited pro-forma results of operations for the seven
month period ended December 31, 1995 and for the year ended May 31, 1995 is
presented as though the Company's business acquisition during the seven month
period ended December 31, 1995 had occurred at the beginning of the prior fiscal
year ended May 31, 1995:
For the seven
months ended For the year
December 31, ended May 31,
1995 1995
---------- ----------
Revenues $5,957,662 $8,141,980
Net income $ 601,400 $6,840,548
Net income per share $ .08 $ .92
Note 4 - Discontinued Operations
On July 20, 1995, the Company sold the assets relating to its Insurance
Inspection Services business for $3,750,000 in cash. The gain on the sale was
$296,839 after applicable taxes of $152,917. On April 1, 1995, the Company sold
the assets relating to its Orion Network, Compass Network, Checkmate Computer
Systems, and Insurance Parts Locator businesses to ADP Claims Solutions Group,
Inc., for $30,350,000 in cash. The gain of the sale was $8,885,688 after
applicable taxes of $7,658,641. Prior years have been restated to present the
businesses sold as discontinued operations.
Summarized results of operations of the discontinued operations were as
follows:
For the seven For the year
months ended ended
December 31, May 31,
1995 1995
------------- -----------
Revenues $ 533,318 $17,490,757
========= ===========
Income (loss) before income taxes (42,685) 2,021,194
Income taxes (benefit) (14,522) 502,535
--------- -----------
Net income (loss) from discontinued
operations $ (28,163) $ 1,518,659
========= ===========
Gain on sale $ 449,756 $16,544,329
Income Taxes 152,917 7,658,641
--------- -----------
Net income from sale of discontinued
operations $ 296,839 $ 8,885,688
========= ===========
F-10
<PAGE>
Note 5 - Short-Term Investments
Debt and equity securities used as part of the Company's investment
management that may be sold in response to cash needs, changes in interest
rates, and other factors have been classified as securities available for sale.
Such securities are reported at cost which approximates fair value and have
maturities of less than one year and included:
December 31, December 31,
1996 1995
----------- -----------
Common stock and bond funds $ 2,883,524 $ 3,613,394
Money market instruments 665,619 4,585,558
Municipal bonds 1,343,056 15,707,507
----------- -----------
$ 4,892,199 $23,906,459
----------- -----------
Gains and losses on disposition of securities are recognized on the
specific identification method in the period in which they occur. Unrealized
gains and losses, if material, would be excluded from earnings and reported as a
separate component of stockholders' equity on an after-tax basis. During the
year ended December 31, 1996, the seven month period ended December 31, 1995 and
the fiscal year ended May 31, 1995, gains and losses arising from the
disposition of marketable securities as well as unrealized gains and losses were
not material.
F-11
<PAGE>
Note 6 - Credit Losses
A rollforward of allowance for credit losses by significant component is
as follows:
Portfolio
Acquired from Other
FFC Portfolios Total
------------ ------------ ------------
Balance at December 31, 1995 $ 6,122,000 $ 696,000 $ 6,818,000
Purchase discounts -- 11,181,000 11,181,000
Charge offs (10,469,000) (5,156,000) (15,625,000)
Additions to reserve (Note 12) 8,100,000 5,251,000 13,351,000
------------ ------------ ------------
Balance at December 31, 1996 $ 3,753,000 $ 11,972,000 $ 15,725,000
------------ ------------ ------------
Provision For Credit Losses
During 1996, the Company purchased automobile receivables from CFAW
pursuant to a ten-year purchase agreement related to the acquisition of assets
from FFC in December 1995, in addition to purchases from other dealers. In 1996,
the determination was made by the Company to terminate this relationship. Due to
the poor performance of this portfolio, in addition to additional credit losses
provided on the portfolio acquired from FFC, the Company has provided for
additional credit losses relating to automobile receivables purchased from CFAW
during 1996 included in the $5,251,000 noted above.
Note 7 - Investment
In December 1991, the Company acquired a Preferred Stock Investment (3,293
shares of $500 par value, 7% cumulative convertible preferred stock) in
ComputerLogic, Inc., a Georgia corporation ("ComputerLogic"), which offers
computer based products to the automobile parts and repair industries. The
Preferred Stock elects not less than 40% of the ComputerLogic board of
directors. The Company's Preferred Stock Investment is convertible into 38% of
the outstanding capital stock of ComputerLogic. The Company also has the option
to increase its investment for additional consideration as described in the
purchase agreement. The purchase price consisted of cash of $1,250,000 and
101,667 shares of the Company's Common Stock. The investment was being carried
at the lower of cost or net realizable value.
As a result of the sale of the Company's businesses providing
computerization and communications services to the automotive industry and the
resulting lack of synergistic business opportunities, the Company does not plan
to exercise its option to increase its investment in ComputerLogic. The Company
therefore as of May 31, 1995 wrote off its preferred stock investments totaling
$1,804,256 which included unpaid management fees and unpaid preferred stock
dividends of $155,460 as of May 31, 1995 and determined that any future fees and
dividend received would be recorded as income when received. During the year
ended December 31, 1996 the Company received $280,000 in fees and dividends from
ComputerLogic.
F-12
<PAGE>
Note 8 - Debt
Revolving Lines of Credit
In December 1996, the Company entered into a revolving credit agreement
with CS First Boston Mortgage Capital Corp. ("CSFB"), which provides for
borrowings of up to $100 million collateralized by installment automobile loan
contracts. Among other provisions, this facility requires the Company to
maintain tangible net worth, as defined, of $10 million and is cancelable in the
event of a material adverse change in the Company's business. At December 31,
1996, the Company had approximately $10.3 million of tangible net worth and was
in compliance with all other covenants. The Company expects to maintain
compliance with these covenants through 1997 and beyond. The note matures
December 1999 and is renewable each year at the option of the lender. Interest
is payable monthly at the LIBOR rate ( 5.55% as of December 31, 1996) plus 3%.
Advances outstanding as of December 31, 1996 were $3,243,000 and the weighted
average interest rate for the month of December 1996 was 8.6%.
In conjunction with the acquisition of FFC on December 6, 1995, the
Company entered into a revolving credit facility with Finova Capital Corporation
("Finova") which provided for borrowings of up to $42 million. Interest is
payable monthly at the prime rate (8.25% at December 31, 1996) plus 1.75%.
Advances outstanding as of December 31, 1996 were $14,839,000 and the weighted
average interest rate for the month of December 1996 was 10.0%. This revolving
credit facility was terminated and repaid through the utilization of the CSFB
revolving credit facility in January 1997.
The total amount available under these lines at December 31, 1996 was
approximately $82 million.
F-13
<PAGE>
Automobile Receivables Backed Notes
In October 1996, AutoInfo Receivables Company, a wholly-owned special
purpose subsidiary of the Company, sold, in a private placement, $34,281,119 of
6.53% Class A Auto Loan Backed Notes and $2,016,536 of 11.31% Class B Auto Loan
Backed Notes with a stated maturity date of January 2002. These Notes are repaid
from the collection of payments of principal and interest and are collateralized
by approximately $40,330,000 of automobile receivables and a Reserve Account in
the amount of approximately $5,600,000. In addition, the repayment of principal
of the Class A Notes is guaranteed by insurance issued by MBIA Insurance
Corporation, a nationally recognized insurance company. The Class A Notes were
rated AAA by Standard & Poors's Rating Group and Aaa by Moody's Investor
Service. The Class B Notes were rated BB by Standard & Poors's Rating Group.
The Company acts as servicer and, as such, performs collection and
servicing activities on these receivables. An Indenture and Servicing Agreement
requires, among other provisions, the maintenance of certain performance
standards with respect to the portfolio of loan contracts securitized and
certain overall financial considerations of the Company as a whole, including
not realizing a net loss from operations in any two consecutive quarters and
maintenance of minimum tangible net worth, as defined, of $7 million. At
December 31, 1996, the Company had approximately $7.7 million of tangible net
worth and was in compliance with all other covenants. The Company expects to
maintain compliance with these covenants through 1997 and beyond. The proceeds
from the issuance of these notes were used to reduce the borrowings under the
Company's senior credit facility as well as to fund the Reserve Account. The
assets of AutoInfo Receivables Company are not available to pay general
creditors of the Company.
As of December 31, 1996, the balance of the Class A and Class B Notes, the
underlying loan contracts receivable backing these Notes and the Reserve Account
balances were as follows:
Underlying Reserve
Note Receivables Account
Balance Balance Balance
----------- ----------- ----------
Class A Notes $29,595,453 $34,303,344 $6,178,783
Class B Notes 2,016,536 (a) 201,654
----------- ----------
$31,611,989 $6,380,437
----------- ----------
(a) The Class B Notes are collateralized by the loan contracts only
after the Class A noteholders are paid in full.
F-14
<PAGE>
Subordinated Notes and Other Debt
Subordinated notes and other debt consist of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Subordinated notes (a) $ 8,200,000 $ 9,800,000
Subordinated notes due January 2000 payable in equal
annual installments in January 1998, 1999 and 2000 with
interest at 7.55% paid semi-annually 2,000,000 2,000,000
Other notes payable due in monthly installments through 2001
with interest at prime to 12.4% 510,330 267,166
----------- -----------
Total other notes $10,710,330 $12,067,166
----------- -----------
</TABLE>
(a) On December 6, 1995 as part of the acquisition of FFC, the Company
assumed unsecured subordinated notes in the amount of $9,800,000. In
1996, the Company redeemed $1,600,000 of the Series B Notes. These
notes bear interest at the rate of 12% per annum, payable monthly.
The Series A Notes ($4,900,000) mature on May 1, 1999 and the Series
B Notes ($3,300,000) mature on December 31, 2000.
The Company paid interest of approximately $3,938,000 for the year ended
December 31, 1996, $231,000 for the seven month period ended December 31, 1995
and $308,000 during the fiscal year ended May 31, 1995, respectively.
Note 9 - Income Taxes
For the year ended December 31, 1996, the seven months ended December 31,
1995 and for the year ended May 31, 1995, the provision (benefit) for income
taxes consisted of the following:
Seven Months
Year ended Ended Year ended
December 31, December 31, May 31,
1996 1995 1995
----------- ----------- -----------
Federal $(4,352,000) $ (184,882) $ (320,331)
State -- 8,922 (11,949)
----------- ----------- -----------
Income tax benefit on loss from
continuing operations $(4,352,000) $ (175,960) $ (332,280)
----------- ----------- -----------
Income tax on income from
discontinued operations:
Federal -- $ (14,522) $ 593,093
State -- -- (90,558)
----------- ----------- -----------
$ -- $ (14,522) $ 502,535
----------- ----------- -----------
Income taxes on gain on sale of
discontinued operations:
Federal -- $ 152,917 $ 7,148,753
State -- -- 509,888
----------- ----------- -----------
$ -- $ 152,917 $ 7,658,641
----------- ----------- -----------
F-15
<PAGE>
The following table reconciles the Company's effective income tax rate on
income (loss) from continuing operations to the Federal Statutory Rate for the
year ended December 31, 1996, the seven month period ended December 31, 1995 and
for the year ended May 31, 1995:
Seven Months
Year ended Ended Year Ended
December 31, December 31, May 31,
1996 1995 1995
------ ------ ------
Federal Statutory Rate (34.0)% 34.0% (34.0)%
Effect of:
State and local taxes, net of federal
benefit -- (.8) (.2)
Benefit from tax exempt income (.8) (81.4) (7.0)
Preferred stock investment write-off -- -- 23.1
Valuation allowance against deferred
tax assets 15.3 -- --
Other, net -- 2.5 4.3
-------- -------- --------
(19.5)% (45.7)% (13.8)%
======== ======== ========
The Company paid income taxes of approximately $0, $6,632,000 and
$884,000, for the year ended December 31, 1996, the seven month period ended
December 31, 1995 and for the fiscal year ended May 31, 1995, respectively.
Note 10 - Commitments and Contingencies
Leases
The Company is obligated under noncancellable operating leases for
premises and equipment expiring at various dates through 1999. Future minimum
lease payments are $313,000, $204,000, $167,000, $142,000 and $53,000 for each
of the five year periods ended December 31, 2001. Lease expense for the year
ended December 31, 1996, the seven month period ended December 31, 1995 and the
year ended May 31, 1995 was approximately $ 227,000, $68,000 and $384,000,
respectively.
401(k) Plan
The Company is obligated under its 401(k) Plan to match fifty percent of
employee contributions up to a maximum of three percent of eligible
compensation. 401(k) Plan expense for the year ended December 31, 1996, the
seven month period ended December 31, 1995 and the year ended May 31, 1995 was
approximately $38,000, $ 3,000 and $72,000, respectively.
Other Agreements
The Company has employment agreements with two officers of the Company,
one of whom is also a stockholder. The agreements expire through 1998 and
provide for aggregate annual compensation of approximately $400,000. In
addition, the Company has an employment agreement with a non-officer employee.
This agreement expires in April 2000 and provides for an aggregate minimum
annual compensation of $140,000 plus a bonus equal to one-tenth of one percent
(1/10%) of the outstanding net performing installment contract receivable
portfolio of the Company's non-prime auto finance business generated in the
Northeast Region. An employment agreement with another non-officer employee was
terminated in January 1997. In accordance with this
F-16
<PAGE>
termination, the Company is obligated for compensation at an annual rate of
$140,000 through October 1997.
The Company has entered into supplemental employment agreements (the
"Supplemental Employment Agreements") with Messrs. Zecher and Wunderlich (the
"Covered Executives"), which provide that if there is a Change in Control of the
Company (as defined therein) during the Protected Period (described below), the
terms of the Supplemental Employment Agreements will supersede the Covered
Executives' existing employment agreements and will govern the terms of the
Covered Executives' employment following the Change in Control for a three-year
term, in the case of Mr. Zecher, and a two-year term, in the case of Mr.
Wunderlich (the "Employment Term").
The Supplemental Employment Agreements provide that during the Employment
Term, the Covered Executives will remain employed in their capacities with the
Company as of the Change in Control and will continue to receive an annual
salary (the "Base Salary") and benefits at least equal to that which they
received prior to the Change in Control and an annual bonus at least equal to
the Covered Executive's average annual bonus during the three years prior to the
Change in Control. The Supplemental Employment Agreements provide that if,
during the Employment Term, the Covered Executive's employment is terminated by
the Company other than for Cause or Disability or by the Executive either for
Good Reason or during the 60-day Window Period commencing on the anniversary of
the Change in Control (as each of the foregoing terms are defined in the
applicable Supplemental Employment Agreement), the Covered Executive would
receive a severance payment equal to the sum of his Base Salary and the higher
of his annual bonus for the then most recent year or his average annual bonus
during the three years preceding the Change in Control (the "Highest Annual
Bonus") multiplied by two, in the case of Mr. Zecher, and one and one-half, in
the case of Mr. Wunderlich. In addition, the restrictions on any stock-related
incentive awards held by the Covered Executive would lapse and he would be
entitled to continued coverage under the Company's life, health and disability
benefits for two years following termination of his employment (three years in
the case of Mr. Zecher) or until he receives similar benefits from a new
employer. Mr. Zecher's Supplemental Employment Agreement also provides that if
he is subject to excise taxes under Section 4999 of the Internal Revenue Code on
any payments or benefits triggered by a Change in Control, he will be entitled
to receive an additional amount such that after the payment of all applicable
taxes, he will retain an amount equal to that which he would have retained
absent the excise taxes. In connection with the Supplemental Employment
Agreements, the Company also approved the creation of an Employment Protection
Trust Agreement which is a form of a grantor trust under which the assets of the
trust remain subject to the satisfaction of the general claims of the Company's
creditors, to provide for the payment of all benefits payable under the
Supplemental Employment Agreements.
Note 11 - Stockholders' Equity
Stock Bonus Plan
The Company has issued 425,000 shares of Common Stock pursuant to a
restricted stock bonus plan to key executives, directors and consultants.
These shares will vest ratably every two years over a period of 30 years.
The unvested portion is subject, upon the occurrence of certain events, to
either forfeiture or accelerated vesting. Such shares are recorded at their
estimated fair market value as determined by the Board of Directors and are
charged as compensation expense ratably over the vesting period. As of December
31, 1996 110,333 of such shares had vested and 314,667 remained, subject to
forfeiture.
F-17
<PAGE>
Warrants
In connection with the $4,000,000 7.55% subordinated long-term notes
issued in January 1994, the Company issued to the noteholders six year warrants
to purchase 533,333 shares of Common Stock at a per share price of $4.00. In
September 1995, the Company prepaid $2,000,000 of the notes. In conjunction with
the prepayment, 196,296 of these warrants were canceled. The Company has
reserved 337,037 shares of Common Stock for issuance upon the exercise of the
remaining warrants. No such warrants have been exercised to date.
In connection with a May 1986 public offering of Common Stock, the Company
issued warrants to the underwriter for the purchase of 96,000 shares of its
Common Stock at a per share price of $4.80. During fiscal 1992, 66,750 warrants
to purchase shares of the Company's Common Stock expired. The remaining 29,250
warrants are exercisable through May 1998. The Company has reserved 29,250
shares of Common Stock for issuance upon the exercise of these warrants.
In connection with the $2,016,536 Class B Notes issued in October 1996,
the Company issued 3 year warrants to purchase 159,095 shares of Common Stock at
a per share price of $2.70. The Company has reserved 159,095 shares of Common
Stock for issuance upon exercise of these warrants.
In connection with the $100 million credit facility provided by CSFB in
December 1996, the Company issued 3 year warrants to purchase 125,000 shares of
Common Stock at a per share price of $3.70. The Company has reserved 125,000
shares of Common Stock for issuance upon exercise of these warrants.
Stock Option Plans
The Company has four stock option plans, The 1985 Plan, The 1986 Plan, The
1989 Plan and The 1992 Plan ("the Plans"). The Company accounts for these Plans
under APB Opinion No. 25, under which no compensation cost has been recognized.
Had compensation cost for these Plans been determined consistent with FASB
Statement No. 123, the Company's net income (loss) and earnings (loss) per share
would have been reduced to the following pro forma amounts:
1996 1995
-------------- --------------
Net income (loss):
As reported $ (19,099,501) $ 829,348
Pro forma $ (19,206,821) $ 806,178
Earnings (loss) per share:
As reported ($2.41) $.11
Pro forma ($2.43) $.10
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
1995, and additional awards in future years are anticipated. Pursuant to the
Plans, a total of 1,287,500 shares of Common Stock were made available for grant
of stock options. Under the Plans, options have been granted to key personnel
for terms of up to ten years at not less than fair value of the shares at the
dates of grant and are exercisable in whole or in part at stated times
commencing one year after the date of grant. No further grant will be issued
under the 1986 Plan. At December 31, 1996, options to purchase 275,000 shares of
Common Stock were exercisable with respect to the Plans.
F-18
<PAGE>
Option activity for the year ended December 31, 1996, the seven months
ended December 31, 1995 and the fiscal year ended May 31, 1995 was as follows:
Number of Weighted Average
Shares Exercise Price
--------- ----------------
Outstanding at June 1, 1994 697,799 $2.94
Granted during the year 270,000 3.41
Exercised during the year (502,966) 2.47
Forfeited during the year (30,000) 2.96
-------- -----
Outstanding at May 31, 1995 434,833 3.75
Exercised during the period (21,500) 2.68
-------- -----
Outstanding at December 31, 1995 413,333 3.70
Granted during the year 241,000 2.96
-------- -----
Outstanding at December 31, 1996 654,333 $3.43
-------- -----
Weighted average fair value of options granted:
1996 $ .96
1995 $ 1.14
The fair value of each option grant is estimated on the date of grant
using the Black-Shoals option pricing model with the following weighted
assumptions used for grants in 1996 and 1995, respectively: risk-free interest
rates of 6.20 and 6.36 percent; expected lives of 3 years for all options
granted; expected volatility of 26.2 and 29.1 percent.
On April 10, 1995, an officer of the Company exercised options to acquire
216,799 shares. In connection with this exercise, the Company received a full
recourse, non-interest bearing note due in November 1997, secured by a pledge of
the acquired shares in the amount of $466,797.
Other Options
In April 1996, the Company issued non-qualified options to purchase
400,000 shares of the Company's Common Stock at an exercise price of $3.125 per
share to a new employee. These shares will vest over a four year period based
upon, in part the performance of the Company's non-prime auto finance business
in the Northeast region.
An option issued upon the commencement of employment to another
non-officer employee in December 1995 to purchase an aggregate of 375,000 shares
of the Company's Common Stock was canceled in conjunction with the termination
of the related employment agreement.
Note 12 - Unusual Item - Impairment of Long-Lived Assets on Acquired Business
and Additional Credit Losses on Acquired Automobile Receivables
The acquisition of FFC in December 1995 included a portfolio of non-prime
automobile receivables of approximately $31 million of which approximately 80%
had been acquired by FFC from CFAW. In addition to the tangible assets acquired,
the Company entered into a Non-Compete Agreement and a 10 year Purchase
Agreement with CFAW which, among other provisions, provided for the continued
purchase of automobile receivables based upon established underwriting criteria
at the sole discretion and option of the Company. During the year ended December
31, 1996, the quality of the automobile receivables acquired from CFAW, both
prior to the acquisition date and subsequent thereto, as evidenced by the number
of repossessions and the charge-off incurred, came into question. The Company
determined to cease acquiring automobile receivables from CFAW and accordingly,
effective December 31, 1996, the Company entered into a Modification and
Termination Agreement with CFAW.
As a result of this action and other factors, the Company has deemed that
a significant portion of the goodwill associated with the acquisition of FFC as
well as the Non-Compete and Purchase Agreements are of no continuing value and,
accordingly, has taken a charge against operations as of December 31, 1996 of
$11,193,000 based on its evaluation of the realizable value of such assets in
accordance with SFAS No. 121. Furthermore, the Company recorded additional
credit losses of $8,100,000 on the acquired automobile receivables.
F-19
Exhibit 11
AUTOINFO, INC. AND SUBSIDIARIES
Calculation of Earnings Per Share
<TABLE>
<CAPTION>
Year ended Seven Months Year Ended
December 31, Ended December 31, May 31,
1996 1995 1995
------------ ----------- -----------
<S> <C> <C> <C>
Primary and fully diluted earnings (loss):
Income (loss) from continuing operations $(19,099,501) $ 560,672 $(2,078,126)
Income (loss) from discontinued operations -- (28,163) 1,518,659
Gain on sale of discontinued operations -- 296,839 8,885,688
------------ ----------- -----------
Earnings (loss) from operations applicable to
common stock $(19,099,501) $ 829,348 $ 8,326,221
------------ ----------- -----------
Shares:
Weighted average number of common
shares outstanding 7,920,515 7,765,261 7,307,657
Added shares issuable from assumed
exercise of options -- 5,656 102,891
------------ ----------- -----------
Weighted average number of common
shares as adjusted 7,920,515 7,770,917 7,410,548
------------ ----------- -----------
Primary and fully diluted earnings (loss):
From continuing operations $ (2.41) $ .07 $ (.28)
From discontinued operations -- -- .21
From gain on sale of discontinued
operations -- .04 1.19
------------ ----------- -----------
Earnings (loss) per common share $ (2.41) $ .11 $ 1.12
============ =========== ===========
</TABLE>
Exhibit 21
Subsidiaries of AutoInfo, Inc.
CarLoanCo, Inc. (Virginia)
CarLoanCo, Inc. (Connecticut)
AutoInfo Receivables Company
CarBucks, Inc.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into AutoInfo, Inc.'s previously filed
Registration Statement, File No. 33-34442.
ARTHUR ANDERSEN LLP
New York, New York
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 10,687,475
<SECURITIES> 4,892,199
<RECEIVABLES> 61,638,934
<ALLOWANCES> (15,725,390)
<INVENTORY> 0
<CURRENT-ASSETS> 69,818,720
<PP&E> 2,077,919
<DEPRECIATION> (352,145)
<TOTAL-ASSETS> 74,451,081
<CURRENT-LIABILITIES> 1,718,901
<BONDS> 60,404,791
0
0
<COMMON> 79,458
<OTHER-SE> 12,247,841
<TOTAL-LIABILITY-AND-EQUITY> 74,451,081
<SALES> 13,185,123
<TOTAL-REVENUES> 13,185,123
<CGS> 0
<TOTAL-COSTS> 8,102,384
<OTHER-EXPENSES> 11,193,328
<LOSS-PROVISION> 13,351,000
<INTEREST-EXPENSE> 3,989,912
<INCOME-PRETAX> (23,451,501)
<INCOME-TAX> (4,352,000)
<INCOME-CONTINUING> (19,099,501)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,099,501)
<EPS-PRIMARY> (2,410)
<EPS-DILUTED> (2,410)
</TABLE>
- --------------------------------------------------------------------------------
LOAN SALE AGREEMENT
between
AUTOINFO FINANCE OF VIRGINIA, INC.
(Company)
and
AUTOINFO RECEIVABLES COMPANY
(Issuer)
- --------------------------------------------------------------------------------
Dated as of October 1, 1996
<PAGE>
This LOAN SALE AGREEMENT, dated as of October 1, 1996, is by and between
AutoInfo Finance of Virginia, Inc. (the "Company") and AutoInfo Receivables
Company (the "Issuer").
RECITALS
The Issuer has entered into an Indenture, dated as of October 1,
1996, (the "Indenture"), with Bankers Trust Company (the "Indenture Trustee")
and Crestar Bank (the "Custodian") pursuant to which the Issuer intends to issue
Class A Notes and Class B Notes (the "Notes").
In furtherance thereof, the Issuer and Company have entered into
this Loan Sale Agreement to provide for, among other things, the acquisition by
the Issuer of all of the right, title and interest in and to certain Loan
Assets, which the Issuer is and will be pledging to the Indenture Trustee and in
which the Issuer is and will be Granting to the Indenture Trustee a security
interest, as security for the Notes. As a precondition to the effectiveness of
this Loan Sale Agreement, the Issuer, the Indenture Trustee, AutoInfo Finance of
Virginia, Inc., as servicer (the "Servicer") and Bankers Trust Company, in its
capacity as Back-Up Servicer (the "Back-up Servicer") and the Custodian will
enter into the Servicing Agreement to provide for the servicing of the Loan
Assets.
In order to further secure the Notes, the Issuer is Granting to the
Indenture Trustee a security interest in, among other things, the Issuer's
rights derived under this Loan Sale Agreement and the Servicing Agreement, and
the Company agrees that all covenants and agreements made by it in this Loan
Sale Agreement with respect to the Loan Assets shall also be for the benefit and
security of the Indenture Trustee, MBIA and all Holders from time to time of the
Notes.
In consideration of the mutual agreements herein contained, and of
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.
For purposes of this Loan Sale Agreement, the following terms shall
have the meanings specified herein. Capitalized terms used herein but not
otherwise defined shall have the respective meanings assigned to such terms in
the Indenture.
"CFAW Purchase Agreement": shall mean the form of purchase agreement
set forth on Exhibit D hereto.
"Closing Date": October 11, 1996.
"Common Stock": shall mean all of the issued and outstanding shares
of common stock of the Issuer, which consists of 1,000 shares having a par value
of $.01 per share.
"Company Address": shall mean 863 Glenrock Road, Suite 201, Norfolk,
Virginia, 23502, or at any other address furnished in writing to the Indenture
Trustee, the Custodian, MBIA and the Issuer.
"Computer Tape": shall mean the diskette, or other computer readable
medium, prepared by the Servicer, containing descriptions and payment
information on each Loan Contract on the Loan Schedule.
"Cut-off Date": shall mean the close of business on August 31, 1996
"Dealer": shall mean any dealer of new or used automobiles, light
trucks or motorcycles, with is either a Third Party Dealer or the Falk Dealer.
"Dealer Agreement" shall mean an agreement between the Company and a
Dealer relating to the sale of Loan Contracts to the Company in substantially
the form of Exhibit C hereto.
"Dollars": shall mean the lawful currency of the United States.
"Eligible Loan Contract:" shall mean a Loan Contract that satisfies
the selection criteria set forth in Section 3.01(a) hereof.
"Falk Dealer": shall mean Charlie Falk Auto Wholesalers, Inc.
"Issuer Address": shall mean 863 Glenrock Road, Norfolk, Virginia,
23502, or at any other address furnished in writing to the Indenture Trustee and
MBIA.
2
<PAGE>
"Issuer State of Incorporation": shall mean the State of Delaware.
"Lien": shall mean any security interest, lien, charge, pledge,
equity or encumbrance of any kind other than liens for taxes due and payable
after the Cut-Off Date, mechanic's liens filed after the Cut-Off Date and any
liens that attach after the Cut-Off Date by operation of law.
"Loan Sale Agreement": shall mean this Loan Sale Agreement, as
amended from time to time in accordance with the terms hereof.
"Loan Assets": shall mean all right, title and interest in and to
(a) the Loan Contracts and all rights with respect thereto, including all
guaranties and other agreements or arrangements of whatever character from time
to time supporting or securing payment of any Loan Contract, and all rights with
respect to any agreement or arrangements with the vendors, dealers or
manufacturers of the Vehicles to the extent specifically related to any Loan
Contract, (b) all payments received on or with respect to the Loan Contracts due
on or after the Cut-Off Date, including without limitation, all periodic
payments due from the Obligors thereunder, all amounts paid by guarantors under
the Loan Contracts, all Insurance Proceeds received on or with respect to the
Loan Contracts, all payments received on Defaulted Loan Contracts and, with
respect to liquidation, all late payment charges paid by Obligors and any other
incidental charges or fees received from an Obligor, including but not limited
to, late fees, collection fees and bounced check charges, (c) the Loan Contract
Files, the original Loan Contracts, original Certificates of Title and
Applications for Certificates of Title relating to the Loan Contracts, (d) a
security interest in the Vehicles securing the Loan Contracts, and (e) all
income and proceeds of the foregoing or relating thereto.
"Loan Contracts": the sub-prime retail installment contracts, and
such other motor vehicle loan contracts (and all rights with respect thereto,
including all guaranties and other agreements or arrangements of whatever
character from time to time supporting or securing payment of any Loan Contract
and all rights with respect to any agreements or arrangements with the vendors,
dealers or manufacturers of the Vehicles to the extent specifically related to
any Loan Contract) which are identified on the Loan Schedule; provided that,
from and after the date on which a Loan Contract is purchased by the Company at
the Purchase Price in accordance with the terms hereof, such repurchased Loan
Contract shall no longer constitute a Loan Contract for purposes of the
Transaction Documents.
"Loan Schedule": shall mean the list of Loan Contracts attached as
Schedule I hereto, which shall include in respect to each Loan Contract: (a) a
number identifying the Loan Contract, (b) the Loan Balance as of the Cut-off
Date, (c) the Obligor, (d) the Obligor's billing address, (e) the original and
remaining months to maturity of the Loan Contract, (f) the Scheduled Payment,
(g) the annual percentage rate, (h) the dates of the first and last Scheduled
Payment, (i) the original amount financed, and (j) the vehicle identification
numbers of the related Vehicles.
3
<PAGE>
"Purchase Price": An amount equal to the sum of (i) the Loan Balance
of the purchased Loan Contract and (ii) any interest accrued through the date of
such repurchase.
"Third Party Dealer": shall mean a franchised or other third party
retail auto, motorcycle and light truck dealer which originates and sells Loan
Contracts to the Company or through another finance company approved by MBIA.
"Transfer Taxes": As defined in Section 3.01(a)(xix) hereof.
"Vehicle": A new or used automobile, light truck or motorcycle and
all accessories thereto.
4
<PAGE>
ARTICLE II
ACQUISITION OF LOAN ASSETS
Section 2.01. Conveyance of Loan Assets.
(a) In consideration of the Issuer's delivery to or upon the order
of the Company of the net proceeds from the sale of the Notes, the Company does
hereby sell, transfer, contribute, assign, set over and otherwise convey to the
Issuer, without recourse (except as provided in Sections 2.06 and 3.03 hereof)
all of the Company's right, title and interest now existing or hereafter arising
in and to the Loan Assets related to the Loan Contracts listed on the Loan
Schedule. The Company agrees that all Loan Contracts sold, contributed,
transferred and conveyed to the Issuer hereunder shall be Eligible Loan
Contracts and that all Loan Assets acquired by the Issuer shall conform with all
of the requirements hereof. The Company hereby acknowledges that its transfer of
the Loan Assets to the Issuer is absolute and irrevocable, without reservation,
retention of any interest, or recourse to the Company, except as provided in
Sections 2.06 and 3.03 hereof.
(b) To the extent that the Company shall retain any files or
documentation pertaining to the Loan Assets it shall hold such documents as
Servicer and in trust for the benefit of the Indenture Trustee, the Noteholders,
MBIA and the Issuer as the owner thereof. The possession of any documents or
files pertaining to the Loan Assets by the Servicer is at the will of the Issuer
for the sole purpose of servicing such Loan Assets, and such retention and
possession by the Servicer is in a custodial capacity only. The documents and
files retained by the Servicer relating to the Loan Assets shall be segregated
from the books and records of the Company and shall be marked conspicuously to
reflect clearly the sale of the related Loan Assets to the Issuer and the
Indenture Trustee's security interest therein.
Section 2.02. Use of Proceeds.
On the Closing Date, the Company shall use the cash proceeds
received pursuant to Section 2.01 towards the purchase price for the Loan
Assets, to remove any liens encumbering the Loan Assets as of such date, and for
general corporate purposes.
Section 2.03. Delivery of Loan Contracts; Filing of Financing
Statements.
(a) In connection with the Issuer's acquisition of the Loan Assets,
the Company, on behalf of the Issuer, shall deliver to the Custodian the
Custodial Files, shall deliver to the Servicer all documents necessary to assist
the Servicer in its servicing obligations and shall deliver to the Indenture
Trustee a power of attorney to permit the Indenture Trustee to submit for
retitling any Certificate of Title in accordance with the terms of the
Transaction Documents. If the original Certificate of Title is not available on
the Closing Date, the Company shall deliver the Application for Certificate of
Title to the Custodian on the Closing Date; provided, however, that the Company
shall deliver to the Custodian the original Certificate of Title relating to
each
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Vehicle within 120 days of the Closing Date. In addition, the Company agrees to
record and file prior to the Closing Date or within the time period set forth in
the Indenture, at its own expense, financing statements (and thereafter timely
continuation statements with respect to such financing statements) with respect
to the Loan Assets, meeting the requirements of the Transaction Documents.
(b) In connection with such acquisition, the Company shall promptly,
at its own expense, cause its books and records, including any electronic ledger
maintained by it or the Servicer, to be marked to show the sale of the related
Loan Assets to the Issuer and the Indenture Trustee's security interest therein.
Section 2.04. Servicing of Loan Contracts and Vehicles.
The Company acknowledges and agrees that its obligations hereunder
are independent of any obligations it may have as Servicer under the Transaction
Documents and that its obligations under this Loan Sale Agreement will continue
in full force and effect, whether or not it is acting as Servicer.
Section 2.05. Review of Loan Contracts.
If the Company discovers or is notified by the Custodian, Indenture
Trustee, MBIA or the Noteholders that any Loan Contracts, Certificates of Title
or Applications for Certificate of Title, as applicable, are missing or
defective (that is, mutilated, damaged, defaced, incomplete, improperly dated,
clearly forged or otherwise physically altered) in any material respect, the
Company shall correct or cure such omission, defect or other irregularity within
60 days from the date the Company discovered, or is notified by the Custodian,
Indenture Trustee, MBIA or the Noteholders of, such omission or defect.
Otherwise, the Company shall repurchase such Loan Contract from the Issuer in
accordance with Section 3.03 hereof. In addition, the Company shall repurchase
Loan Contracts with respect to which the original Certificates of Title relating
to the relevant Vehicle are not delivered within 120 days of the Closing Date.
Section 2.06. Nature of Transfer.
(a) It is the intention of the Company and the Issuer that the
transfer and assignment of the Company's right, title and interest in and to the
Loan Contracts and the Loan Assets shall constitute an absolute sale by the
Company to the Issuer. In the event that the transfer of the Loan Assets from
the Company to the Issuer is deemed to be a secured financing, the Company shall
be deemed hereunder to have Granted to the Issuer, and the Company does hereby
Grant to the Issuer, a first priority security interest in all of the Company's
right, title and interest in, to and under the Loan Assets, whether now owned or
hereafter acquired. For purposes of such Grant, this Loan Sale Agreement shall
constitute a security agreement under applicable law.
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(b) In the event that the transfer contemplated by this Loan Sale
Agreement is deemed for any reason to be less than a transfer of complete legal
title of all of the Company's right, title and interest in, to and under the
Loan Assets, the parties hereto intend that this Loan Sale Agreement operate to
transfer all of the Company's equitable interests in, to and under the Loan
Assets to the Issuer.
Section 2.07. Re-Liening Triggers.
At the direction of MBIA upon the occurrence of a Re-Liening
Trigger, the Company, at its own cost and expense shall promptly cause the
Certificate of Title to be retitled to show the Indenture Trustee as the secured
party thereon. If the Company fails to pay such expense within thirty days of
the occurrence of such Re-Liening Trigger, such amount shall be paid in
accordance with Section 12.02(d) of the Indenture.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Company.
(a) The Company hereby makes the following representations and
warranties as to each Loan Contract to the Issuer and for the benefit of MBIA,
the Indenture Trustee and the Noteholders, on which the Issuer relies in
acquiring the Loan Assets and MBIA relies in issuing the Class A Note Insurance
Policy. Such representations and warranties speak as of the Closing Date for the
Loan Contracts and the related Vehicles but shall survive any subsequent
transfer, assignment, contribution or conveyance of the Loan Contracts and
related Vehicles:
(i) The information set forth in the Loan Schedule is true and
correct as of the related Cut-Off Date.
(ii) The Loan Contract was originated in the United States of
America by a Dealer approved by the Company under the Company's approved
form of Loan Contract attached hereto as Exhibit B for the retail sale of
a financed Vehicle in the ordinary course of such Dealer's business, and
was purchased by the Company in the ordinary course of the Company's
business. Each Loan Contract is fully and properly executed by the parties
thereto, is a fully amortizing "Rule of 78's" Loan Contract motor vehicle
loan and provides for level Scheduled Payments over the term of such Loan
Contract. The rights with respect to each Loan Contract are assignable by
the lender thereunder and its assignees without the consent of or notice
to any Person.
(iii) The Company has heretofore provided to the Custodian on
behalf of the Indenture Trustee the sole original counterpart of each of
the Loan Contracts as amended, and the related Certificate of Title or the
Application for Certificate of Title, previously in the possession of the
Company, and the Loan Contracts have not been amended, waived or modified.
A Loan Contract File exists for each Loan Contract and such Loan Contract
File contains, without limitation, (a) a fully executed original of each
Loan Contract, endorsed, "Pay to the order of Bankers Trust Company as
Indenture Trustee," (b) a certificate of insurance, application form for
insurance signed by the Obligor, or signed representation letter from the
Obligor named in the Loan Contract pursuant to which the Obligor has
agreed to obtain physical damage insurance for the related Vehicle, (c)
evidence that the Obligor took possession of the Vehicle and that the
Vehicle was in good working order and acceptable to the Obligor at the
time of receipt by the Obligor, (d) the original credit application
executed by the Obligor and (e) the Certificate of Title or Application
for Certificate of Title or relevant lien certificate. Each of such
documents which is required to be signed by the Obligor has been signed by
the Obligor in the appropriate spaces. All blanks on any form have been
properly filled in and each form has otherwise been correctly prepared.
Each Loan Contract fulfills the documentation
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requirements contained in the Credit and Collection Policy as in effect on
the Closing Date.
(iv) There is only one original executed counterpart of the Loan
Contract that constitutes "chattel paper" for purposes of section
9-105(1)(b) and 9-308 of the UCC which has been delivered to the Custodian
and the Company's or the Servicer's electronic ledgers have been marked as
provided in Section 2.03 hereof.
(v) The Loan Contract was not originated in, nor is it subject
to the laws of, any jurisdiction, the laws of which would make unlawful
the sale, transfer or assignment of such document under any of the
Transaction Documents, including any repurchase in accordance with the
Transaction Documents. The Company has not entered into any agreement with
any Obligor that prohibits, restricts, or conditions the assignment of the
Loan Contracts.
(vi) The Loan Contract is, and on the Closing Date will be, in
full force and effect in accordance with its respective terms and neither
the Company nor any Obligor has or will have suspended or reduced any
payments or obligations due or to become due thereunder by reason of a
default by the other party to such Loan Contract; as of the Cut-Off Date,
none of the Obligors on the Loan Contracts are more than 30 days
delinquent in making a Scheduled Payment (except that Obligors on Loan
Contracts representing no more than 5% of the Initial Aggregate Loan
Balance may be up to 60 days delinquent in making a Scheduled Payment);
none of the Obligors are more than 30 days delinquent on any other
obligations to the Company and there are no proceedings pending, or to the
best of the Company's knowledge, threatened, asserting insolvency of an
Obligor; there has been no previous default on the Loan Contract that
resulted in repossession of the related Vehicle; and there are no
proceedings pending, or to the best of the Company's knowledge,
threatened, wherein the Obligor or any governmental agency has alleged
that any such Loan Contract is illegal or unenforceable. No funds have
been advanced by the Servicer, the Company, any Dealer, Falk or anyone
acting on behalf of any of them in order to cause any Loan Contract to
qualify under this clause.
(vii) The Loan Contract is the valid, binding and legally
enforceable obligation of the parties thereto, enforceable in accordance
with its terms, subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and other similar laws of general applicability
relating to or affecting creditors' rights generally and to general
principles of equity regardless of whether enforcement is sought in a
court of law or equity and all parties to each Loan Contract had full
legal capacity to deliver such Loan Contract and all other documents
related thereto and to grant the security interest purported to be granted
thereby.
(viii) All filings, notices (including Uniform Commercial Code
filings and Department of Motor Vehicles filings and notices), transfers
and recordings as required under the Indenture or applicable law to
perfect the first priority security interests of the
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Issuer and the Indenture Trustee in the Loan Assets being acquired
hereunder, have been accomplished and are in full force and effect or will
be accomplished within the time period specified in the Transaction
Documents. Each Loan Contract is secured by a Vehicle, creates a valid,
subsisting and enforceable first priority security interest in the Vehicle
securing such Loan Contract in favor of the Company and such Loan Contract
together with the related security interest has been duly assigned by the
Company to the Issuer. All documents necessary to permit the Indenture
Trustee to submit the Certificates of Title for each Vehicle to the
applicable Department of Motor Vehicles for retitling in the name of the
Indenture Trustee as secured party have been delivered to the Indenture
Trustee.
(ix) Each Loan Contract being acquired by the Issuer is
substantially in one of the forms attached hereto as Exhibit B, which each
of the Issuer and MBIA has had the opportunity to review prior to the
Closing Date, except for immaterial modifications or deviations from the
form loan contracts; any such modifications or deviations from the form
loan contracts will not have a material adverse effect on the Issuer, the
Noteholders or MBIA and will not reduce the Scheduled Payments or other
payments due under the Loan Contracts.
(x) Each Loan Contract was purchased by the Company from a
Dealer pursuant to a form of dealer agreement attached hereto as Exhibit C
or from the Falk Dealer pursuant to the CFAW Purchase Agreement. Each such
dealer agreement (other than the CFAW Purchase Agreement) was "without
recourse" to the related Dealers.
(xi) The Loan Contract was originated by a Dealer and
underwritten by the Company and the Dealer pursuant to, and each Loan
Asset satisfies in all material respects, the underwriting guidelines and
documentation standards of the Company. Such underwriting and origination
criteria meet the Company's underwriting and origination criteria as set
forth in the Credit and Collection Policy. The Credit and Collection
Policy used by the Servicer with respect to each Loan Contract have been
in all respects legal, proper, prudent and customary in the motor vehicle
financing and servicing business.
(xii) Each Loan Contract (A) has an original stated term of at
least 9 months and no more than 60 months (except that one Loan Contract
may have an original stated term of 64 months), (B) an interest rate of at
least 9.81%, and the weighted average interest rate of the Loan Contracts
as of the Closing Date is at least 25.16%, (C) is within its original term
and has not had more than two one-month extensions as of the Cut-Off Date,
(D) has a current Loan Balance of less than $25,000 (except that one Loan
Contract may have a Current Loan Balance of $30,337.41) and (E) has had at
least one Scheduled Payment made by the Obligor (except that Obligors on
Loan Contracts representing no more than 20% of the Initial Aggregate Loan
Balance may have made no Scheduled Payment).
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(xiii) None of the Obligors is the United States of America or any
state, or agency, department or instrumentality or political subdivision
of the United States of America or any state. Each Loan Contract is
payable in Dollars and the Obligor thereon is an individual who is a
United States resident.
(xiv) All requirements of applicable Federal, state and local
laws, and regulations thereunder in respect of the Loan Assets have been
complied with in all material respects, including, without limitation,
usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity
Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Federal Trade Commission Act, the Magnusson-Moss Warranty Act,
the Federal Reserve Board's Regulations B & Z, the applicable state
Consumer Credit Code and state adaptations of the National Consumer Act
and of the Uniform Consumer Credit Code, and any other applicable consumer
credit, equal opportunity and disclosure laws if any, and each Loan
Contract and the sale of any physical damage credit life and credit
accident and health insurance and any extended service contracts complied
in all material respects at the time it was originated or made and now
complies in all material respects with all legal requirements of the
jurisdiction in which it was originated.
(xv) The Loan Contract is not as of the Closing Date subject to
any right of rescission, set-off, counterclaim, claim or defense,
including the defense of usury, whether arising out of transactions
concerning the Loan Contract or otherwise, and the operation of any of the
terms of the Loan Contract or the exercise by the Company or the Obligor
of any right under the Loan Contract will not render the Loan Contract
unenforceable, in whole or in part, nor subject to any right of
rescission, set-off, counterclaim, claim or defense, including without
limitation, the defense of usury, and no such right of rescission,
set-off, counterclaim, claim or defense has been asserted with respect
thereto, except that certain rights or defenses may exist under applicable
law which, individually or in the aggregate, do not make the remedies
available to the Company and its assignees with respect to such Loan
Contract inadequate for the practical realization of the benefits provided
thereby.
(xvi) The Company has duly fulfilled all obligations to be
fulfilled on the lender's part under or in connection with the
origination, acquisition and assignment of the Loan Assets, including,
without limitation, giving any notices or consents necessary to effect the
acquisition of the Loan Assets by the Issuer, and none of the Servicer,
the Dealer nor the Company has done anything to impair the rights of the
Trust Estate, the Indenture Trustee, MBIA or the Noteholders in the Loan
Contract or payments with respect thereto. The Company has obtained all
necessary licenses, permits and charters required to be obtained by the
Company, which failure to obtain would render any portion of the
Transaction Documents unenforceable and would have a material adverse
effect on the Issuer, MBIA or the Noteholders.
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(xvii) The Loan Assets have not been sold, transferred, assigned or
pledged by the Company to any Person other than the Issuer, and upon
execution and delivery of this Loan Sale Agreement by the Company, the
Issuer will have all of the right, title and interest in and to the Loan
Assets, free and clear of all liens and encumbrances and any interest of
the Company or its successors, except for the interests of the Obligor
pursuant to the Loan Contract and the lien of the Indenture Trustee under
the Indenture. None of the Servicer, the Dealer nor the Company has taken
any action to convey any right to any Person that would result in such
Person having a right to payments received under the related Insurance
Policies, the related Dealer Agreements or dealer assignments or to
payments due under such Loan Contracts.
(xviii) Each Loan Contract requires that the Obligor obtain and
maintain, and each Obligor has in effect, an Insurance Policy covering
physical loss on and damage to the related Vehicle naming the Servicer as
loss payee and each Loan Contract permits the holder thereof to obtain
physical loss and damage insurance at the expense of the Obligor if the
Obligor fails to do so. Insurance coverage required to be maintained by
the Obligor under each Loan Contract is of a type, and insures the Vehicle
for an amount, that is (A) customary to industry practice for the type and
age of such Vehicle covered thereby and (B) consistent with the Company's
historical requirements for such coverage. Each Insurance Policy is
monitored in accordance with industry practice. At the time of origination
of each Loan Contract, the related Vehicle was covered by a comprehensive
and collision insurance policy (i) in an amount at least equal to the
lesser of (a) the maximum insurable value of the Vehicle or (b) the
principal amount due from the Obligor under the related Loan Contract,
(ii) naming the Company as a loss payee and (iii) insuring against loss
and damage due to fire, theft, transportation, collision and other risks
generally covered by comprehensive and collision coverage.
(xix) The sale to the Issuer of the Loan Assets does not violate
the terms or provisions of any loan or any other agreement to which the
Company is a party or by which it is bound.
(xx) The sale, transfer, assignment and conveyance of the Loan
Assets by the Company pursuant to this Loan Sale Agreement is not subject
to and will not result in any tax, fee or governmental charge payable by
the Company to any Federal, state or local government ("Transfer Taxes")
other than Transfer Taxes which have or will be paid by the Company as
due.
(xxi) Each Dealer that originated a Loan Contract for sale to the
Company has been selected by the Company based on the Company's
underwriting criteria, such Dealer's financial and operating history and
record of compliance with requirements of applicable Federal and state
law. Each Dealer from whom the Company purchases Loan Contracts directly,
has entered into an agreement with the Company providing for the sale of
motor vehicle loans from time to time by such Dealer to the Company and is
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authorized to originate Loan Contracts for sale to the Company. No Dealer
has engaged in any conduct constituting fraud or misrepresentation with
respect to the Loan Assets.
(xxii) As of the Closing Date, unless otherwise indicated, (a) no
application has been filed with the Department of Motor Vehicles of the
State of Virginia requesting assignment of a lien to or the issuance of a
new certificate of title noting the lien of any party other than the
Company or Falk and (b) except with respect to 35 Loan Contracts, the
Company has not received prepayment in full on any Loan Contract from an
Obligor.
(xxiii) Each Loan Contract has a final scheduled payment date on or
before six months prior to the Stated Maturity Date for the Class A Notes.
(xxiv) The Company or Falk is named as secured party on the
Certificate of Title or Application for Certificate of Title for each
Vehicle.
(xxv) No more than 2% of the Loan Contracts, based upon the Loan
Balance as of the Closing Date, are loans to finance an Obligor's purchase
of a motorcycle.
(xxvi) At the time of origination of each Loan Contract, the
proceeds of such Loan Contract were fully disbursed. There is no
requirement for future advances thereunder, and all fees and expenses in
connection with the origination of such Loan Contract have been paid.
(xxvii) No Loan Contract is due from an Obligor who has defaulted or
was more than 30 days delinquent under a previous or another contract with
the Company.
(xxviii) Each Loan Contract contains provisions requiring the
Obligor to assume all risk of loss or malfunction of the related Vehicle
and to maintain liability insurance with respect thereto, requiring the
Obligor to pay all sales, use, property, excise and other similar taxes
imposed on or with respect to the related Vehicle and making the Obligor
liable for all payments required to be made thereunder, without any
setoff, counterclaim or defense for any reason whatsoever, subject only to
the Obligor's right of quiet enjoyment.
(xxix) No Loan Contract provides for the substitution, exchange or
addition of any Vehicle subject to such Loan Contract.
(xxx) The Dealer that sold each Loan Contract had all necessary
licenses and permits to originate the Loan Contracts in the state where
such Dealer was located. The Loan Contract was purchased by the Company
from such Dealer under an existing dealer agreement with the Company and
was validly assigned by such Dealer to the Company. Each such dealer
agreement is in full force and effect and is the legal, valid and binding
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obligation of such Dealer and there have been no material defaults by such
Dealer or by the Company under such dealer agreement.
(xxxi) Each Vehicle was properly delivered to the related Obligor
in good repair, without defects and in satisfactory order, and, to the
best of the Company's knowledge, each Vehicle is in good operating
condition and repair as of the Closing Date. Each Vehicle was accepted by
the Obligor after reasonable opportunity to inspect and test same and no
Obligor has informed the Company of any defect therein.
(xxxii) To the best of the Company's knowledge, no Obligor is a
Person involved in the business of leasing or selling equipment of a type
similar to the Vehicles.
(xxxiii) No Loan Contract constitutes a "consumer lease" under
either (a) the UCC as in effect in the jurisdiction whose law governs the
Loan Contract or (b) the Consumer Leasing Act, 15 USC 1667.
(xxxiv) Each Loan Contract had at least one Loan Contract payment
remaining as of the Cut-Off Date.
(xxxv) No Loan Contract is assumable by another Person in a manner
which would release the Obligor thereof from such Obligor's obligations
with respect to such Loan Contract.
(xxxvi) Each Obligor has paid the entire down payment called for by
the Loan Contract.
(xxxvii) Scheduled Payments under each Loan Contract are due monthly
(or, in the case of the first Scheduled Payment, no later than the 45 days
after the date of such Loan Contract) in substantially equal amounts to
maturity, with the portion of the aggregate amount of such Scheduled
Payments to be refunded or credited to the Obligor as unearned add-on
interest upon prepayment in full or upon demand for payment upon
acceleration being determined on the basis of the terms of such Loan
Contract, and will be sufficient to fully amortize such Loan Contract at
maturity. Such Scheduled Payments are applicable only to payment of
principal and interest on the related Loan Contract and not to the payment
of any insurance premiums (although the proceeds of the extension of
credit on such Loan Contract may have been used to pay insurance
premiums).
(xxxviii) Each Loan Contract does not permit early termination or
prepayment unless the amount to be paid by or on behalf of the Obligor in
respect of such prepayment or termination is at all times equal to or in
excess of a specified prepayment amount.
(xxxix) No Loan Contract was purchased by the Company after August
31, 1996.
(xl) Each Loan Contract was originated after September 1, 1992.
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(xli) The Dealer that sold each Loan Contract to the Company has
entered into a Dealer Agreement and such Dealer Agreement constitutes the
entire agreement between the Company and the related Dealer with respect
to the sale of such Loan Contract to the Company. Each such Dealer
Agreement is in full force and effect and is the legal, valid and binding
obligation of such Dealer; there have been no material defaults by such
Dealer or by the Company under such Dealer Agreement; the Company has
fully performed all of its obligations under such Dealer Agreement; the
Company has not made any statements or representations to such Dealer
(whether written or oral) inconsistent with any term of such Dealer
Agreement; the purchase price (as specified in the applicable Dealer
Agreement) for such Loan Contract has been paid in full by the Company;
there is no other payment due to such Dealer from the Company for the
purchase of such Loan Contract; such Dealer has no right, title or
interest in or to any Loan Contract; there is no prior course of dealing
between such Dealer and the Company which will affect the terms of such
Dealer Agreement; any payment owed to such Dealer by the Company is a
corporate obligation of the Company in the nature of a bonus for amounts
collected by the Company in excess of the purchase price for a Loan
Contract.
(xlii) No more than 85% of the aggregate principal balance of the
Loan Contracts as of the Closing Date is attributable to Loan Contracts with
Obligors having a billing address in any single State.
(xliii) Prior the sale to the Issuer, the Company had all right,
title and interest in and to the Loan Assets, free and clear of all liens and
encumbrances.
(xliv) As of the Closing Date, the parties to each Loan Contract are
the Company and Obligor.
(xlv) As of the time of the assignment, transfer and contribution of
the Loan Contracts pursuant to the terms of this Loan Sale Agreement, no Obligor
will have been released, in whole or in part, from any of its obligations in
respect of any Loan Contract; no Loan Contract will have been satisfied or
subordinated, in whole or in part, or rescinded, and no Vehicle covered by such
Loan Contract will have been released from such Loan Contract, in whole or in
part, nor will any instrument have been executed that would effect any such
satisfaction, release, cancellation, subordination, or rescission; except that
after the Cut-Off Date and prior to the Closing Date, the Company has received
prepayment on less than 1% (by Aggregate Loan Balance) of the Loan Contracts and
such Loan Contracts have been satisfied and the related Vehicles released from
such Loan Contracts.
(b) The Company hereby makes, as of the Closing Date, the following
representations and warranties to the Issuer, and for the benefit of MBIA, the
Indenture Trustee and the Noteholders, on which the Issuer relies in acquiring
the Loan Assets and selling the Notes and on which MBIA relies in issuing the
Class A Note Insurance Policy. Such representations and warranties shall survive
any subsequent transfer, assignment, contribution or conveyance of the Loan
Contracts and related Vehicles.
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(i) The Company used no selection procedures that identified the
Loan Contracts being acquired on the Closing Date as being less desirable
or valuable than other comparable motor vehicle loans originated or
acquired by the Company.
(ii) The Computer Tape from which the selection of the Loan
Contracts being acquired on the Closing Date was made, as made available
to the Issuer's accountants that are providing a comfort letter to MBIA,
the Noteholders, or the Placement Agent in connection with any information
contained in any Private Placement Memorandum applicable to such Notes was
complete and accurate as of the Cut-Off Date and includes a description of
the same Loan Contracts that are described in the related Loan Schedule
and the payments due thereunder as of the Cut-Off Date.
(iii) The Company has foreclosed on Vehicles and retitled
Certificates of Titles using the power of attorney executed by the Falk
Dealer and has the legal right to foreclose on all Vehicles and to retitle
all related Certificates of Title or Applications for Certificates of
Title.
(c) The Company hereby makes the following representations and
warranties to the Issuer and for the benefit of MBIA, the Indenture Trustee and
the Noteholders, on which the Issuer relies in acquiring the Loan Assets and
selling the Notes and on which MBIA relies in issuing the Class A Note Insurance
Policy. Such representations and warranties speak as of the Closing Date but
shall survive any subsequent transfer, assignment, contribution or conveyance of
the Loan Contracts and related Vehicles:
(i) The Company has been duly organized and is validly existing
and in good standing as a corporation under the laws of its jurisdiction
of incorporation with corporate power and authority to own its properties
and to transact the business in which it is now engaged, and the Company
is duly qualified to do business in and is in good standing under the laws
of each State in which the nature of its business requires such
qualification, except where failure to so qualify would not have a
material adverse effect on the ability of the Company to perform its
obligations under the Transaction Documents or any of the Loan Contracts.
(ii) The performance of the obligations of the Company under this
Loan Sale Agreement and the other Transaction Documents, and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in any breach of any of the terms or provisions
of, or constitute with or without notice, lapse of time or both, a default
under the certificate of incorporation or by-laws of the Company, or any
material indenture, agreement, mortgage, deed of trust or other instrument
to which the Company is a party or by which it is bound, or result in the
creation or imposition of any lien, charge or encumbrance (except the lien
created by the Indenture) upon any of the property or assets of the
Company pursuant to the terms of such indenture, mortgage, deed of trust,
or other agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the Company's property or
assets is
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subject, nor will such action result in any violation of the provisions of
the Company's certificate of incorporation or by-laws or any statute or
any order, rule or regulation of any court or any regulatory authority or
other governmental agency or body having jurisdiction over the Company or
any of its properties; and no consent, approval, authorization, order,
registration or qualification of or with or other action of any court, or
any such regulatory authority or other governmental agency or body is
required for consummation of the transactions contemplated by this Loan
Sale Agreement and the other Transaction Documents, except such consents,
approvals and authorizations that have been obtained or such registrations
or qualifications that have been made.
(iii) This Loan Sale Agreement has been duly authorized, executed
and delivered by the Company by all necessary corporate action and such
agreements are the valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject as to enforcement to applicable bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of
equity regardless of whether enforcement is sought in a court of law or
equity.
(iv) The chief executive office, chief place of business and the
office where the Company keeps its records concerning the Loan Contracts
and the Vehicles is 863 Glenrock Road, Suite 201, Norfolk, Virginia 23502.
(v) the Company does not believe, nor does it have any
reasonable cause to believe, that it cannot perform each and every
covenant contained in this Loan Sale Agreement.
(vi) The transactions contemplated by the Transaction Documents
are being consummated by the Company in furtherance of its ordinary
business purposes, with no contemplation of insolvency and with no intent
to hinder, delay or defraud any of its present or future creditors.
(vii) The consideration received by the Company as set forth
herein is fair consideration having value reasonably equivalent to or in
excess of the value of the Loan Assets and the performance of the
Company's obligations hereunder.
(viii) Neither on the date of the transactions contemplated by the
Transaction Documents or immediately before or after such transactions,
nor as a result of the transactions, will the Company:
(A) be insolvent such that the sum of its debts is greater
than all of its respective property, at a fair valuation;
(B) be engaged in or about to engage in, business or a
transaction for which any property remaining with the Company will
be an unreasonably small
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capital or the remaining assets of the Company will be unreasonably
small in relation to its respective business or the transaction; and
(C) have intended to incur or believed it would incur, debts
that would be beyond its ability to pay as such debts mature or
become due. The Company's assets and cash flow enable it to meet its
present obligations in the ordinary course of business as they
become due.
(ix) Both immediately before and after the transactions
contemplated by the Transaction Documents (a) the present fair salable
value of the Company's assets was or will be in excess of the amount that
will be required to pay its probable liabilities as they then exist and as
they become absolute and matured; and (b) the sum of the Company's assets
was or will be greater than the sum of its debts, valuing its assets at a
fair salable value.
(x) The acquisition of the Loan Assets by the Issuer pursuant to
this Loan Sale Agreement is not subject to the bulk transfer or any
similar statutory provisions in effect in any applicable jurisdiction.
(xi) There are no proceedings or investigations pending, or to
the knowledge of the Company, threatened, against or affecting the Company
in or before any court, governmental authority or agency or arbitration
board or tribunal (including, but not limited to any such proceeding or
investigation with respect to any environmental or other liability
resulting from an interest in any of the Vehicles) which, individually or
in the aggregate, if determined adversely to the Company, would materially
and adversely affect the properties, business, prospects, profits or
conditions (financial or otherwise) of the Company, or the ability of the
Company to perform its obligations under, or the validity or
enforceability of, this Loan Sale Agreement. The Company is not in default
with respect to any order of any court, governmental authority or agency
or arbitration board or tribunal.
(xii) All tax returns or extensions required to be filed by the
Company in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon the Company, or upon
any of the respective properties, income or franchises of the Company,
shown to be due and payable on such returns have been, or will be, paid
when due. To the best of the Company's knowledge, all such tax returns are
true and correct and the Company has no knowledge of any proposed
additional tax assessment against it in any material amount nor of any
basis therefor. The provisions for taxes on the books of the Company are
in accordance with generally accepted accounting principles.
(xiii) The Company (i) is not in violation of any laws, ordinances,
governmental rules or regulations to which it is subject, (ii) has not
failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the
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ownership of its property or to the conduct of its business, and (iii) is
not in violation in any material respect of any term of any agreement,
charter instrument, bylaw or instrument to which it is a party or by which
it may be bound which violation or failure to obtain would materially and
adversely affect the ability of the Company to perform its obligations
under, or the validity or enforceability of, this Loan Sale Agreement.
(xiv) It is the intention of the Company that the Loan Assets be
acquired by the Issuer and that the beneficial interest in and title to
the Loan Assets not be part of the Company's property for any purpose
under state or Federal law.
(xv) Immediately prior to the acquisition of the Loan Contracts
by the Issuer pursuant to this Loan Sale Agreement, the Company was the
sole owner of the Loan Contracts and had a valid first perfected security
interest in the related Vehicles and had good and marketable title
thereto, free and clear of all liens, claims and encumbrances and the
acquisition of the Loan Assets by the Issuer does not violate the terms or
provisions of any Loan Contract.
(xvi) The Company is treating the transfer of the Loan Contracts
and the related Vehicles on the Closing Date as a sale to the Issuer for
Federal, state and local income tax, reporting and accounting purposes.
(xvii) The Private Placement Memorandum (except with respect to the
section entitled "MBIA and the Class A Note Insurance Policy" and
Appendices C, D and E thereto) does not contain any untrue statement of
fact or omit to state any fact necessary to make the facts stated therein
not materially misleading.
(xviii) The Company and the Issuer are members of an affiliated
group within the meaning of section 1504 of the Internal Revenue Code,
which will file a consolidated Federal income tax return at all times
until termination of the Transaction Documents.
Notwithstanding that any representation or warranty set forth in
this Section 3.01 is made to the best of the Company's knowledge (or to the best
of the Issuer's knowledge as such representation or warranty is applied to the
Issuer under the terms of the Indenture), in the event any such representation
or warranty is found to be untrue or incorrect, the repurchase and substitution
provisions of Sections 3.03 and 3.04 hereof shall apply as if such
representation or warranty was not conditioned on the Company's (or the
Issuer's) knowledge.
Section 3.02. Representations and Warranties of the Issuer.
The Issuer hereby makes the following representations and warranties
to and agrees with the Company for the benefit of MBIA, the Indenture Trustee
and the Noteholders, on which representations and warranties the Company relies
in entering into this Loan Sale Agreement with the Issuer and MBIA relies in
issuing the Class A Note Insurance Policy. The Company agrees that any breach by
the Issuer of any such representations and warranties shall
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not limit or excuse the full performance of the Company's obligations hereunder.
Such representations and warranties speak as of the Closing Date, but shall
survive any subsequent transfer, assignment, contribution or conveyance of the
Loan Contracts and the security interest in the related Vehicles:
(a) The Issuer has been duly organized and is validly existing in
good standing as a corporation under the laws of the Issuer State of
Incorporation, with corporate power and authority to own its properties, perform
its obligations under the Transaction Documents and to transact the business in
which it is now engaged or in which it proposes to engage; the Issuer is duly
qualified to do business and is in good standing in each State in which the
nature of its business requires it to be so qualified, except where failure to
so qualify would not have a material adverse effect on the ability of the Issuer
to perform its obligations under the Transaction Documents.
(b) The Transaction Documents have been duly authorized, executed
and delivered by the Issuer by all necessary corporate action and constitute
valid and legally binding obligations of the Issuer enforceable against the
Issuer in accordance with their terms, subject as to enforcement to bankruptcy,
insolvency, reorganization and other similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity regardless of whether enforcement is sought in a court of equity or
law.
(c) There are no proceedings or investigations to which the Issuer,
or any of the Issuer's Affiliates, is a party pending or, to the knowledge of
the Issuer, threatened, before any court, regulatory body, administrative agency
or other tribunal or governmental instrumentality (a) asserting the invalidity
of this Loan Sale Agreement, (b) seeking to prevent the issuance of the Notes or
the consummation of any of the transactions contemplated by this Loan Sale
Agreement, or (c) seeking any determination or ruling that would materially and
adversely affect the performance by the Issuer of its obligations under, or the
validity or enforceability of, this Loan Sale Agreement.
(d) All approvals, authorizations, consents, orders or other actions
of any Person or of any court, governmental agency or body or official, required
in connection with the execution and delivery of this Loan Sale Agreement, have
been or will be taken or obtained on or prior to the Closing Date.
(e) The principal place of business and chief executive office of
the Issuer is 863 Glenrock Road, Norfolk, Virginia 23502.
(f) The Issuer will treat the Notes as debt of the Issuer for all
Federal, state and local income tax purposes.
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Section 3.03. Purchase of Loan Contracts.
(a) If (i) the Company, the Issuer, the Indenture Trustee, the
Servicer or MBIA discovers the breach of any representations or warranties set
forth in Sections 3.01 or 3.02 hereof which materially and adversely affects the
value of a Loan Contract or an interest in the related Vehicles, or the
interests of the Noteholders or MBIA, or the breach of any of the
representations and warranties set forth in Sections 3.01(a)(ii), 3.01(a)(v),
3.01(a)(vii) or 3.01(a)(xvi) hereof, or (ii) the Company or the Issuer discovers
or is notified of the occurrence of any missing or defective document as
specified in Section 2.05 hereof, or (iii) the Custodian shall fail to receive
with respect to each Loan Contract an original Certificate of Title within the
time required pursuant to Section 4.02(a) of the Indenture and 2.03(a) hereof,
then the party discovering such breach or condition shall give prompt written
notice to the other parties and MBIA and in the case of clause (i) above, the
Company shall, within 30 days from the date the Company was notified of, or
otherwise discovers, such breach, cure such breach, and in the case of clause
(ii), the Company shall, within 60 days from the date the Company was notified
of or otherwise discovers such breach, cure such breach. If the Company fails to
cure such breach in the applicable time period or is unable to cure such
circumstance or condition, the Company shall purchase such Loan Contract and the
security interest in the related Vehicle from the Issuer at the Purchase Price.
The Purchase Price for a repurchased Loan Contract and the security interest in
the related Vehicle shall be paid by the Company in accordance with Section 3.04
hereof. It is understood and agreed that the obligation of the Company to cure
or purchase any Loan Contract as to which such a breach has occurred shall
constitute the sole remedy respecting such breach available to the Issuer, the
Noteholders or the Indenture Trustee on behalf of such Noteholders (except for
any indemnities provided under Section 4.01(j) hereof or under the Indenture)
for any losses, claims, damages and liabilities arising from the Issuer's
ownership of such Loan Contract or the inclusion of such Loan Contract in the
Trust Estate.
Section 3.04. Requirements for Purchase of Loan Contracts.
(a) If the Company purchases any Loan Contracts under Section 3.03
hereof, or if the Issuer purchases any Loan Contract under Sections 4.03 or
11.03 of the Indenture or if the Servicer purchases any Loan Contract under
Section 3.04 of the Servicing Agreement, such Loan Contract shall be purchased
by the Company, the Servicer or the Issuer, as applicable, at the Purchase
Price. All purchases and removals shall be accomplished at the times specified
in subsection (b) below.
(b) Any purchase of a Loan Contract by the Company, the Servicer or
the Issuer in accordance with the terms of the Transaction Documents shall be
made by remittance of the Purchase Price to the Servicer for deposit into the
Collection Account in accordance with Section 3.03 of the Servicing Agreement on
or prior to the Determination Date next following the expiration of the cure
period set forth in Section 3.03 hereof. In addition, upon deposit into the
Collection Account of the Purchase Price the Indenture Trustee shall release the
related Loan Contract, the Certificate of Title and/or Application for
Certificate of Title in accordance with
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Section 4.04 of the Indenture, and the Custodian shall no longer hold the
related Loan Contract File.
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ARTICLE IV
COVENANTS OF THE COMPANY
Section 4.01. Company Covenants.
The Company hereby covenants and agrees with the Issuer as follows:
(a) Except as hereinafter provided, the Company will keep in full
effect its existence, rights and franchises as a corporation, and will obtain
and preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Loan Sale Agreement or any of the Loan
Contracts and to perform its duties hereunder. Any person into which the Company
may be merged or consolidated, or to whom the Company has sold substantially all
of its assets, or any corporation resulting from any merger, conversion or
consolidation to which the Company shall be a party, or any Person succeeding to
the business of the Company shall be the successor of the Company hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding;
provided, however, that (i) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Section 3.01(c) hereof shall have
been breached and no Reserve Account Increase Event, Event of Default or
Servicer Event of Default would occur as a result thereof, (ii) such successor
executes an agreement or assumption, in form reasonably satisfactory to the
Indenture Trustee and MBIA, to perform every obligation under this Loan Sale
Agreement, (iii) such successor has a net worth that is sufficient to perform in
accordance with the Transaction Documents and at least approximately equivalent
to the net worth of the Company immediately prior to such sale, merger or
consolidation, (iv) the Company shall have delivered prior written notice
thereof to MBIA and to the Issuer and MBIA a certificate of an officer of the
Company and an Opinion of Counsel each stating that such consolidation, merger,
or succession and such agreement of assumption complies with this Section 4.01
and that all conditions precedent, if any, provided for in this Loan Sale
Agreement relating to such transaction have been complied with, and (v) the
Company shall have delivered to the Issuer, MBIA, and the Indenture Trustee an
Opinion of Counsel stating either (1) in the opinion of such Counsel, all
financing statements, continuation statements and amendments thereto have been
executed and filed that are necessary fully to preserve and protect the interest
of the Issuer and the Indenture Trustee in the Loan Contracts and reciting the
details of such filings, or (2) in the opinion of such Counsel, no such action
shall be necessary to preserve and protect such interest.
(b) Neither the Company nor any of the directors, officers,
employees or agents of the Company shall be under any liability to the Issuer,
the Indenture Trustee or the Noteholders for any action taken or for refraining
from the taking of any action in good faith pursuant to this Loan Sale
Agreement, or for errors in judgment not involving recklessness or negligence;
provided, however, that this provision shall not protect the Company against any
breach of warranties or representations made herein, or failure to perform its
obligations in strict compliance with this Loan Sale Agreement, or any liability
which would otherwise be imposed
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by reason of any breach of the terms and conditions of this Loan Sale
Agreement. The Company, and any director, officer, employee or agent of the
Company, may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Company shall not be under any obligation to appear in, prosecute, or defend
any legal action that is not incidental to its obligations as the contributor of
the Loan Assets under this Loan Sale Agreement and that in its opinion may
involve it in any expense or liability.
(c) The Company, from time to time, at its own expense, shall
execute and file such additional financing statements (including continuation
statements) as may be necessary to preserve the security interests and liens
described in Section 3.01(a)(viii) hereof as may be reasonably requested by the
Issuer, MBIA or the Indenture Trustee and are reasonably satisfactory in form
and substance to the Indenture Trustee and MBIA.
(d) The Company will not change its name, identity or corporate
structure in any manner that would, could, or might make any financing statement
or continuation statement misleading within the meaning of section 9-402(7) of
the UCC, unless it shall have given the Issuer, MBIA and the Indenture Trustee
at least 30 days' prior written notice thereof and shall have provided evidence
of appropriate UCC filings.
(e) The Company will give the Issuer, MBIA and the Indenture Trustee
at least 30 days' prior written notice of any relocation of its principal
executive office, and if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement, the Company shall provide evidence of appropriate UCC filings.
(f) The Company will duly fulfill all obligations on its part to be
fulfilled under or in connection with each Loan Contract, will not change or
modify the terms of the Loan Contracts except as expressly permitted by the
terms of the Transaction Documents and will do nothing to impair the rights of
the Issuer, MBIA or the Indenture Trustee in the Loan Contract or the Vehicles.
In the event that the rights of the Company under any Loan Contract, any
guaranty of the related Obligor's obligations under any Loan Contract, or any
Insurance Policy are not assignable or have in fact, not been assigned to the
Issuer or to the Indenture Trustee, the Company will enforce such rights on
behalf of the Issuer and the Indenture Trustee.
(g) The Company will comply, in all material respects, with all
acts, rules, regulations, orders, decrees and directions of any governmental
authority applicable to the Loan Assets or any part thereof; provided, however,
that the Company may contest any act, regulation, order, decree or direction in
any reasonable manner which shall not materially and adversely affect the rights
of the Issuer, MBIA or the Indenture Trustee in the Loan Assets.
(h) The Company will advise the Issuer, MBIA and the Indenture
Trustee promptly, in reasonable detail, of the occurrence of any breach by the
Company following
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discovery by the Company of such breach of any of its representations,
warranties or covenants contained herein.
(i) The Company will execute or endorse, acknowledge, and deliver to
the Issuer, MBIA and the Indenture Trustee from time to time such schedules,
confirmatory assignments, conveyances, powers of attorney, and other
reassurances or instruments and take such further similar actions relating to
the Loan Contracts, the related Vehicles, and the rights covered by the
Transaction Documents, as the Issuer, MBIA or the Indenture Trustee may
reasonably request to preserve and maintain the Issuer's right and title to the
Loan Assets and the rights of the Indenture Trustee, MBIA and the Noteholders
therein against the claims of all persons and parties.
(j) The Company agrees to indemnify, defend and hold the Issuer, the
Indenture Trustee and MBIA harmless from and against any and all loss,
liability, damage, judgment, claim, deficiency or expense (including interest,
penalties, reasonable attorney's fees and amounts paid in settlement) that is
caused by (i) a breach at any time by the Company of its representations,
warranties and covenants contained in Section 3.01 hereof or this Section 4.01
or (ii) any material information furnished by the Company which is set forth in
any schedule delivered hereunder, being untrue in any respect when any such
representation was made or schedule delivered, provided that the Company shall
not have any liability with respect to a representation or warranty as to any
specific Loan Contract or Vehicle other than to purchase such Loan Contract in
accordance with Section 3.03 hereof unless such breach of representation or
warranty is the result of the Company's fraud, negligence, bad faith or willful
misconduct. The Company shall also indemnify the Issuer, the Indenture Trustee,
the Servicer and MBIA for any cost or expenses incurred by them in the
enforcement of this Loan Sale Agreement or as a result of the Company's failure
to perform its obligations hereunder. The obligations of the Company under this
Section 4.01(j) shall be considered to have been relied upon by the Issuer, the
Indenture Trustee and MBIA and shall survive the execution, delivery and
performance of this Loan Sale Agreement, regardless of any investigation made by
or on behalf of the Issuer, until termination of the Indenture. If the Company
has made any indemnity payments pursuant to this Section 4.01(j) and thereafter
any Person recovers the amount of the related loss or any portion thereof from
others, such Person will promptly repay the amount recovered to the Company,
without interest.
(k) The Company will do nothing to disturb or impair the acquisition
hereunder by the Issuer of the Loan Contracts and the related Vehicles.
(l) The Company (i) will (A) maintain its books and records separate
from the books and records of the Issuer and (B) maintain bank accounts separate
from those of the Issuer and (C) maintain two independent directors on the
Issuer's board of directors, so long as the Company is a shareholder of the
Issuer and (ii) will not (X) take any action that would cause the dissolution or
liquidation of the Issuer, (Y) guarantee (directly or indirectly), endorse or
otherwise become contingently liable (directly or indirectly) for the
obligations of the Issuer, or (Z) institute against the Issuer, or join any
other person in instituting against the Issuer, any case, proceeding
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or other action under any existing or future bankruptcy, insolvency or similar
laws. This subsection (l) shall survive termination of this Loan Sale Agreement.
(m) The Company shall notify the Issuer, the Indenture Trustee and
MBIA promptly after becoming aware of any Lien on any Loan Asset.
(n) The annual financial statements of the Company will disclose the
effects of the transactions contemplated by the Transaction Documents as a sale
by the Company in accordance with generally accepted accounting principles. The
financial statements of the Company and the Issuer will also disclose that the
assets of the Issuer are not available to pay creditors of the Company. The
resolutions, agreements and other instruments underlying the Transaction
Documents will be continuously maintained by the Company as official records.
(o) The Company, as Servicer, will, at its own cost and expense, (i)
retain or cause to be retained the electronic ledger as a master record of the
Loan Contracts and related Vehicles and the Loan Contract File as custodian for
the Issuer, the Indenture Trustee, MBIA and other Persons, if any, with
interests in the Loan Contracts and related Vehicles and (ii) mark the
Electronic Ledger to the effect that the Loan Contracts and security interest in
the Vehicles have been acquired by the Issuer and that they have been
transferred and assigned to the Indenture Trustee pursuant to the Indenture.
(p) The affiliated group of which the Company and the Issuer are
members within the meaning of section 1504 of the Code shall treat the Loan
Contracts as owned by the Issuer for Federal, state and local income tax
purposes, shall include in the computation of the Issuer's gross income the
income from the Loan Contracts, shall treat the Notes as debt of the Issuer, and
shall cause the Issuer to deduct the interest paid or accrued with respect to
the Notes in accordance with such group's applicable method of accounting.
(q) In the event that the Issuer receives actual notice of any
Transfer Taxes arising out of the transfer, assignment and conveyance of the
Loan Assets, on written demand by the Issuer or the Indenture Trustee, or upon
the Company otherwise being given notice thereof by the Issuer or the Indenture
Trustee, the Company shall pay, and otherwise indemnify and hold the Issuer, the
Indenture Trustee, MBIA and the Noteholders harmless, on an after-tax basis,
from and against any and all such Transfer Taxes (it being understood that the
Issuer, the Indenture Trustee, MBIA and the Noteholders shall have no obligation
to pay such Transfer Taxes).
(r) The Company shall deliver or cause to be delivered within 30
days of the Closing Date, by first class mail, postage prepaid, written notice
to each Obligor substantially in the form of Exhibit E hereto indicating that
the Obligor's related Loan Contract has been sold to the Issuer and that all
payments with respect to such Loan Contract are required to be paid, on and
after the date of receipt of such notice, to AutoInfo Finance of Virginia, Inc.,
as Servicer. The Company shall, on or before the thirty-fifth day following the
Closing Date, deliver a written certificate to the Issuer and the Indenture
Trustee certifying that the written notice described in the immediately
preceding sentence was timely mailed to each Obligor.
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Section 4.02. Issuer Covenants.
The Issuer hereby covenants and agrees with the Company as follows:
(a) If in any enforcement suit or legal proceeding it is held that
the Company may not enforce a Loan Contract on the ground that it is not a real
party in interest or holder entitled to enforce the Loan Contract, the Issuer
shall, at the Issuer's expense, take such steps as the Issuer deems necessary to
enforce the Loan Contract, including bringing suit in the Issuer's name.
(b) The Issuer warrants that it will own and possess a first
priority security interest in the Vehicles upon its acquisition thereof and that
it will warrant and defend its interest in the Vehicles against all Persons,
claims and demands whatsoever. The Issuer shall not assign, sell, pledge, or
exchange, or in any encumber or otherwise dispose of its interest in the
Vehicles, except as permitted under the Indenture.
(c) The Issuer shall treat the Loan Contracts as owned by it for
Federal, state and local income tax purposes, shall include in the computation
of its gross income the income from the Loan Contracts, shall treat the Notes as
its debt and shall deduct the interest paid or accrued with respect to the Notes
in accordance with its applicable method of accounting for such purposes.
Section 4.03. Assignment of Loan Assets.
The Company understands that the Issuer will assign to and grant to
the Indenture Trustee a security interest in all of its right, title and
interest to this Loan Sale Agreement and the Loan Assets. The Company consents
to such assignment and grants and further agrees that all representations,
warranties, covenants and agreements the Company makes herein shall also be for
the benefit of and inure to the Indenture Trustee, MBIA and all Noteholders from
time to time of the Notes. The Company agrees to execute in favor of the
Indenture Trustee a power of attorney and any other assignments and applications
in form and substance sufficient to allow the Indenture Trustee to assert or
protect its security interest in the Vehicles, including, as may be necessary to
submit for retitling in the Indenture Trustee's name any Certificate of Title to
the applicable Department of Motor Vehicles.
Section 4.04. Limitation on Recourse to Dealers.
(a) With respect to each Loan Contract acquired from a Falk Dealer
by the Company, sold by the Company to the Issuer pursuant to the terms hereof
and Granted to the Indenture Trustee by the Issuer pursuant to the terms of the
Indenture, the Company and the Issuer shall not have the right to, and shall
not, exercise or accept the benefits of any right of recourse the Company or the
Issuer may have against such Falk Dealer that otherwise would permit the Company
or the Issuer to cause such Falk Dealer to pay any amount with respect to such
Loan Contract in the event it becomes a Defaulted Loan Contract, except that
such recourse
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may be exercised to the extent that all Recoveries in the aggregate paid by the
Falk Dealer after the Cut-Off Date with respect to the related Loan Contracts as
a result of the exercise of such recourse by the Company or the Issuer does not
exceed an amount equal to 10% of the aggregate Loan Balance as of the Cut-Off
Date of all Loan Contracts acquired from such Falk Dealer.
(b) The form of UCC-1 financing statements filed pursuant to Section
2.03(a) hereof shall contain a statement to the effect that recourse to the Falk
Dealer is limited as provided in Section 4.04(a) hereof.
(c) The limitation on recourse provided in Section 4.04(a) hereof
shall be for the benefit of, and shall be enforceable through specific
performance or other remedies available at law or in equity by, the Falk Dealer,
the Indenture Trustee or the Noteholders.
Section 4.05. Termination of Obligations.
The obligations hereunder shall continue in full force and effect
until the later of (i) the termination of the Indenture or (ii) the final
payment with respect to the last Loan Asset.
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ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Conditions to the Issuer's Obligations.
The obligations of the Issuer to provide the Company with the
consideration provided for herein shall be subject to the satisfaction of the
following conditions:
(a) All representations and warranties of the Company and all
information provided in any Loan Schedule shall be true and correct on the
Closing Date;
(b) On or prior to the Closing Date, the Company shall have
delivered to the Custodian the original Loan Contracts, the Certificates of
Title or the Applications for Certificates of Title and a power of attorney and
such other documents that would be sufficient to permit the Indenture Trustee to
submit for retitling in the Indenture Trustee's name any Certificate of Title,
and there shall have been made all filings, recordings and/or registrations, and
there shall have been given, or taken, any notice or any other similar action,
as may be necessary in the opinion of the Issuer and MBIA, in order to establish
and preserve the right, title and interest of the Issuer in the Loan Assets;
(c) On or prior to the Closing, the Custodian shall have received
the Custodial Files for each Loan Contract;
(d) On or before the Closing Date, the Issuer, the Servicer, the
Back-Up Servicer, the Custodian and the Indenture Trustee shall have entered
into the Indenture and the Servicing Agreement, as applicable;
(e) The Notes shall be issued and sold on the Closing Date and the
Issuer shall receive the full consideration due it upon the issuance of such
Notes;
(f) The Company shall have delivered all other information
theretofore required or reasonably requested by the Issuer to be delivered by
the Company hereunder, duly certified by an officer of the Company, and the
Company shall have substantially performed all other obligations required to be
performed by the provisions of this Loan Sale Agreement; and
(g) No Default, Event of Default, Reserve Account Increase Event,
Re-Liening Trigger or Servicer Event of Default shall have occurred with respect
to any of the Notes.
Section 5.02. Conditions to the Company's Obligations.
The obligations of the Company to enter into this Loan Sale
Agreement on the Closing Date shall be subject to the satisfaction of the
following conditions:
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(a) The consideration set forth herein shall have been paid or
delivered to the Company simultaneously with the execution of this Loan Sale
Agreement.
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ARTICLE VI
RESERVED
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ARTICLE VII
MISCELLANEOUS
Section 7.01. Amendments.
This Loan Sale 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 together with the prior
written consent of the Indenture Trustee and MBIA. Promptly after the execution
of any amendment, the Issuer shall send to the Indenture Trustee, MBIA, the
Custodian, each Noteholder, and each Rating Agency, a conformed copy of each
such amendment.
Section 7.02. Governing Law.
This Loan Sale Agreement shall be construed in accordance with the
internal laws of the State of New York, without regard to choice of law
principles.
Section 7.03. Notices.
All demands, notices and communications hereunder shall be in
writing and shall be delivered or mailed by registered or certified United
States mail, postage prepaid, and addressed, in the case of the Company, to the
Company Address, and in the case of the Issuer, to the Issuer Address. All
notices and demands shall be deemed to have been given either at the time of the
delivery thereof to any officer of the Person entitled to receive such notices
and demands at the address of such Person for notices hereunder, or on the third
day after the mailing thereof to such address, as the case may be. Any Person
may change the address for notices hereunder by giving notice of such change to
the other Person.
Section 7.04. Separability Clause.
Any provisions of this Loan Sale 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 7.05. Assignment.
Except as provided in Section 4.01(a) hereof, this Loan Sale
Agreement may not be assigned or delegated by the Company without the prior
written consent of the Issuer, MBIA and the Indenture Trustee, and may not be
assigned or delegated by the Issuer without the prior written consent of the
Company, MBIA and the Indenture Trustee.
32
<PAGE>
Section 7.06. Further Assurances.
Each of the Company and the Issuer agrees to do such further acts
and things and to execute and deliver to the Indenture Trustee and MBIA such
additional assignments, agreements, powers and instruments as are required by
the Indenture Trustee or MBIA to carry into effect the purposes of this Loan
Sale Agreement or to better assure and confirm unto the Indenture Trustee, MBIA
or the Noteholders their rights, powers or remedies hereunder. If any Obligor
shall be in default under any Loan Contract, upon reasonable request from the
Servicer, the Company will take all reasonable steps to assist in enforcing such
Loan Contract and preserving and maintaining title to the Loan Assets and the
rights of the Indenture Trustee, MBIA and the Noteholders therein against the
claims of all persons and parties to the extent the Company is capable of
performing such requested steps and the Servicer determines that the assistance
of the Company is necessary to effect the intent and purposes hereof.
Section 7.07. No Waivers; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of
the Issuer or the Company, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise of any
right, remedy, or privilege hereunder preclude any other or further exercise
hereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privilege provided by law.
Section 7.08. Binding Effect; Third Party Beneficiaries.
This Loan Sale Agreement will inure to the benefit of and be binding
upon the parties hereto, and shall inure to the benefit of the Indenture
Trustee, MBIA, the Noteholders, and their respective successors and permitted
assigns as express third party beneficiaries.
Section 7.09. Set-Off.
(a) The Company hereby irrevocably and unconditionally waives all
right of set-off that it may have under contract (including this Loan Sale
Agreement), applicable law or otherwise with respect to any funds or monies of
the Issuer at any time held by or in the possession of the Company.
(b) The Issuer shall have the right to set-off against the Company
any amounts to which the Company may be entitled and to apply such amounts to
any claims the Issuer may have against the Company from time to time under this
Loan Sale Agreement. Upon any such set-off the Issuer shall give notice of the
amount thereof and the reasons therefor.
33
<PAGE>
Section 7.10. MBIA Default.
If (i) an MBIA Default occurs and continues unremedied or (ii) if
the Class A Note Balance has been reduced to zero, the Insurance Agreement is
terminated and all amounts due to MBIA have been paid in full, MBIA's right to
consent hereunder and to direct the Indenture Trustee shall be suspended until
remedied and, in such event, in all provisions of this Loan Sale Agreement
wherein MBIA's consent or direction is required or permitted, the consent or
direction of the Controlling Holders shall be required or permitted during such
period of suspension.
Section 7.11. No Petition.
So long as the Indenture remains in effect, for 366 days after the
Final Payment Date, the Company agrees that it shall not file an involuntary
petition or otherwise institute any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other proceeding under any Federal or
state bankruptcy similar law against the Issuer.
34
<PAGE>
IN WITNESS WHEREOF, the Company and the Issuer have caused this Loan
Sale Agreement to be duly executed by their respective officers thereunto duly
authorized as of the date and year first above written.
AUTOINFO FINANCE OF VIRGINIA, INC.
By:__________________________________
Name:
Title:
AUTOINFO RECEIVABLES COMPANY
By:__________________________________
Name:
Title:
<PAGE>
EXHIBIT A
Credit and Collection Policy
<PAGE>
EXHIBIT B
Form of Loan Contract
<PAGE>
EXHIBIT C
Form of Dealer Agreement
<PAGE>
EXHIBIT D
Form of CFAW Purchase Agreement
<PAGE>
EXHIBIT E
Form of Notice to Obligors
Re: Loan Number _____________:
Dear ____________:
You are hereby notified that AutoInfo Finance of Virginia ("Seller")
has sold, transferred and assigned its interest in the above-referenced loan
(the "Loan") to AutoInfo Receivables Company (the "Purchaser"). AutoInfo Finance
of Virginia, Inc., as servicer (the "Servicer") will continue to service this
Loan on behalf of the Purchaser. Unless you are otherwise notified by the
Purchaser or the Servicer, you should direct all payments to:
[address]
and you should continue to direct all inquiries to:
[address]
Date: ______________ AUTOINFO FINANCE OF VIRGINIA, INC.
By:_________________________________
Name:
Title:
<PAGE>
SCHEDULE I
Loan Schedule
See Tab 9
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS............................. 2
Section 1.01. Defined Terms....................................... 2
ARTICLE II
ACQUISITION OF LOAN ASSETS...................... 5
Section 2.01. Conveyance of Loan Assets........................... 5
Section 2.02. Use of Proceeds..................................... 5
Section 2.03. Delivery of Loan Contracts; Filing of Financing
Statements ....................................... 5
Section 2.04. Servicing of Loan Contracts and Vehicles............ 6
Section 2.05. Review of Loan Contracts............................ 6
Section 2.06. Nature of Transfer.................................. 6
Section 2.07. Re-Liening Triggers................................. 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES.................... 8
Section 3.01. Representations and Warranties of the Company....... 8
Section 3.02. Representations and Warranties of the Issuer........ 19
Section 3.03. Purchase of Loan Contracts.......................... 21
Section 3.04. Requirements for Purchase of Loan Contracts......... 21
ARTICLE IV
COVENANTS OF THE COMPANY....................... 23
Section 4.01. Company Covenants................................... 23
Section 4.02. Issuer Covenants.................................... 27
Section 4.03. Assignment of Loan Assets........................... 27
Section 4.04. Limitation on Recourse to Dealers................... 27
Section 4.05. Termination of Obligations.......................... 28
ARTICLE V
CONDITIONS PRECEDENT............................ 29
Section 5.01. Conditions to the Issuer's Obligations.............. 29
Section 5.02. Conditions to the Company's Obligations............. 29
i
<PAGE>
Page
----
ARTICLE VI
RESERVED............................... 31
ARTICLE VII
MISCELLANEOUS............................ 32
Section 7.01. Amendments.......................................... 32
Section 7.02. Governing Law....................................... 32
Section 7.03. Notices............................................. 32
Section 7.04. Separability Clause................................. 32
Section 7.05. Assignment.......................................... 32
Section 7.06. Further Assurances.................................. 33
Section 7.07. No Waivers; Cumulative Remedies..................... 33
Section 7.08. Binding Effect; Third Party Beneficiaries........... 33
Section 7.09. Set-Off............................................. 33
Section 7.10. MBIA Default........................................ 34
Section 7.11. No Petition......................................... 34
Exhibit A Credit and Collection Policy
Exhibit B Form of Loan Contract
Exhibit C Form of Dealer Agreement
Exhibit D Form of CFAW Purchase Agreement
Exhibit E Form of Notice to Obligors
Schedule I Loan Schedule
ii
================================================================================
INDENTURE
among
AUTOINFO RECEIVABLES COMPANY
as Issuer
CRESTAR BANK
as Custodian
and
BANKERS TRUST COMPANY
as Indenture Trustee
Dated as of October 1, 1996
================================================================================
<PAGE>
This Indenture, dated as of October 1, 1996, is made by and among
AutoInfo Receivables Company (the "Issuer"), Crestar Bank (the "Custodian") and
Bankers Trust Company, a New York banking corporation, as Indenture Trustee (in
such capacity, the "Indenture Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the Issuer's Notes issuable as provided
in this Indenture. All covenants and agreements made by the Issuer and the
Indenture Trustee herein are for the benefit and security of the Holders of the
Notes and MBIA. The Issuer and the Indenture Trustee are entering into this
Indenture, and the Indenture Trustee is accepting the trusts created hereby, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer, the Custodian and the Indenture Trustee in accordance with its terms
have been done.
GRANTING CLAUSE
The Issuer does hereby Grant to the Indenture Trustee for the
ratable benefit of the Noteholders and MBIA, as security for the Issuer's
obligations hereunder and under the Notes, without recourse, all of the Issuer's
rights, title and interest now or hereafter acquired in and to the following and
any and all benefits accruing to the Issuer from: (a) the Loan Contracts and all
rights with respect thereto, including all guaranties and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of any such Loan Contract, and all rights with respect to any agreement
or arrangements with the vendors, dealers or manufacturers of the Vehicles to
the extent specifically related to any such Loan Contract; (b) all payments
received on or with respect to the Loan Contracts due on or after the Cut-Off
Date, including, without limitation, all periodic payments due from the Obligors
thereunder, all amounts paid by guarantors under the Loan Contracts, all amounts
received on Defaulted Loan Contracts and with respect to liquidation, and all
late payment charges paid by Obligors and any other incidental charges or fees
received from an Obligor, including, but not limited to, late fees, collection
fees and bounced check charges; (c) a security interest in the Vehicles securing
the Loan Contracts; (d) the Loan Sale Agreement, the Lockbox Agreement and the
Servicing Agreement; (e) all amounts from time to time on deposit in the Trust
Accounts; (f) the original Loan Contracts, the Certificates of Title and
Applications for Certificates of Title related to the Loan Contracts and the
Loan Contract Files; (g) the interest of the Issuer in any Insurance Policy
related to the Loan Contracts and the Vehicles, including, but not limited to,
any vendor's single-interest, fire, damage and credit life insurance policies;
and (h) all proceeds of the foregoing (including, but not by way of limitation,
all cash proceeds, accounts, receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights
to payment of any and
<PAGE>
every kind, and other forms of obligations and receivables which at any time
constitute all or part or are included in the proceeds of any of the foregoing),
in each case whether now owned or hereafter acquired; (all of the foregoing
being hereinafter referred to as the "Trust Estate"). The foregoing Grant does
not constitute and is not intended to result in a creation or an assumption by
the Indenture Trustee, any Noteholder, the Custodian or MBIA of any obligation
of the Issuer, the Company or any other Person in connection with the Trust
Estate or under any agreement or instrument relating thereto.
The Indenture Trustee acknowledges its acceptance on behalf of the
Noteholders and MBIA of all right, title and interest previously held by the
Issuer in and to the Trust Estate, and declares that it shall maintain such
right, title and interest in accordance with the provisions hereof and agrees to
perform the duties herein required to the best of its ability to the end that
the interests of the Noteholders and MBIA may be adequately and effectively
protected.
In consideration of the mutual agreements herein contained, and of
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Except as otherwise expressly provided or
unless the context otherwise requires, the following terms have the respective
meanings set forth below for all purposes of this Indenture, and the definitions
of such terms are equally applicable both to the singular and plural forms of
such terms.
"Act": With respect to any Noteholder, the meaning specified in
Section 13.01.
"Additional Class A Principal Distribution Amount": On any Payment
Date, in the event that an Event of Default which has not been waived by MBIA
has occurred, any remaining Available Funds then on deposit in the Collection
Account with respect to such Payment Date after the payments First through
Eighth of Section 12.02(d) hereof have been made as of such Payment Date, up to
the outstanding Class A Note Balance.
"Affiliate": With respect to any Person, any other person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by
2
<PAGE>
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Loan Balance": As of any date of determination, the sum
of all Loan Balances with respect to all outstanding Loan Contracts.
"Aggregate Note Balance": At any time, the sum of the Outstanding
Class A Note Balance and the Outstanding Class B Note Balance.
"Application for Certificate of Title": With regard to each Vehicle
for which a Certificate of Title has not been issued naming the Company, Falk or
the Indenture Trustee as secured party, evidence that an application for a
Certificate of Title naming the Company or the Indenture Trustee as secured
party has been submitted with the appropriate authority.
"Authenticating Agent": Any entity appointed by the Indenture
Trustee pursuant to Section 7.14 hereof.
"AutoInfo": AutoInfo, Inc., a Delaware corporation.
"Available Funds": With respect to any Payment Date, the sum of (i)
Scheduled Payments, gross Recoveries, Guaranty Amounts, Insurance Proceeds and
Servicing Charges received during the related Collection Period, (ii)
Prepayments received during the related Collection Period, (iii) the Purchase
Price of Loan Contracts repurchased by the Company, the Servicer or the Issuer
during the related Collection Period and (iv) any amounts released from the
Reserve Account on such Payment Date in the event the amount on deposit therein
is in excess of the Required Reserve Account Amount in accordance with Section
12.02 (f)(ii) hereof.
"Back-up Servicer": Initially, Bankers Trust Company, until a
successor Person shall have become the Back-up Servicer pursuant to the
applicable provisions of this Indenture and the Servicing Agreement, and
thereafter "Back-up Servicer" shall mean such successor Person.
"Back-up Servicer Fee": With respect to each Payment Date,
one-twelfth of the product of (i) the Back-up Servicer Fee Rate and (ii) the
Aggregate Loan Balance as of the first day of the related Collection Period;
provided, however, that with respect to the Initial Payment Date, an amount
equal to the product of (i)(A) a fraction, the numerator of which is the actual
number of days in the related Collection Period and the denominator of which is
360, times (B) the Back-up Servicer Fee Rate and (ii) the Initial Aggregate Loan
Balance.
"Back-up Servicer Fee Rate": 0.0435% per annum.
3
<PAGE>
"Back-up Servicer Officer": Any Responsible Officer of the Indenture
Trustee.
"Benefit Plan Investor": The meaning set forth in 29 Code of Federal
Regulations ss. 2510.3-101.
"Board Resolution": With respect to any Person, a resolution passed
by the board of directors of such Person, in accordance with the required
procedures as proscribed by the law of such Person's state of incorporation or
organization and such Person's by-laws or other similar incorporation or charter
documents.
"Business Day": Any day other than a Saturday, a Sunday or a day on
which banking institutions in the city in which the principal place of business
of the Issuer, the Servicer, MBIA or the Corporate Trust Office of the Indenture
Trustee is located are authorized or obligated by law or executive order to
close.
"Calculation Date": The last day of a Collection Period; provided,
however, that with respect to any calculation of the Loan Balance of a Loan
Contract as of the Closing Date, the Calculation Date shall mean the Cut-Off
Date.
"Certificate of Title": With regard to each Vehicle, either (a) the
original title relating thereto, or (b) in States in which the department of
motor vehicles delivers the original certificate of title to the Obligor, the
"lien card," "notice of recorded lien" or similar document which is delivered to
the secured party in lieu of the original certificate of title, in each case,
which shall name the related Obligor as the owner of the Vehicle and the
Company, Falk or the Indenture Trustee as secured party.
"Class": Means (i) when used with reference to the "Class A Notes,"
their designation as Class A Notes and (ii) when used with reference to the
"Class B Notes," their designation as Class B Notes.
"Class A Interest Payment Amount": With respect to any Payment Date,
interest accrued from the prior Payment Date to and including the day
immediately preceding such Payment Date, calculated on the basis of a 360-day
year consisting of twelve 30-day months, at the Class A Interest Rate on the
Class A Note Balance as of the close of business on the day preceding such
Payment Date; provided, however, that the Class A Interest Payment Amount for
the first Payment Date shall be interest accrued from the Closing Date to but
excluding the first Payment Date at the Class A Interest Rate on the Class A
Note Balance as of the Closing Date.
"Class A Interest Rate": 6.53% per annum, calculated on the basis of
a 360-day year consisting of twelve 30-day months; provided, however, that so
long as an Event of Default has not occurred, or has been waived by MBIA,
continuing at any time the Outstanding Class A Note Balance of the Class A Notes
is less than 10% of the Initial
4
<PAGE>
Class A Note Balance, and such Class A Notes are not redeemed in full in
accordance with Section 10.01 hereof, interest on the Class A Notes shall accrue
at an interest rate of 7.03% per annum.
"Class A Interest Shortfall Amount": For any Payment Date, the
amount by which the Class A Interest Payment Amount due on such Payment Date
exceeds the sum of (i) the amount of Available Funds for such Payment Date
remaining following payment of "First" through "Fourth" in Section 12.02(d)
hereof and (ii) the amount on deposit in the Reserve Account.
"Class A Note": Any one of the Notes executed by the Issuer and
authenticated by the Indenture Trustee in substantially the form set forth in
Exhibit A hereto.
"Class A Note Balance": With respect to any date of determination,
the Initial Class A Note Balance less all amounts previously distributed to
Class A Noteholders as Class A Principal Payment Amounts.
"Class A Note Insurance Policy": The note guaranty insurance policy
dated as of the Closing Date issued by MBIA insuring the Class A Notes, the form
of which is attached hereto as Exhibit C.
"Class A Percentage": 85%.
"Class A Principal Payment Amount": With respect to any Payment
Date, the Class A Percentage of the sum of: (i) the principal portion of all
Scheduled Payments received by the Trustee during the related Collection Period,
(ii) all Prepayments of principal received by the Trustee during the related
Collection Period, (iii) the aggregate outstanding Loan Balance as of the
beginning of the related Collection Period of all Loan Contracts repurchased by
the Company pursuant to Section 3.03 of the Loan Sale Agreement or by the Issuer
pursuant to Sections 4.03 or 11.03 hereof or by the Servicer pursuant to Section
3.04 of the Servicing Agreement during the related Collection Period to the
extent actually received by the Trustee (without duplication of amounts referred
to in clauses (i) and (ii) above) and (iv) the aggregate outstanding Loan
Balance as of the beginning of the related Collection Period of all Loan
Contracts that became Defaulted Loan Contracts during the related Collection
Period (without duplication of amounts referred to in clauses (i), (ii) or (iii)
above).
"Class A Principal Shortfall Amount": For any Payment Date, the
amount by which the Class A Principal Payment Amount for such Payment Date
exceeds the sum of (i) the amount of Available Funds for such Payment Date
remaining following payment of "First" through "Seventh" in Section 12.02(d)
hereof; and (ii) the amount on deposit in the Reserve Account.
5
<PAGE>
"Class B Interest Payment Amount": With respect to any Payment Date,
interest accrued from the prior Payment Date to and including the day
immediately preceding such Payment Date, calculated on the basis of a 360-day
year consisting of twelve 30-day months, at the Class B Interest Rate on the
Class B Note Balance as of the close of business on the day preceding such
Payment Date; provided, however, that the Class B Interest Payment Amount for
the first Payment Date shall be interest accrued from the Closing Date to but
excluding the first Payment Date at the Class B Interest Rate on the Class B
Note Balance as of the Closing Date.
"Class B Interest Rate": 11.31% per annum, calculated on the basis
of a 360-day year consisting of twelve 30-day months.
"Class B Note": Any one of the Notes executed by the Issuer and
authenticated by the Indenture Trustee in substantially the form set forth in
Exhibit B hereto.
"Class B Note Balance": With respect to any date of determination,
the Initial Class B Note Balance less all amounts previously distributed to
Class B Noteholders as Class B Principal Payment Amounts.
"Class B Principal Payment Amount": With respect to any Payment Date
prior to the Senior Liability Termination Date, the product of (i) Available
Funds remaining after all payments and deposits described in clauses First
through Twelfth of Section 12.02(d) hereof have been made, and (ii) 0.5;
provided, however, that in the event that a Class B Trigger Event has occurred
and is continuing, the Class B Principal Payment Amount shall be equal to the
Available Funds remaining after all payments and deposits described in clauses
First through Twelfth of Section 12.02(d) hereof have been made, up to the
Outstanding Class B Note Balance; with respect to the Senior Liability
Termination Date, the sum of (x) all amounts then remaining on deposit in the
Reserve Account and the Class B Reserve Account and (y) all Available Funds
remaining after all payments and deposits described on clauses First through
Twelfth of Section 12.02(d) hereof have been made; with respect to each Payment
Date after the Senior Liability Termination Date, all Available Funds remaining
after all payments and deposits described in clauses First through Twelfth of
Section 12.02(d) hereof have been made.
"Class B Reserve Account": The Trust Account created and maintained
pursuant to Section 12.02(b)(iii) hereof.
"Class B Required Reserve Account Amount": For each Payment Date
prior to the Senior Liability Termination Date, $201,654, and for each Payment
Date thereafter, zero.
"Class B Trigger Event": The occurrence of either of the following:
6
<PAGE>
(x) as of any of the first nine Determination Dates, the average
Delinquency Rate for the most current three months exceeds
14.00% or the average Delinquency Rate for the most current
three months as of any Determination Date thereafter exceeds
13.50%; or
(y) as of any of the first nine Determination Dates, the average
Monthly Net Default Rate for the most current three months
exceeds 2.50% or the average Monthly Net Default Rate for the
most current three months as of any Determination Date
thereafter exceeds 2.25%.
"Closing Date": October 11, 1996.
"Code": The Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"Collection Account": The Trust Account established and maintained
pursuant to Section 12.02(a) hereof.
"Collection Period": With respect to a Payment Date or a
Determination Date, the calendar month immediately preceding the month in which
such Payment Date or Determination Date occurs (such calendar month being
referred to as the "related" Collection Period with respect to such Payment Date
or Determination Date). With respect to a Record Date, the calendar month in
which such Record Date occurs is referred to as the Collection Period "related"
to such Record Date.
"Commitment": The Commitment to Issue a Financial Guaranty Insurance
Policy between MBIA and the Issuer dated as of October 3, 1996.
"Company": AutoInfo Finance of Virginia, Inc., a Virginia
corporation.
"Controlling Holders": Holders of Class A Notes representing at
least 50% of the Class A Note Balance, and after the Class A Note Balance has
been reduced to zero, Holders of Class B Notes representing at least 50% of the
Class B Note Balance.
"Corporate Trust Administration Department": The principal corporate
trust office of the Custodian at 919 East Main Street, 10th Floor, Richmond,
Virginia 23219, or at such other address as the Custodian may designate from
time to time by notice to the Noteholders, the Servicer, MBIA, the Indenture
Trustee and the Issuer, or the principal corporate trust department of any
successor Custodian.
"Corporate Trust Office": The principal corporate trust office of
the Indenture Trustee at Four Albany Street, New York, New York 10006,
Attention: Corporate Trust and Agency Group - Structured Finance, or at such
other address as the Indenture Trustee may designate from time to time by notice
to the Noteholders, the
7
<PAGE>
Servicer, MBIA and the Issuer, or the principal corporate trust office of any
successor Indenture Trustee.
"Credit and Collection Policy": The credit extension policies and
procedures maintained by the Servicer and the administration and collection
practices maintained by the Servicer as in effect on the Closing Date, as set
forth in Exhibit C to the Servicing Agreement.
"Cumulative Net Default Table": The table attached hereto as
Exhibit D.
"Cumulative Net Default Rate": As of any Determination Date, the
ratio of (i) the sum of the Loan Balances of Loan Contracts that have become
Defaulted Loan Contracts for the period from the Closing Date through the end of
the related Collection Period reduced by the amount of all Recoveries received
by the Servicer during the period from the Closing Date through the end of the
related Collection Period to (ii) the Initial Aggregate Loan Balance.
"Custodial Files": The meaning specified in Section 11.01(a) hereof.
"Custodian": Crestar Bank, Richmond, Virginia, and any successor
Custodian acceptable to MBIA appointed in accordance with Section 11.09 hereof.
"Cut-Off Date": The close of business on August 31, 1996.
"Default": The meaning specified thereto in Section 3.02(n) hereof.
"Defaulted Loan Contract": A Loan Contract with respect to which the
earliest of the following has occurred: (i) any portion of the Scheduled
Payments due thereon becomes 90 days or more delinquent; (ii) the Vehicle
securing such Loan Contract is repossessed and sold by the Servicer, (iii) the
Servicer determines in its sole discretion in accordance with its Credit and
Collection Policy that the remaining Scheduled Payments due under such Loan
Contract should be written off as uncollectible or (iv) proceeds have been
received which, in the Servicer's good faith judgment, constitute the final
amounts recoverable in respect of such Loan Contract.
"Delinquency Rate": As of any Determination Date, the ratio of (i)
the aggregate Loan Balance as of the related Calculation Date of Loan Contracts
as of such Calculation Date as to which the Obligors are more than 30 days past
due in making any portion of the Scheduled Payments, to (ii) the Aggregate Loan
Balance as of such Calculation Date.
"Delinquent Loan Contract": As of any Calculation Date, a Loan
Contract (a) with respect to which an Obligor (or an insurance company on its
behalf) has not made
8
<PAGE>
a Scheduled Payment by the applicable Due Date, and (b) which is not a Defaulted
Loan Contract.
"Determination Date": The third Business Day preceding each Payment
Date.
"Due Date": The date on which a Scheduled Payment is due in
accordance with the terms of the related Loan Contract.
"Eligible Account": (i) A segregated account or accounts maintained
with a depository institution or trust company whose long-term unsecured debt
obligations are rated A+ by Standard & Poor's and Al by Moody's, or (ii) a
segregated trust account or accounts maintained with a Federal or state
chartered depository institution that is acceptable to MBIA subject to
regulation regarding fiduciary funds on deposit substantially similar to 12
C.F.R. Section 9.10(b), or (iii) a trust account at the Indenture Trustee's
Corporate Trust Office, provided that such Indenture Trustee is acceptable to
MBIA.
"Eligible Investments": Any and all of the following:
(i) direct obligations of, and obligations fully guaranteed as to
the full and timely payment by, the United States of America, the Federal
Home Loan Mortgage Corporation, the Federal National Mortgage Association,
the Federal Home Loan Banks or any agency or instrumentality of the United
States of America the obligations of which are backed by the full faith
and credit of the United States of America;
(ii) (A) demand and time deposits in, certificates of deposit of,
banker's acceptances issued by or federal funds sold by any depository
institution or trust company (including the Indenture Trustee or its agent
acting in their respective commercial capacities) incorporated under the
laws of the United States of America or any State thereof and subject to
supervision and examination by federal and/or state authorities, so long
as at the time of such investment or contractual commitment providing for
such investment, such depository institution or trust company has a
short-term unsecured debt rating in one of the two highest available
rating categories of S&P and the highest available rating category of
Moody's and provided that each such investment has an original maturity of
no more than 365 days, and (B) any other demand or time deposit or deposit
which is fully insured by the Federal Deposit Insurance Corporation;
(iii) repurchase obligations with a term not to exceed 30 days with
respect to any security described in clause (i) above and entered into
with a depository institution or trust company (acting as a principal)
rated in the highest short-term rating category by S&P and by Moody's;
provided, however, that collateral transferred pursuant to such repurchase
obligation must be of the type
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described in clause (i) above and must (A) be valued daily at current
market price plus accrued interest, (B) pursuant to such valuation, equal,
at all times, to 105% of the cash transferred by the Indenture Trustee in
exchange for such collateral and (C) be delivered to the Indenture Trustee
or, if the Indenture Trustee is supplying the collateral, an agent for the
Indenture Trustee, in such a manner as to accomplish perfection of a
security interest in the collateral by possession of certificated
securities.
(iv) commercial paper having an original maturity of less than 365
days and issued by an institution having a short-term unsecured debt
rating in the highest available rating category of each of the Rating
Agencies at the time of such investment;
(v) a guaranteed investment contract approved by each of the Rating
Agencies and MBIA and issued by an insurance company or other corporation
having a long-term unsecured debt rating in the highest available rating
category of each of the Rating Agencies at the time of such investment;
(vi) money market funds having ratings in the highest available
rating category of Moody's and one of the two highest available rating
categories of S&P at the time of such investment which invest only in
other Eligible Investments; any such money market funds which provide for
demand withdrawals being conclusively deemed to satisfy any maturity
requirement for Eligible Investments set forth herein (including, in
either case, such funds in which the Indenture Trustee or any Affiliate
thereof is investment manager or advisor); and
(vii) any other investment approved in writing by MBIA and written
evidence that any such investment will not result in a downgrading or
withdrawal of the rating by each Rating Agency on the Class A Notes.
The Indenture Trustee may purchase from or sell to itself or an Affiliate, as
principal or agent, the Eligible Investments listed above. All Eligible
Investments shall be made in the name of the Indenture Trustee for the benefit
of the Noteholders and MBIA.
"Eligible Loan Contract": The meaning set forth in the Loan Sale
Agreement.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.
"Event of Default": The meaning set forth in Section 6.01 hereof.
"Falk": Falk Finance Company.
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"FASIT": Financial Asset Securitization Investment Trust.
"Final Due Date": With respect to each Loan Contract, the final Due
Date thereunder.
"Final Payment Date": The actual date on which the last amounts are
distributed with respect to any Notes, whether on the Stated Maturity Date or
earlier pursuant to an optional redemption under Article Ten or otherwise.
"GAAP": Generally accepted accounting principles, as in effect on
June 30, 1996.
"Grant": To grant, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, mortgage, pledge, create and grant a security
interest in and right of set-off against, deposit, set over and confirm. A Grant
of the security interest in the Vehicles, the Loan Contracts or of any other
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including, without limitation,
the immediate and continuing right to claim, collect, receive and provide
receipts for payments in respect of the Loan Contracts, or any other payment due
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
proceedings in the name of the Granting party or otherwise, and generally to do
and receive anything which the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Guaranty Amounts": Any and all amounts paid by the individual
guarantor indicated on the applicable Loan Contract.
"Holder": For any date, the holder of a Note as specified in the
Note Register as of the preceding Record Date.
"Indebtedness": With respect to any Person, all recourse
obligations, which in accordance with GAAP shall be classified upon such
Person's balance sheet as a liability, and in any event shall include all (i)
recourse obligations of such Person for borrowed money or which have been
incurred in connection with the acquisition of property or assets, (ii) recourse
obligations secured by any lien upon property or assets owned by such Person,
even though the Person has not assumed or become liable for the payment of such
obligations, (iii) recourse obligations created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person, notwithstanding the fact that the rights and remedies of the
seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of property and (iv) recourse guaranties of the
indebtedness of others.
"Indenture": This Indenture, as amended from time to time in
accordance with the terms hereof.
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"Indenture Trustee": Bankers Trust Company, until a successor Person
shall have become the Indenture Trustee pursuant to the applicable provisions of
this Indenture, and thereafter "Indenture Trustee" shall mean such successor
Person.
"Indenture Trustee Fee": With respect to each Payment Date,
one-twelfth of the Indenture Trustee Fee Rate provided, however, that with
respect to the Initial Payment Date, an amount equal to the product of (i) a
fraction, the numerator of which is the actual number of days in the related
Collection Period and the denominator of which is 360, times (ii) the Indenture
Trustee Fee Rate.
"Indenture Trustee Fee Rate": $5,000.00 per annum.
"Independent Accountants": Arthur Andersen & Co., or any other firm
of independent certified public accountants of recognized national standing, or
otherwise acceptable to MBIA.
"Initial Aggregate Loan Balance": The Aggregate Loan Balance as of
the Cut-Off Date, which is $40,330,728.75.
"Initial Aggregate Note Balance": The sum of the Initial Class A
Note Balance and the Initial Class B Note Balance.
"Initial Class A Note Balance": $34,281,119.44.
"Initial Class B Note Balance": $2,016,536.44.
"Initial Payment Date": October 15, 1996.
"Insolvency Event": With respect to a specified Person, (a) the
commencement of an involuntary case against such Person under the Federal
bankruptcy laws, as now or hereinafter in effect, or another present or future
Federal or state bankruptcy, insolvency or similar law, and such case is not
dismissed within 60 days; or (b) the filing of a decree or entry of an order for
relief by a court having jurisdiction in the premises in respect of such Person
or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding up or liquidation of such Person's
affairs; or (c) the commencement by such Person of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by such Person to the entry of an order for
relief in an involuntary case under any such law, or the consent by such Person
to the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any
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general assignment for the benefit of creditors, or the failure by such Person
generally to pay its debts as such debts become due, or the taking of action by
such Person in furtherance of any of the foregoing.
"Insolvency Laws": The United States Bankruptcy Code or any similar
applicable state law.
"Insurance Agreement": The Insurance and Indemnity Agreement, dated
as of October 1, 1996, by and among MBIA, the Issuer, the Servicer, the Company,
the Lockbox Bank, the Indenture Trustee, the Custodian and the Back-up Servicer.
"Insurance Policy": With respect to a Vehicle and a Loan Contract,
any insurance policy maintained by the Obligor pursuant to the related Loan
Contract, which policy names the Company as loss payee.
"Insurance Proceeds": With respect to a Vehicle and a Loan Contract,
any amount received during the related Collection Period pursuant to an
Insurance Policy issued with respect to such Vehicle and the related Loan
Contract, net of any costs of collecting such amounts not otherwise reimbursed.
"Interest Coverage Ratio": With respect to any Person, the ratio of
(x) earnings from operations before interest, taxes, depreciation and
amortization, divided by (y) interest expense.
"Investment Letter": The meaning specified in Section 2.06(b)
hereof, substantially in the form of Exhibit E attached hereto.
"Issuer": AutoInfo Receivables Company and all successors thereto
acceptable to MBIA.
"Issuer Order": As defined in Section 12.02(c) hereof.
"Issuer State of Incorporation": means the state of incorporation of
the Issuer, which, as of the Closing Date, is the State of Delaware.
"Lien": The meaning specified in the Loan Sale Agreement.
"Loan Assets": The meaning specified in the Loan Sale Agreement.
"Loan Balance": With respect to any Loan Contract, as of any date of
determination, the principal amount of such Loan Contract as of the Cut-Off
Date, minus the sum of (a) the portion of Scheduled Payments and Prepayments
allocable to principal made by or on behalf of the related Obligor and (b) the
portion of the Purchase Price with respect to any repurchased Loan Contract
allocable to principal as of the close of business
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on the last day of the Collection Period (or, prior to the end of the first
Collection Period, calculated as of the close of business on the day immediately
prior to the Cut-Off Date); provided, however, that the Loan Balance of a
Defaulted Loan Contract shall be zero. The respective principal and interest
portions of each Scheduled Payment shall be determined in accordance with the
"Rule of 78's" method.
"Loan Contracts": The retail installment contracts, installment sale
contracts, and such other motor vehicle loan contracts (and all rights with
respect thereto, including all guaranties and other agreements or arrangements
of whatever character from time to time supporting or securing payment of any
Loan Contract and all rights with respect to any agreements or arrangements with
the vendors, dealers or manufacturers of the Vehicles to the extent specifically
related to any Loan Contract) which are identified on the Loan Schedule
delivered to the Indenture Trustee and MBIA on the Closing Date; provided that,
except as otherwise provided herein, from and after the date on which a Loan
Contract is purchased or removed from the Trust Estate by the Company, the
Servicer or the Issuer in accordance with the terms hereof or the terms of the
Loan Sale Agreement or of the Servicing Agreement, such repurchased, removed or
replaced Loan Contract shall no longer constitute a Loan Contract for purposes
of the Transaction Documents.
"Loan Contract File": With respect to each Loan Contract, a file
containing the following:
(i) The original of each executed Loan Contract;
(ii) Copies of any evidence of insurance and any other documents
evidencing or related to any Insurance Policy;
(iii) Copies of any evidence that the Obligor took possession of the
Vehicle and that the Vehicle was in good working order and acceptable to
the Obligor at the time of receipt by the Obligor;
(iv) A copy of the original credit application executed by the
Obligor; and
(v) The original Certificate of Title or Application for Certificate
of Title or relevant lien certificate.
"Loan Sale Agreement": The Loan Sale Agreement dated as of October
1, 1996 entered into by and between the Company and the Issuer, as amended from
time to time in accordance with the terms thereof.
"Loan Schedule": The list of Loan Contracts attached hereto as
Schedule 1, each of which shall include with respect to each Loan Contract: (a)
a number
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identifying the Loan Contract, (b) the Loan Balance as of the Cut-Off Date, (c)
the Obligor, (d) the Obligor's billing address, (e) the original and remaining
months to maturity of the Loan Contract, (f) the Scheduled Payment, (g) the
annual percentage rate, (h) the dates of the first and last Scheduled Payment,
(i) the original amount financed and (j) the vehicle identification numbers of
the related Vehicles.
"Lockbox Account": A Trust Account established by the Servicer and
maintained on behalf of the Indenture Trustee pursuant to the Servicing
Agreement.
"Lockbox Agreement": The Lockbox Agreement dated as of October 1,
1996 by and among the Lockbox Bank and the Servicer, as amended, modified or
supplemented, or any other agreement, in form and substance acceptable to the
Issuer and MBIA.
"Lockbox Bank": Crestar Bank, Richmond, Virginia or any other
depository institution named by the Servicer and, so long as an MBIA Default
shall not have occurred and be continuing, acceptable to the Issuer and MBIA.
"MBIA": MBIA Insurance Corporation, the issuer of the Class A Note
Insurance Policy.
"MBIA Default": The occurrence and continuance of any of the
following events:
(a) the failure by MBIA to make a payment under the Class A Note
Insurance Policy in accordance with its terms that continues unremedied
for a period of five Business Days; or
(b) the occurrence of an "Insurer Insolvency", as that term is
defined in the Insurance Agreement, with respect to MBIA.
"MBIA Premium": The meaning set forth in the Insurance Agreement.
"MBIA Reimbursement Amounts": Any payments made by MBIA under the
Class A Note Insurance Policy, and any unpaid MBIA Premiums due MBIA. MBIA
Reimbursement Amounts shall be payable from the flow of funds in accordance with
Section 12.02(d) hereof. MBIA Reimbursement Amounts shall be repaid with
interest thereon calculated at the Prime Rate of interest set forth in the Wall
Street Journal ("Prime") plus 200 basis points. Interest shall accrue on all
MBIA Reimbursement Amounts on a monthly basis, as of each Payment Date at Prime
plus 200 basis points assuming a 360-day year comprised of 12 months of 30 days
each.
"Monthly Net Default Rate": With respect to each Determination Date,
the ratio of (i) (a) the sum of the Loan Balances of all Loan Contracts that
have become
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Defaulted Loan Contracts during the related Collection Period minus (b) the
amount of Recoveries received during such Collection Period to (ii) the
Aggregate Loan Balance as of the Calculation Date immediately preceding such
Collection Period.
"Monthly Servicer's Report": The report prepared by the Servicer
pursuant to Section 4.01 of the Servicing Agreement.
"Moody's": Moody's Investors Service, Inc., or any successor in
interest thereto.
"Note(s)": Any one of the Class A Notes or Class B Notes.
"Note Interest Rate": The Class A Interest Rate or the Class B
Interest Rate, as applicable.
"Noteholder or Holder": The person in whose name a Note is
registered in the Note Register.
"Note Register": The register maintained pursuant to Section 2.05
hereof.
"Note Register": The meaning set forth in Section 2.05 hereof.
"Obligor": The purchaser of a Vehicle under each related Loan
Contract, including any guarantor of such purchaser and their respective
successors and assigns.
"Officer's Certificate": A certificate signed by the Chairman of the
Board, the Vice-Chairman of the Board, the President, a Vice President, the
Treasurer or the Secretary of the Servicer.
"Opinion of Counsel": A written opinion of counsel, who may be
counsel employed by the Issuer, the Servicer or the Indenture Trustee, or other
counsel, and which opinion shall, in each case, be reasonably acceptable to the
Indenture Trustee and MBIA.
"Outstanding": means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered
to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee
or any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture); and
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(iii) Notes in exchange for or in lieu of other Notes that have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided, however, that Notes which have been paid with proceeds of the Class A
Note Insurance Policy shall continue to remain Outstanding for purposes of this
Indenture until MBIA has been paid as subrogee hereunder or reimbursed pursuant
to the Insurance Agreement as evidenced by a written notice from MBIA delivered
to the Indenture Trustee, and MBIA shall be deemed to be the Holder thereof to
the extent of any payments thereon made by MBIA; and provided, further, that in
determining whether the Holders of the requisite Class A or Class B Notes have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder or under any Transaction Document, Notes owned by the Issuer, any
other obligor upon the Notes, the Company or any Affiliate of any of the
foregoing Persons shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Indenture Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes that a Responsible Officer of the Indenture Trustee actually
knows to be so owned shall be so disregarded. Notes so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Indenture Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Issuer, any other obligor
upon the Notes, the Company or any Affiliate of any of the foregoing Persons.
"Paying Agent": means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
7.08 and, so long as no MBIA Default shall have occurred and be continuing, is
consented to by MBIA and is authorized by the Issuer to make the payments to and
distributions from the Collection Account, including payment of principal of or
interest on the Notes on behalf of the Issuer.
"Payment Date": The fifteenth day of each calendar month (or if such
day is not a Business Day, the next succeeding Business Day) commencing on the
Initial Payment Date.
"Person": Any individual, corporation, partnership, association,
limited liability company, joint-stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Placement Agents": Black Diamond Securities, LLC and Alex. Brown &
Sons, Inc.
"Pledged Asset Custodian": The meaning ascribed thereto in Section
11.01 hereof.
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"Preference Amount": The meaning ascribed thereto in the Class A
Note Insurance Policy.
"Prepayment": Any full or partial payment of Scheduled Payments not
yet due on a Loan Contract.
"Prospective Holder": The meaning ascribed to such term in Section
2.06(a) hereof.
"Purchase Price": With respect to any Loan Contract repurchased by
the Company pursuant to Sections 2.05 or 3.03 of the Loan Sale Agreement or by
the Issuer pursuant to Sections 4.03 or 11.03 hereof or by the Servicer pursuant
to Section 3.04 of the Servicing Agreement, the sum of (i) the Loan Balance of
the related Loan Contract on the Calculation Date on or immediately preceding
the date when the Loan Contract is repurchased and (ii) any accrued interest at
the interest rate specified in such Loan Contract through the date of
repurchase.
"Rating Agencies": Each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on the Class A Notes; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Class A Notes, such other
nationally recognized statistical rating organization selected by the Servicer
and a majority in interest of the Noteholders and (so long as an MBIA Default
shall not have occurred and be continuing) acceptable to MBIA.
"Record Date": The close of business on the last day of the month
preceding the applicable Payment Date, whether or not such day is a Business
Day, except with respect to the Initial Payment Date, the Record Date shall be
the Closing Date.
"Recoveries": With respect to a Defaulted Loan Contract and for any
Collection Period occurring after the date on which such Loan Contract becomes a
Defaulted Loan Contract, all payments (including insurance proceeds) that the
Servicer received from or on behalf of an Obligor regarding such Defaulted Loan
Contract or from liquidation of the related Vehicle, net of any reasonably
incurred out-of-pocket expenses incurred by the Servicer in enforcing such
Defaulted Loan Contract.
"Redemption Account": The Trust Account established and maintained
pursuant to the Section 12.02(b)(ii) hereof.
"Redemption Date": The Payment Date specified as such by the
Servicer or MBIA in accordance with the terms of Section 10.02 hereof for the
redemption of the Class A Notes or the Class B Notes after the Class A Note
Balance or the Class B Note Balance, as applicable, is less than 10% of the
Initial Class A Note Balance or the Initial Class B Note Balance, as applicable.
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"Redemption Price": With respect to any Class of Notes being
redeemed pursuant to Article Ten hereof, and as of the related Redemption Date,
the Outstanding Class A Note Balance or Class B Note Balance as applicable,
together with interest accrued and unpaid thereon to but excluding the related
Redemption Date at the applicable Note Interest Rate (exclusive of installments
of interest and principal maturing on or prior to such date, payment of which
shall have been made or duly provided for to the Holder of such Note on the
applicable date or as otherwise provided in this Indenture) plus any outstanding
MBIA Reimbursement Amount.
"Redemption Record Date": As defined in Section 10.01 hereof.
"Registered Holder": For any date, the holder of a Note as specified
in the Note Register as of the preceding Record Date.
"Re-Liening Trigger": The occurrence of any one of the following
events:
(i) The stockholder's equity of AutoInfo, calculated in
accordance with GAAP, as reflected in AutoInfo's most
recent annual or quarterly consolidated financial
statements is less than $23,750,000;
(ii) An Insolvency Event with respect to the Company or the
Issuer;
(iii) One or more courts of competent jurisdiction have issued
final, non-appealable orders to the effect that the
Indenture Trustee is not the secured party with respect
to Vehicles financed under Loan Contracts with an
aggregate initial principal balance (i.e., as of ----
the date upon which such Loan Contracts were originated
by the Company), equal to 5.0% or more of the Initial
Aggregate Loan Balance; or
(iv) The occurrence of an Event of Default.
"Request for Release of Documents": As defined in the Servicing
Agreement.
"Required Reserve Account Amount" means, as of any Payment Date, the
greater of (a) 18% of the Aggregate Loan Balance as of such Payment Date, and
(b) 3% of the Initial Aggregate Loan Balance; provided, however, that, on and
after the Payment Date on which the Class B Note Balance has been reduced to
zero, and no accrued interest thereon remains unpaid, the Required Reserve
Account Amount shall not exceed the Aggregate Loan Balances; provided, further,
that in the event that a Reserve Account Increase Event has occurred and MBIA
has not waived such Reserve Account
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Increase Event, the Required Reserve Account Amount shall be the greater of (a)
24% of the Aggregate Loan Balance as of such Payment Date, and (b) 3% of the
Initial Aggregate Loan Balance, with such increase being subject to a reduction
to the previous level upon the cure of certain Reserve Account Increase Events.
Upon the occurrence of an Event of Default, the Required Reserve Account Amount
shall remain at the then current Required Reserve Account Amount until the Class
A Notes and any MBIA Reimbursement Amounts have been repaid in full. The
Required Reserve Account Amount shall in any event be zero after the Senior
Liability Termination Date.
"Responsible Officer": When used with respect to the Indenture
Trustee or the Custodian, any officer assigned to the Corporate Trust Office or
the Corporate Trust Administration Department, as the case may be (or any
successor thereto), including any managing director, vice president, assistant
vice president, assistant treasurer, assistant secretary or any other officer of
the Indenture Trustee or the Custodian, as applicable, customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Indenture, 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.
"Reserve Account": The Trust Account created and maintained pursuant
to Section 12.02(b)(i) hereof.
"Reserve Account Increase Event": The occurrence of any one of the
following events:
(i) commencing on the third Determination Date, the average Monthly
Net Default Rate for the most current three months exceeds 3%; provided,
however, that such event shall no longer be deemed a Reserve Account
Increase Event should the average Monthly Net Default Rate for the most
current six months following the months in which the Reserve Account
Income Event shall have occurred falls below 3%;
(ii) commencing on the third Determination Date, the average
Delinquency Rate for the most current three months exceeds 16.5%;
provided, however, that such event shall no longer be deemed a Reserve
Account Increase Event if the average Delinquency Rate for the most
current three months following the months in which the Reserve Account
Increase Event shall have occurred falls below 16.5%; or
(iii) the Cumulative Net Default Rate on any Determination Date
exceeds the level specified for such period in the Cumulative Net Default
Table.
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"Reserve Account Initial Deposit": 13.50% of the Initial Aggregate
Loan Balance.
"Rule of 78s Method": The method under which a portion of a payment
allocated to earned interest and the portion allocable to principal is
determined according to the sum of the month's digits or any equivalent method
commonly referred to as the "Rule of 78s."
"Scheduled Payments": With respect to a Loan Contract, the periodic
payment set forth in such Loan Contract due from the Obligor on the related Due
Date; the respective principal and interest portions of each such payment shall
be determined in accordance with the "Rule of 78's" method.
"Senior Liability Termination Date": The first Payment Date on which
the Class A Note Balance is zero, no accrued interest on the Class A Notes
remains unpaid, and no MBIA Reimbursement Amounts remain outstanding.
"Servicer": AutoInfo Finance of Virginia, Inc., a Virginia
corporation, and any successor Servicer appointed in accordance with the terms
of the Servicing Agreement and acceptable to MBIA.
"Servicer Default": The meaning given in the Servicing Agreement.
"Servicer Event of Default": The meaning given in the Servicing
Agreement.
"Servicer Fee": An amount equal to the product of (i) one-twelfth of
the Servicer Fee Rate and (ii) the Aggregate Loan Balance as of the first day of
the related Collection Period; provided, however, that with respect to the
Initial Payment Date, an amount equal to the product of (i)(A) a fraction, the
numerator of which is the actual number of days in the related Collection Period
and the denominator of which is 360, times (B) the Servicer Fee Rate and (ii)
the Initial Aggregate Loan Balance.
"Servicer Fee Rate": 3.0% per annum.
"Servicer Termination Notice": The meaning given in the Servicing
Agreement.
"Servicing Agreement": The Servicing Agreement dated as of October
1, 1996 by and among the Indenture Trustee, the Back-up Servicer, the Servicer,
the Custodian and the Issuer, as amended from time to time in accordance with
the terms thereof.
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"Servicing Charges": The sum of (i) all late payment charges paid by
Obligors on Delinquent Loan Contracts after payment in full of any Scheduled
Payments due in a prior Collection Period and Scheduled Payments for the related
Collection Period and (ii) any other incidental charges or fees received from an
Obligor, including, but not limited to, late fees, collection fees and bounced
check charges.
"Servicing Officer": As defined in the Servicing Agreement.
"Stated Maturity Date": January 15, 2002.
"Standard & Poor's" or "S&P": Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., or any successor thereto.
"Sub-Servicer": Any sub-servicer appointed by the Servicer in
accordance with the terms of the Servicing Agreement.
"Transaction Documents": This Indenture, the Loan Sale Agreement,
the Servicing Agreement, the Insurance Agreement and the Lockbox Agreement.
"Trust Accounts": The Collection Account, the Lockbox Account, the
Redemption Account, the Reserve Account and the Class B Reserve Account
established pursuant to the terms of this Indenture; provided, however, that the
Class B Noteholders shall, prior to the Senior Liability Termination Date, have
no interest in the Reserve Account and provided, further, that the Class A
Noteholders and MBIA shall have no interest in the Class B Reserve Account.
"Trust Estate": As defined in the Granting Clause hereof.
"Vehicle": A new or used automobile, light truck or motorcycle, and
all accessories thereto.
"Withdrawn Collateral": As defined in Section 5.01(b) hereof.
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ARTICLE II
THE NOTES
SECTION 2.01. Form Generally.
The Class A Notes, the Class B Notes and the certificates of
authentication shall be in substantially the form set forth, respectively, in
Exhibits A and B attached hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon, as may, consistently herewith,
be determined by the officers executing such Notes, as evidenced by their
execution of the Notes.
The definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any manner acceptable to the Indenture Trustee and
the initial purchaser of the Notes, all as determined by the officers executing
such Notes, as evidenced by their execution of such Notes.
SECTION 2.02. Denomination.
The aggregate principal amount of Class A Notes which may be
authenticated and delivered hereunder is $34,281,119.44, and the aggregate
principal amount of Class B Notes which may be authenticated and delivered
hereunder is $2,016,536.44, except for Notes of such Class authenticated and
delivered upon registration of transfer or in exchange for or in lieu of, other
Notes of such Class pursuant to Sections 2.04, 2.05 or 2.07 hereof. The Notes
shall be issuable only as registered Notes without coupons in denominations of
at least $250,000 and integral multiples of $1,000 in excess thereof (except in
the single case of one Note of each Class); provided, however, that, the
foregoing shall not restrict or prevent the transfer in accordance with Sections
2.05 and 2.06 hereof of any Class A Note with a remaining principal balance of
less than $250,000.
SECTION 2.03. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Issuer by its President
or one of its Vice Presidents. The signature of these officers on the Notes must
be manual.
Notes bearing the manual signatures of individuals who were at any
time the proper officers of the Issuer shall bind the Issuer, notwithstanding
that such individuals or any of them have ceased to hold such offices prior to
the authentication or delivery of such Notes or did not hold offices at the date
of authentication or delivery of such Notes.
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Each Note shall bear on its face the applicable delivery date and be
dated as of the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee or by any Authenticating Agent by the manual
signature of one of its authorized officers, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
SECTION 2.04. Temporary Notes.
Pending the preparation of definitive Notes, the Issuer may execute,
and upon Issuer Order, the Indenture Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any denomination, containing the same terms and
representing the same rights as the definitive Notes in lieu of which they are
issued.
If temporary Notes are issued, the Issuer will cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive Notes
upon surrender of the temporary Notes at the office or agency of the Issuer to
be maintained as provided in Section 3.02(f) hereof, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Issuer shall execute and the Indenture Trustee shall authenticate and deliver in
exchange therefor one or more definitive Notes of any authorized denominations
and of a like initial aggregate principal amount, Class and Stated Maturity
Date. Until so exchanged, the temporary Notes shall in all respects be entitled
to the same benefits under this Indenture as definitive Notes.
SECTION 2.05. Registration, Registration of Transfer and Exchange.
(a) The Issuer shall cause to be kept at an office or agency to be
maintained by the Issuer in accordance with Section 3.02(f) hereof a register
(the "Note Register"), in which, subject to such reasonable regulations as it
may prescribe, the Issuer shall provide for the registration of Notes and the
registration of transfers of Notes. The Indenture Trustee is hereby appointed
"Note Registrar" for the purpose of registering Notes and transfers of Notes as
herein provided. The Indenture Trustee and MBIA shall have the right to examine
the Note Register at all reasonable times and to rely conclusively upon a
certificate of the Note Registrar as to the names and addresses of the Holders
of the Notes and the principal amounts and numbers of such Notes as held.
(b) Upon surrender for registration of transfer of any Note at the
office or agency of the Issuer to be maintained as provided in Section 3.02(s)
hereof and subject to
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the conditions set forth in Section 2.06 hereof, the Issuer shall execute, and
the Indenture Trustee or by any Authenticating Agent shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Notes of any authorized denominations, and of a like aggregate principal
amount, Class and Stated Maturity Date.
(c) At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denominations and of a like aggregate principal amount,
Class and Stated Maturity Date, upon surrender of the Notes to be exchanged at
such office or agency. Whenever any Notes are so surrendered for exchange, the
Issuer shall execute, and the Indenture Trustee or by any Authenticating Agent
shall authenticate and deliver, the Notes which the Noteholder making the
exchange is entitled to receive.
(d) All Notes issued upon any registration of transfer or exchange
of Notes pursuant to this Indenture shall be the valid obligations of the
Issuer, evidencing the same debt and entitled to the same benefits under this
Indenture, as the Notes surrendered upon such registration of such transfer or
exchange pursuant to this Indenture.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed or be accompanied by a written instrument of
transfer in form satisfactory to the Issuer and the Note Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.04 or 9.05 hereof not involving any registration
of transfer.
Notwithstanding anything else to the contrary contained herein, the
obligation of the Issuer to pay the principal of and interest on the Notes is
not a general obligation of the Issuer, but is limited solely to the Trust
Estate pledged hereunder and, with respect to the Class A Notes, the Class A
Note Insurance Policy subject to the terms thereof.
SECTION 2.06. Limitation on Transfer and Exchange.
(a) Each prospective initial Noteholder acquiring a Note, each
prospective transferee acquiring a Note and each prospective owner of a
beneficial interest in a Note acquiring such beneficial interest (any
prospective initial Noteholder, prospective transferee or prospective owner of a
beneficial interest, a "Prospective Holder") shall either (i) represent and
warrant in a written certification addressed to the Indenture Trustee, the
Issuer and MBIA that it is not (a) an employee benefit plan (as defined in
Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a plan described
in Section 4975(e)(i) of the Code or (c) any entity whose underlying assets
include plan assets by
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reason of a plan's investments in the entity, or (ii) provide a representation
and warranty in a written certification addressed to the Indenture Trustee, MBIA
and the Issuer that such acquisition and holding by the Prospective Holder is
subject to a Department of Labor class exemption, provided that the foregoing
shall not apply with respect to the initial sale of the Notes.
(b) The Notes have not been registered or qualified under the
Securities Act of 1933 (the "1933 Act") or the securities laws of any state. No
transfer of any Note shall be made unless such transfer is made in a transaction
which does not require registration under the 1933 Act and pursuant to an
effective registration or qualification under any state securities or "blue sky"
laws, or in a transaction which does not require such registration or
qualification. In the event that a transfer, other than the initial sale of the
Notes, is to be made without registration or qualification, such Holder's
prospective transferee shall either (i) deliver to the Indenture Trustee an
investment letter substantially in the form set forth on Exhibit E hereto, or
other applicable document (the "Investment Letter") or (ii) deliver to the
Indenture Trustee an Opinion of Counsel that the transfer is exempt from the
1933 Act. Neither the Issuer nor the Servicer nor the Indenture Trustee is
obligated to register or qualify the Notes under the 1933 Act or any other
securities law. Any such Holder desiring to effect a transfer other than in
accordance with the foregoing procedures shall be liable to the Indenture
Trustee, the Servicer, MBIA and the Issuer against any liability, cost or
expense (including attorneys' fees) that may result if the transfer is not in
accordance with the foregoing procedures. Neither the Issuer nor the Servicer
nor the Indenture Trustee nor MBIA shall have any liability to any Holder
arising from a transfer of any Note in reliance upon a certification described
in this Section 2.06(b). The Indenture Trustee shall promptly, after receipt of
such information as is set forth in the next succeeding sentence, furnish to any
Holder, or any Prospective Holder designated by a Holder, the information
required to be delivered to Holders and Prospective Holders of Notes in
connection with resales of the Notes to permit compliance with said Rule 144A in
connection with such resales. Such information shall be provided to the
Indenture Trustee by the Servicer. No Note may be subdivided (including any
assignment or transfer of a participation or beneficial interest therein) for
resale or other transfer into a unit smaller than a unit the initial offering
price of which would have been $250,000.
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Note.
If (i) any mutilated Note is surrendered to the Note Registrar, or
the Indenture Trustee receives evidence to its satisfaction of the destruction,
loss or theft of any Note, and (ii) there is delivered to the Indenture Trustee
and MBIA such security or indemnity (provided that an agreement of indemnity
shall suffice from the initial Noteholders who maintain a claims paying ability
of investment grade or better as determined by a nationally recognized rating
organization) as may be required by the Indenture Trustee and MBIA to save the
Issuer, the Indenture Trustee and MBIA or any director, officer, employee or
agent of any of them harmless, then, in the absence of notice
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to the Issuer or the Note Registrar that such Note has been acquired by a bona
fide purchaser, the Issuer shall execute and, upon its request, the Indenture
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a new Note of the same tenor, initial
principal balance, Class and Stated Maturity Date, bearing a number not
contemporaneously outstanding. If after the delivery of such new Note, a bona
fide purchaser of the original Note in lieu of which such new Note was issued
presents for payment such original Note, MBIA, the Issuer and the Indenture
Trustee shall be entitled to recover such new Note from the person to whom it
was delivered or any person taking therefrom, except a bona fide purchaser, and
shall be entitled to recover upon the security or indemnity provided therefor to
the extent of any loss, damage, cost or expenses incurred by MBIA, the Issuer or
the Indenture Trustee or any agent of any of them in connection therewith. If
any such mutilated, destroyed, lost or stolen Note shall have become or shall be
about to become due and payable, or shall have become subject to redemption in
full, instead of issuing a new Note, the Issuer may pay such Note without
surrender thereof, except that any mutilated Note shall be surrendered.
Upon the issuance of any new Note under this Section, the Issuer may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Indenture Trustee) connected therewith.
Every new Note issued pursuant to this Section 2.07, in lieu of any
destroyed, lost or stolen Note, shall constitute an original additional
contractual obligation of the Issuer, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits hereof equally and proportionately with any and all other Notes
duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.08. Payment of Principal and Interest; Principal and
Interest Rights Preserved.
(a) With respect to each Payment Date, interest on the Notes shall
accrue from the prior Payment Date (or from the Closing Date in the case of the
first Payment Date) to and including the day preceding such Payment Date on the
Class A Note Balance or the Class B Note Balance, as applicable, as of the close
of business on the day preceding such Payment Date at the related Note Interest
Rate (calculated on the basis of a 360-day year consisting of 12 months of 30
days each) for such Notes, until the last day preceding the Final Payment Date
and (to the extent that the payment of such interest shall be legally
enforceable) on any overdue installment of interest from the date such interest
became due and payable (giving effect to any applicable grace periods provided
herein)
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until fully paid. Interest shall be due and payable in arrears on each Payment
Date, with each payment of interest calculated as described above on the
Outstanding Aggregate Note Balance of the Notes immediately following the
preceding Payment Date or on the Closing Date, if there has not been any
preceding Payment Date; provided, that the payment of interest on the Class B
Notes is subordinate to the payment of interest on the Class A Notes and to
certain other payments in accordance with Section 12.02(d). In making any such
interest payment, if the interest calculation with respect to a Note shall
result in a portion of such payment being less than $.01, then such payment
shall be decreased to the nearest whole cent, and no subsequent adjustment shall
be made in respect thereof.
(b) The principal of each Note shall be payable in installments
ending no later than the applicable Stated Maturity Date thereof unless such
Note becomes due and payable at an earlier date by call for redemption or
otherwise. All reductions in the principal amount of a Note effected by payments
of installments of principal made on any Payment Date shall be binding upon all
future Holders of such Note and of any Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof, whether or not such
payment is noted on such Note. Each installment of principal payable on the
Class A Notes shall be in an amount equal to the sum of (i) the Class A
Principal Payment Amount, if any, and (ii) the Additional Class A Principal
Distribution Amount, if any, available to be paid in accordance with the
priorities of Sections 12.02(d) hereof. Each installment of principal payable on
the Class B Notes shall be in an amount equal to the Class B Principal Payment
Amount; provided, that the payment of the Class B Principal Payment Amount shall
be subordinate to the payments of principal of and interest on the Class A Notes
and to certain other payments in accordance with Section 12.02(d) hereof. The
principal payable on the Notes of any Class shall be paid on each Payment Date
beginning on the applicable Initial Payment Date and ending on the applicable
Final Payment Date, and with respect to all of the Notes of any Class, on a pro
rata basis based upon the ratio that the Outstanding Note Balance of a Note
bears to the Outstanding Note Balance of all Notes of such Class; provided,
however, that if as a result of such proration a portion of such principal would
be less than $.01, then such payment shall be increased to the nearest whole
cent, and such portion shall be deducted from the next succeeding principal
payment.
(c) The principal of and interest on the Notes are payable by check
mailed by first-class mail to the Person whose name appears as the Registered
Holder of such Note on the Note Register at the address of such Person as it
appears on the Note Register or by wire transfer in immediately available funds
to the account specified in writing to the Indenture Trustee by such Registered
Holder at least five Business Days prior to the Record Date for the Payment Date
on which wire transfers will commence, in such coin or currency of the United
States of America as at the time of payment is legal tender for the payment of
public and private debts. Except as set forth in the final sentence of this
Section 2.08(c), all payments on the Notes shall be paid without any requirement
of presentment. The Issuer shall notify the Person in whose name a Note is
registered at the close of business on the Record Date next preceding the
Payment Date on which the Issuer
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expects that the final installment of principal of such Note will be paid that
the Issuer expects that such final installment will be paid on such Payment
Date. Such notice shall be mailed no later then the tenth day prior to such
Payment Date and shall specify the place where such Note may be surrendered.
Funds representing any such checks returned undeliverable shall be held in
accordance with Section 7.15 hereof. Each Noteholder shall surrender its Note to
the Indenture Trustee prior to payment of the final installment of principal of
such Note.
(d) Each Noteholder, by acceptance of its Note, agrees that the
Notes shall be limited recourse obligations of the Issuer payable solely from
the Trust Estate. Each Holder of a Note, by acceptance of such Notes, agrees
that during the term of this Indenture and for one year and one day after the
termination hereof, such Holder and any Affiliate thereof will not file any
involuntary petition or otherwise institute any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other proceeding under any
federal or state bankruptcy or similar law against the Issuer.
SECTION 2.09. Persons Deemed Owner.
Prior to due presentment for registration of transfer of any Note,
the Issuer, MBIA, the Indenture Trustee and any agent of the Issuer, MBIA or the
Indenture Trustee shall treat the Person in whose name any Note is registered as
the owner of such Note for the purpose of receiving payments of principal of and
interest on such Note and for all other purposes whatsoever, whether or not such
Note be overdue, and neither the Issuer, MBIA, the Indenture Trustee nor any
agent of the Issuer, MBIA or the Indenture Trustee shall be affected by notice
to the contrary.
SECTION 2.10. Cancellation.
All Notes surrendered to the Indenture Trustee for payment,
registration of transfer or exchange (including Notes surrendered to any Person
other than the Indenture Trustee which shall be delivered to the Indenture
Trustee) shall be promptly canceled by the Indenture Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section 2.10, except as expressly permitted by this Indenture. All canceled
Notes held by the Indenture Trustee shall be disposed of by the Indenture
Trustee as is customary with its standard practice in effect from time to time.
SECTION 2.11. Tax Treatment.
The Issuer has structured this Indenture and the Notes with the
intention that the Notes will qualify under applicable tax law as indebtedness
of the Issuer, and the Issuer and each Noteholder, by acceptance of its Note,
agree to treat the Notes as debt for all purposes unless and until otherwise
required by an applicable taxing authority.
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ARTICLE III
ISSUER REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 3.01. Representations, Warranties and Covenants of the
Issuer. The Issuer hereby makes the following representations and warranties to
the Indenture Trustee and for the benefit of MBIA and the Noteholders. Such
representations and warranties speak as of the Closing Date, but shall survive
any subsequent transfer, assignment, contribution or conveyance of the Loan
Assets.
(a) Organization and Good Standing. The Issuer is a corporation duly
organized, validly existing and in good standing under the law of the Issuer
State of Incorporation and each other State where the nature of its business
requires it to qualify, except to the extent that the failure to so qualify
would not in the aggregate materially adversely affect the ability of the Issuer
to perform its obligations under the Transaction Documents;
(b) Authorization. The Issuer has the power, authority and legal
right to execute, deliver and perform under the terms of the Transaction
Documents and the execution, delivery and performance of the Transaction
Documents have been duly authorized by the Issuer by all necessary corporate
action;
(c) Binding Obligation. Each of (i) this Indenture, assuming due
authorization, execution and delivery by the Indenture Trustee, (ii) the
Insurance Agreement, assuming due authorization, execution and delivery by MBIA,
the Indenture Trustee and the Servicer, (iii) the Servicing Agreement, assuming
due authorization, execution and delivery by the Indenture Trustee, the Back-Up
Servicer, the Custodian and the Servicer and (iv) the Loan Sale Agreement,
assuming due authorization, execution and delivery by the Company, constitutes a
legal, valid and binding obligation of the Issuer, enforceable against the
Issuer in accordance with its terms except that (A) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws (whether statutory, regulatory or decisional) now or hereafter in effect
relating to creditors' rights generally and (B) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought, whether a proceeding at law or in equity;
(d) No Violation. The consummation of the transactions contemplated
by the fulfillment of the terms of the Transaction Documents will not conflict
with, result in any breach of any of the terms and provisions of or constitute
(with or without notice, lapse of time or both) a default under the
organizational documents or bylaws of the Issuer, or any material indenture,
agreement, mortgage, deed of trust or other instrument to which the Issuer is a
party or by which it is bound, or in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of such indenture, agreement,
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mortgage, deed of trust or other such instrument, other than any Lien created or
imposed pursuant to the terms of the Transaction Documents, or violate any law
or any material order, rule or regulation applicable to the Issuer of any court
or of any Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Issuer or any of its
properties.
(e) No proceedings. There are no proceedings, or investigations to
which the Issuer, or any of the Issuer's Affiliates, is a party pending, or, to
the knowledge of the Issuer, before any court, regulatory body, administrative
agency or other tribunal or governmental instrumentality (A) asserting the
invalidity of the Transaction Documents, (B) seeking to prevent the issuance of
any of the Notes or the consummation of any of the transactions contemplated by
the Transaction Documents or (C) seeking any determination or ruling that would
materially and adversely affect the performance by the Issuer of its obligations
under, or the validity or enforceability of, the Transaction Documents.
(f) Approvals. All approvals, authorizations, consents, orders or
other actions of any Person, or of any court, governmental agency or body or
official, required in connection with the execution and delivery of the
Transaction Documents and with the valid and proper authorization, issuance and
sale of the Notes pursuant hereto (except approvals of State securities
officials under the Blue Sky Laws), have been or will be taken or obtained on or
prior to the Closing Date.
(g) Place of Business. The Issuer's principal place of business and
chief executive office is located at 863 Glenrock Road, Norfolk, Virginia 23502.
(h) Transfer and Assignment. Upon the delivery to the Custodian, as
agent of the Indenture Trustee, of the Loan Contracts, the related Certificates
of Title and the Applications for Certificates of Title, the Indenture Trustee,
for the benefit of the Noteholders and MBIA, shall have a first priority
perfected security interest in such items, as well as the other items
constituting the Trust Estate, except for Liens permitted under Section 3.02(a)
and limited with respect to proceeds to the extent set forth in Section 9-306 of
the UCC as in effect in the applicable jurisdiction. All filings (including,
without limitation, UCC filings) and other actions as are necessary in any
jurisdiction to perfect the interest of the Indenture Trustee in the Trust
Estate, including the transfer of the Certificates of Title and the Applications
for Certificates of Title, and the Loan Contracts, and the payment of any fees,
have been made.
(i) Parent of the Issuer. As of the Closing Date, the Company is the
registered owner of all of the issued and outstanding common stock of the
Issuer, all of which common stock has been validly issued, is fully paid and
nonassessable.
(j) Loan Sale Agreement. As of the Closing Date, the Issuer has
entered into the Loan Sale Agreement with the Company relating to its
acquisition of the Loan Contracts and its security interest in the Vehicles, and
the representations and warranties
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made by the Company relating to the Loan Contracts and the Vehicles have been
validly assigned to and are for the benefit of the Issuer, the Indenture
Trustee, MBIA and the Noteholders and such representations and warranties are
true and correct in all material respects.
(k) Bulk Transfer Laws. The transfer, assignment and conveyance of
the Loan Contracts and security interest in the Vehicles by the Company to the
Issuer pursuant to the Loan Sale Agreement and by the Issuer pursuant to this
Indenture is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
(l) The Loan Contracts. The Issuer hereby restates and makes each of
the representations and warranties with respect to the Loan Contracts and the
Vehicles that are made by the Company in Section 3.01 of the Loan Sale
Agreement.
SECTION 3.02. Covenants.
The Issuer hereby makes the following covenants for the benefit of
the Indenture Trustee, MBIA and the Noteholders, on which the Indenture Trustee
relies in accepting the Trust Estate in trust and in authenticating the Notes
and MBIA relies in issuing the Class A Note Insurance Policy. Such covenants are
made as of the Closing Date, but shall survive the transfer, grant and
assignment of the Trust Estate to the Indenture Trustee:
(a) No Liens. Except for the conveyances and grant of security
interests hereunder, the Issuer will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien on any
part of Trust Estate now existing or hereafter created, or any interest therein
prior to the termination of this Indenture pursuant to Section 5.01 hereof; the
Issuer will notify the Indenture Trustee and MBIA of the existence of any Lien
on any part of Trust Estate immediately upon discovery thereof; and the Issuer
shall defend the right, title and interest of the Indenture Trustee in, to and
under the Trust Estate now existing or hereafter created, against all claims of
third parties claiming through or under the Issuer; provided, however, that
nothing in this Section 3.02(a) shall prevent or be deemed to prohibit the
Issuer from suffering to exist upon any of the Trust Estate any Liens for
municipal or other local taxes and other governmental charges if such taxes or
governmental charges shall not at the time be due and payable or if the Issuer
shall currently be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with respect
thereto.
(b) Delivery of Collections. The Issuer agrees to hold in trust and
promptly deposit into the Collection Account all amounts received by the Issuer
in respect of the Trust Estate (other than amounts distributed to or for the
benefit of the Issuer pursuant to Article Twelve hereof).
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(c) Obligations with Respect to Loan Contracts. The Issuer will duly
fulfill all obligations on its part to be fulfilled under or in connection with
each Loan Contract and will do nothing to impair the rights of the Indenture
Trustee (for the benefit of the Noteholders and MBIA) in the Loan Contracts, the
Vehicles and any other part of the Trust Estate.
(d) Compliance with Law. The Issuer will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions of
any governmental authority applicable to the Loan Contracts or any part thereof;
provided, however, that the Issuer may contest any act, regulation, order,
decree or direction in any reasonable manner which shall not materially and
adversely affect the rights of the Indenture Trustee (for the benefit of the
Noteholders and MBIA) in the Loan Contracts and the Vehicles. The Issuer will
comply, in all material respects, with all requirements of law applicable to the
Issuer.
(e) Preservation of Security Interest. The Issuer shall execute and
file such continuation statements and any other documents which may be required
by law to fully preserve and protect the interest of the Indenture Trustee (for
the benefit of the Noteholders and MBIA) in the Trust Estate. If a Re-Liening
Trigger occurs, the Issuer shall enforce its rights against the Company under
the Loan Sale Agreement to have the Vehicles retitled noting the security
interest of the Indenture Trustee hereunder.
(f) Maintenance of Office, etc. The Issuer will not, without
providing 30 days' prior written notice to the Indenture Trustee and MBIA and
without filing such amendments to any previously filed financing statements as
the Indenture Trustee or MBIA may require or as may be required in order to
maintain the Indenture Trustee's perfected security interest in the Trust
Estate, (a) change the location of its principal executive office, or (b) change
its name, identity or corporate structure in any manner which would make any
financing statement or continuation statement filed by the Issuer in accordance
with the Servicing Agreement or this Indenture seriously misleading within the
meaning of Article 9-402(7) of any applicable enactment of the UCC.
(g) Further Assurances. The Issuer will make, execute or endorse,
acknowledge, and file or deliver to MBIA, the Rating Agencies and the Indenture
Trustee from time to time such schedules, confirmatory assignments, conveyances,
transfer endorsements, powers of attorney, certificates, reports and other
assurances or instruments and take such further steps relating to the Trust
Estate, as the Indenture Trustee or MBIA may reasonably request and reasonably
require.
(h) Notice of Liens. The Issuer shall notify the Indenture Trustee
and MBIA promptly after becoming aware of any Lien on any part of the Trust
Estate, except for any Liens for municipal or other local taxes if such taxes
shall not at the time be due or payable without penalty or if the Issuer shall
currently be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with respect
thereto.
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(i) Activities of the Issuer. The Issuer shall at all times abide by
the restrictions on its activities as set forth in its certificate of
incorporation and shall not amend such certificate of incorporation unless (x)
the Issuer shall cause, prior to the taking of such action, an Opinion of
Counsel experienced in federal bankruptcy matters, in substance satisfactory to
MBIA and the Rating Agencies, to be delivered to the Indenture Trustee, MBIA and
the Rating Agencies and (y) the Rating Agencies shall indicate in writing that
the taking of such action will not affect the then current rating of any Notes
or the shadow rating of this transaction. So long as the Notes remain
Outstanding, the Issuer shall not amend its certificate of incorporation without
the prior written consent of MBIA.
(j) Directors. The Issuer agrees that at all times, at least two of
the directors of the Issuer will not be a director, officer or employee of any
direct or ultimate parent, or Affiliate of the parent or of the Issuer;
provided, however, that such independent directors and officers may serve in
similar capacities for other "special purpose corporations" formed by the
Company and its Affiliates. The Issuer's Certificate of Incorporation shall at
all times provide that such independent directors shall have a fiduciary duty to
the Holders of the Notes.
(k) Tax Treatment. Unless and to the extent otherwise required by an
applicable taxing authority, the Issuer will treat the Notes as debt of the
Issuer.
(l) Notice of Reserve Account Increase Events; Re-Liening Triggers
and Events of Default. Upon the Issuer's obtaining knowledge of the occurrence
of any Reserve Account Increase Event, Re-Liening Trigger or Event of Default,
the Issuer shall within one Business Day of obtaining such knowledge notify MBIA
and the Indenture Trustee of such occurrence in writing.
(m) Enforcement of this Indenture and Loan Sale Agreement. The
Issuer will take all actions necessary, and diligently pursue all remedies
available to it, to the extent commercially reasonable, to enforce the
obligations of the Servicer under the Servicing Agreement and the Company under
the Loan Sale Agreement and to secure its rights thereunder.
(n) Issuer May Consolidate, etc., Only on Certain Terms. The Issuer
shall not consolidate or merge with or into any other Person or convey or
transfer its properties and assets substantially as an entirety to any Person,
unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger or which acquires by conveyance or transfer
the properties and assets of the Issuer substantially as an entirety shall
be a Person organized and existing as a corporation under the laws of the
United States of America or any State thereof and shall have expressly
assumed, by an agreement supplemental hereto, executed and delivered to
the Indenture Trustee, in form and substance
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reasonably satisfactory to MBIA, the obligation and covenants of this
Indenture and the Loan Sale Agreement on the part of the Issuer to be
performed or observed; and
(ii) immediately after giving effect to such transaction, no Event
of Default or the occurrence of any circumstances which with notice or
lapse of time would become an Event of Default (such event, occurrence or
circumstance, a "Default") shall have occurred and be continuing; and
(iii) the Issuer shall have delivered to the Indenture Trustee and
MBIA an Officer's Certificate and an Opinion of Counsel each stating that
such consolidation, merger, conveyance or transfer comply with this
Article and that all conditions precedent herein provided for relating to
such transaction have been complied with and an Opinion of Counsel, for
the benefit of MBIA, the Indenture Trustee and the Noteholders confirming
the enforceability of documents in connection with such consolidation,
merger, conveyance or transfer;
(iv) such consolidation, merger, conveyance or transfer shall be on
such terms as shall fully preserve the lien and security of this
Indenture, the perfection and priority thereof and the rights and powers
of the Indenture Trustee, MBIA and the Noteholders;
(v) the surviving corporation shall be a "special purpose
corporation" having an organizational charter substantially similar to the
certificate of incorporation of the Issuer including specific limitations
on its business purposes, and provisions for independent directors; and
(vi) MBIA shall have given its prior written consent, which consent
shall not be unreasonably withheld or delayed.
(o) Successor Substituted. Upon any consolidation or merger, or any
conveyance or transfer of the properties and assets of the Issuer substantially
or in entirety in accordance with this Indenture, the Person formed by or
surviving such consolidation or merger (if other than the Issuer) or the Person
to which such conveyance or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer under
this Indenture with the same effect as if such Person had been named as the
Issuer herein. In the event of any such conveyance or transfer, the Person named
as the "Issuer" in the first paragraph of this Indenture or any successor which
shall theretofore have become such in the manner prescribed in this Article
shall be released from its liabilities and from its obligations under this
Indenture and may be dissolved, wound-up and liquidated at any time thereafter.
(p) Use of Proceeds. The proceeds from the sale of the Notes will be
used by the Issuer (a) to pay the purchase price of the Loan Assets pursuant to
the Loan Sale
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Agreement and (i) to deposit into the Reserve Account the Reserve Account
Initial Deposit and (ii) to deposit the Class B Reserve Account Deposit into the
Class B Reserve Account, (b) to pay the expenses associated with this
transaction, and (c) for general corporate purposes. None of the transactions
contemplated in this Indenture or the Loan Sale Agreement (including the use of
the proceeds from the sale of the Notes) will result in a violation of Section 7
of the Securities and Exchange Act of 1934, as amended, or any regulations
issued pursuant thereto, including Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter 11. The Issuer does
not own or intend to carry or purchase any "margin security" within the meaning
of said Regulation G, including margin securities originally issued by it or any
"margin stock" within the meaning of said Regulation U.
(q) Consolidated Return. The Issuer and the Company are members of
an affiliated group within the meaning of section 1504 of the Code which will
file a consolidated return for federal income tax purposes at all times until
the termination of this Indenture.
(r) Taxable Income from the Loan Contracts. The Issuer shall treat
the Notes issued by it as debt and shall treat the Loan Contracts as owned by it
for Federal, state and local income tax purposes, and the affiliated group of
which the Issuer is a member within the meaning of section 1504 of the Code
shall treat the Notes issued by the Issuer as debt of the Issuer and shall treat
the Loan Contracts as owned by the Issuer for Federal, state and local income
tax purposes, and the Issuer and such affiliated group shall report and include
in the computation of the Issuer's gross income for such tax purposes the income
from the Loan Contracts, and shall deduct the interest paid or accrued with
respect to the Notes in accordance with its applicable method of accounting for
such purposes.
(s) Maintenance of Office or Agency. The Issuer will maintain an
office or agency within the United States of America where its Notes may be
presented or surrendered for payment, where Notes may be surrendered for
registration of transfer or exchange and where notices and demand to or upon the
Issuer in respect of the Notes and this Indenture may be served. The Issuer
hereby initially appoints the Indenture Trustee as the Paying Agent and its
Corporate Trust Office as the office for each of said purposes. The Issuer will
give 30 days' prior written notice to the Indenture Trustee, MBIA and the
Noteholders of any change in the identity of the Paying Agent or the location,
of any such office or agency. If at any time the Issuer shall fail to maintain
any such office or agency or shall fail to furnish the Indenture Trustee with
the address thereof, such presentations, surrenders, notices and demands may be
made or served at the Indenture Trustee, and the Issuer hereby appoints the
Indenture Trustee its agent to receive all such presentations, surrenders,
notices and demands.
(t) Limited Waiver of Recourse to Dealers. With respect to each Loan
Contract acquired from the Falk Dealer by the Company, sold by the Company to
the
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Issuer pursuant to the terms of the Loan Sale Agreement and Granted to the
Indenture Trustee by the Issuer pursuant to the terms hereof, the Issuer shall
not have the right to, and shall not, exercise or accept the benefits of any
right of recourse the Issuer may have against the Falk Dealer that otherwise
would permit the Issuer to cause such Dealer to pay any amount with respect to
such Loan Contract in the event it becomes a Defaulted Loan Contract, except
that, with respect to the CFAW Purchase Agreement, such recourse may be
exercised to the extent that all Recoveries in the aggregate paid by the Falk
Dealer after the Cut-Off Date with respect to the related Loan Contracts as a
result of the exercise of such recourse by the Issuer do not exceed an amount
equal to 10% of the aggregate Loan Balance as of the Cut-Off Date of all Loan
Contracts acquired from such Dealer.
The form of UCC-1 financing statements filed pursuant to Section
4.01(f) hereof shall contain a statement to the effect that recourse to the Falk
Dealer is limited as provided in this paragraph.
The limitation on recourse provided in this paragraph shall be for
the benefit of, and shall be enforceable through specific performance or other
remedies available at law or in equity by, the Falk Dealer, the Indenture
Trustee or the Noteholders.
SECTION 3.03. Representations and Warranties Regarding the Loan
Assets.
The Issuer hereby restates and makes each of the representations and
warranties with respect to the Loan Contracts and the Vehicles that are made by
the Company in the Loan Sale Agreement. Such representations and warranties
shall survive any subsequent transfer, assignment, contribution, pledge or
conveyance of the Loan Assets.
SECTION 3.04. Limitation on Liability of Directors, Officers, or
Employees of the Issuer.
The directors, officers, or employees of the Issuer shall not be
under any liability to MBIA, the Indenture Trustee, the Custodian, the
Noteholders, the Company, the Servicer, the Back-up Servicer or any other Person
hereunder or pursuant to any document delivered hereunder, it being expressly
understood that all such liability is expressly waived and released as a
condition of, and as consideration for, the execution of this Indenture and the
issuance of the Notes.
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ARTICLE IV
ISSUANCE OF NOTES; REMOVAL OF COLLATERAL
SECTION 4.01. Conditions to Issuance of Notes.
The Notes to be issued on the Closing Date may be executed by the
Issuer and delivered to the Indenture Trustee for authentication, and thereupon,
the same shall be authenticated and delivered by the Indenture Trustee upon
Issuer Order and upon receipt by the Indenture Trustee (or, in the case of the
items listed in clause (b) below, the Custodian) of the following:
(a) the Loan Sale Agreement with the related Loan Schedule attached
thereto and the Servicing Agreement;
(b) the original executed counterpart of each Loan Contract and each
original Certificate of Title or the Application for Certificate of Title;
(c) a Board Resolution of each of the Issuer, the Servicer and the
Company authorizing, as applicable, the execution, delivery and performance of
the Transaction Documents and the transactions contemplated hereby and by the
other Transaction Documents, certified by the Secretary or an Assistant
Secretary of the Issuer, the Servicer or the Company, as applicable;
(d) a copy of an officially certified document, dated not more than
(30) days prior to the Closing Date, evidencing the due organization and good
standing of each of the Issuer, the Servicer and AutoInfo in their respective
states of incorporation;
(e) copies of the certificate of incorporation and By-Laws of each
of the Issuer, the Servicer and AutoInfo, certified by the Secretary or an
Assistant Secretary of the Issuer, the Servicer and AutoInfo, as applicable;
(f) evidence of filing with the Secretary of State of the state (and
with the relevant county, if required by the applicable state law) of the
Company's chief executive office of UCC-1 financing statements executed by the
Company, as debtor, and naming the Issuer as secured party, and the Loan Assets
as collateral and the Indenture Trustee as assignee;
(g) evidence of filing with the Secretary of State of the state (and
with the relevant county, if required by the applicable state law) of the
Issuer's chief executive office of UCC-1 financing statements executed by the
Issuer, as debtor, and naming the Indenture Trustee for the benefit of the
Noteholders and MBIA as secured party, and the Trust Estate as collateral;
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(h) a certificate listing the Servicing Officers of the Servicer as
of the Closing Date;
(i) the Class A Note Insurance Policy for the Class A Notes;
(j) evidence of the deposit by the Issuer into the Collection
Account of any amounts paid on the Loan Contracts since the Cut-Off Date and
evidence of the deposit of the Reserve Account Initial Deposit into the Reserve
Account and the Class B Reserve Account Deposit into the Class B Reserve
Account; and
(k) such other documents as the Indenture Trustee or MBIA may
reasonably require.
SECTION 4.02. Security for Notes.
(a) The Issuer and the Company shall file UCC-1 financing statements
described in Section 4.01(f) and (g) hereof. From time to time, the Servicer
shall, in accordance with the Servicing Agreement, take or cause to be taken
such actions and execute such documents as are necessary to perfect and protect
the Indenture Trustee's and MBIA's respective interests in the Loan Contracts
and the security interest in the related Vehicles against all other Persons,
including, without limitation, the filing of financing statements, amendments
thereto and continuation statements, the execution of transfer instruments and
the making of notations on or taking possession of all records or documents of
title. If the original Certificate of Title is not available on the Closing
Date, the Company shall deliver the Application for Certificate of Title to the
Custodian on behalf of the Indenture Trustee on the Closing Date; provided,
however, that the Company shall deliver to the Custodian on behalf of the
Indenture Trustee the original Certificate of Title relating to each Vehicle
within 120 days of the delivery of the Application for Certificate of Title.
(b) If any change in either the Company's or the Issuer's name,
identity, structure or the location of its principal place of business or chief
executive office occurs, then the Issuer shall, or the Issuer shall cause the
Company, to deliver 30 days' prior written notice of such change or relocation
to the Servicer, MBIA and the Indenture Trustee and no later than the effective
date of such change or relocation, the Servicer shall file such amendments or
statements as may be required to preserve and protect the Indenture Trustee's
and MBIA's respective interests in the Trust Estate in accordance with the
Servicing Agreement.
(c) During the term of this Indenture, the Issuer will maintain its
chief executive office and principal place of business in one of the States of
the United States.
(d) The Servicer agrees to pay all reasonable costs and
disbursements in connection with the perfection and the maintenance of
perfection, as against all third
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parties, of the Indenture Trustee's and MBIA's respective right, title and
interest in and to the Trust Estate.
(e) So long as an MBIA Default shall not have occurred and be
continuing, upon the occurrence of a Re-Liening Trigger, MBIA may instruct the
Indenture Trustee, the Issuer and the Servicer to take or cause to be taken such
action as may, in the opinion of counsel to MBIA, be necessary or desirable to
perfect or reperfect the security interests in the Vehicles securing the Trust
Estate in the name of the Indenture Trustee by amending the title documents of
such Vehicles or by such other reasonable means as may, in the opinion of
counsel to the MBIA, be necessary or prudent. The Issuer hereby grants to the
Indenture Trustee a power of attorney to effect such re-perfection. The Issuer
hereby agrees to pay all expenses related to such perfection or re-perfection
(and to reimburse the Indenture Trustee for all costs and expenses related
therewith) and to take all action necessary therefor.
SECTION 4.03. Removals of Loan Contracts.
(a) If at any time the Issuer, the Custodian, MBIA or the Indenture
Trustee obtains knowledge (within the meaning of 7.01(e) hereof), discovers or
is notified by the Servicer or MBIA that any of the representations and
warranties of the Company in the Loan Sale Agreement were incorrect at the time
as of which such representations and warranties were made, then the Person
discovering such defect, omission, or circumstance shall promptly notify MBIA
and the other parties to this Indenture.
(b) In the event that the Issuer receives notice that any
representation or warranty of the Company in the Loan Sale Agreement is
incorrect and materially and adversely affects the interests of MBIA or the
Holders of the Notes, or of any breach of any of the representations and
warranties set forth in Sections 3.01(a)(ii), 3.01(a)(v), 3.01(a)(vii),
3.01(a)(xiv) or 3.01(a)(xvi) of the Loan Sale Agreement or if the Custodian
discovers that any Loan Contract File is defective as provided in Section
11.03(b) hereof and in Section 3.09(b) of the Servicing Agreement, the Issuer
shall require the Company pursuant to the Loan Sale Agreement to eliminate or
otherwise cure the circumstance or condition which has caused such
representation or warranty to be incorrect or such defect, as the case may be,
within 30 days of discovery or notice thereof. If the Company fails or the
Company or the Back-up Servicer is unable to cure such circumstance or condition
in accordance with the Loan Sale Agreement, then the Issuer shall require the
Company to purchase pursuant to the Loan Sale Agreement any Loan Asset as to
which such representation or warranty is incorrect within the time specified in
Section 3.03 of the Loan Sale Agreement. The proceeds of such purchase shall be
promptly remitted by the Issuer to the Servicer for deposit by the Servicer in
the Collection Account pursuant to Section 3.03 of the Servicing Agreement.
(c) If the Issuer fails to enforce the purchase obligation of the
Company under the Loan Sale Agreement or of the Servicer under the Servicing
Agreement, the
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Indenture Trustee is hereby appointed attorney-in-fact to act on behalf of and
in the name of the Issuer to require such purchase.
SECTION 4.04. Releases.
(a) The Issuer shall be entitled to obtain a release from the
Indenture Trustee for any Loan Contract and the related Vehicle at any time
(x)(i) after a payment by the Company, the Servicer or the Issuer of the
Purchase Price of the Loan Contract, (ii) after liquidation of the Loan Contract
in accordance with Section 3.01(b) of the Servicing Agreement and the deposit of
all gross Recoveries thereon in the Collection Account or (iii) upon the
termination of a Loan Contract (due to among other causes, prepayment in full of
the Loan Contract and sale or other disposition of the related Vehicle), or
(y)(i) on the Redemption Date, provided that all of the Notes have been redeemed
or (ii) upon the termination of this Indenture, if the Issuer delivers to the
Indenture Trustee, the Custodian and MBIA an Officer's Certificate (A)
identifying the Loan Contract and Vehicle to be released, (B) requesting the
release thereof, (C) setting forth the amount deposited in the Collection
Account with respect thereto and (D) certifying that the amount deposited in the
Collection Account (x) equals the Purchase Price of the Loan Contract, in the
event a Loan Contract and the related Vehicle are being removed from the Trust
Estate pursuant to (i) or (ii) above or (y) equals the entire amount of gross
Recoveries received with respect to such Loan Contract and related Vehicle in
the event of a release pursuant to (iii) above.
(b) Upon satisfaction of the conditions specified in subsection (a)
hereof, the Indenture Trustee shall release from this Indenture and the
Custodian shall deliver to or upon the order of the Issuer (or to or upon the
order of the Company if it has satisfied its obligations under Section 4.03
hereof and 3.04 of the Loan Sale Agreement with respect to a Loan Contract or to
or upon the order of the Servicer if it has satisfied its obligations under
Section 3.04(a)(ii) of the Loan Sale Agreement), the Loan Contract, the
Certificate of Title and/or the Application for Certificate of Title and all
interests in the Vehicle described in the Issuer's request for release.
SECTION 4.05. Trust Estate.
The Indenture Trustee may, and when required by the provisions of
Articles Four, Five, Six and Twelve hereof shall, execute instruments to release
property from the lien of this Indenture, or convey the Indenture Trustee's
interest in the same, in a manner and under circumstances which are not
inconsistent with the provisions hereof. No party relying upon an instrument
executed by the Indenture Trustee as provided in this Article Four shall be
bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
monies.
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ARTICLE V
SATISFACTION AND DISCHARGE
SECTION 5.01. Satisfaction and Discharge of Indenture.
(a) Following payment in full of (i) all of the Notes, (ii) the fees
and charges of the Indenture Trustee, (iii) all other obligations of the Issuer
under this Indenture and (iv) all amounts owing to MBIA under the Insurance
Agreement, and the release by the Indenture Trustee of the Trust Estate in
accordance with Section 5.01(b) hereof, the Indenture shall be discharged and
the Indenture Trustee shall notify the Rating Agencies thereof.
(b) Upon payment in full of the amounts referred to in clauses (i)
through (iv) of Section 5.01(a) hereof, the Issuer may submit to the Indenture
Trustee an Officer's Certificate requesting the release to the Issuer or its
designee some or all of the Trust Estate (the "Withdrawn Collateral"), together
with a written consent executed by MBIA authorizing such release. Promptly after
receipt of such Officer's Certificate and authorization to release from MBIA,
the Indenture Trustee shall release the Withdrawn Collateral from the lien of
this Indenture, and deliver the Withdrawn Collateral to the Issuer or its
designee. The Issuer shall be entitled to deliver more than one such Officer's
Certificate and MBIA consent, until the entire Trust Estate is released and
delivered to the Issuer or its designee. Notwithstanding the foregoing, MBIA may
waive the requirement that the Issuer deliver such Officer's Certificate and
authorize the Indenture Trustee by written direction to release all or a portion
of the Trust Estate from the lien of this Indenture upon payment in full of the
amounts referred to in clauses (i) through (iv) of Section 5.01(a) hereof.
Notwithstanding termination of this Indenture, the Indenture Trustee shall
remain obligated to make claims under the Class A Note Insurance Policy with
respect to any Preference Amount.
(c) In connection with the discharge of this Indenture and the
release of the Trust Estate, the Indenture Trustee shall release from the lien
hereof and deliver to or upon the order of the Issuer all property remaining in
the Trust Estate and shall execute and file, at the expense of the Issuer, UCC
financing statements provided to it evidencing such discharge and release.
SECTION 5.02. Application of Trust Money.
Subject to the last paragraph of Section 7.15 hereof, all monies
deposited with the Indenture Trustee pursuant to Section 5.01 hereof shall be
held in trust and if invested, shall be invested in Eligible Investments of the
type described in clause (i) of the definition thereof, and applied by the
Indenture Trustee, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying
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Agent as the Indenture Trustee may determine, to the Persons entitled thereto,
of the principal and interest for whose payment such money has been deposited
with the Indenture Trustee; but such money need not be segregated from other
funds except to the extent required herein or to the extent required by law.
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ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default.
"Event of Default" wherever used herein means the occurrence of any
one of the following events:
(a) An Insolvency Event with respect to the Servicer, the Company or
the Issuer.
(b) The occurrence of a Default or a breach of a representation,
warranty, or covenant under any of the Transaction Documents by any of the
Servicer, the Company or the Issuer which continues unremedied for a period of
30 days after the Servicer, the Company or the Issuer, as the case may be,
becomes aware of such Default or breach or other written notice of such Default
or breach shall have been given to the Servicer, the Company or the Issuer, as
the case may be;
(c) the occurrence of a Servicer Event of Default pursuant to the
Servicing Agreement;
(d) a payment under the Class A Note Insurance Policy is made by
MBIA;
(e) the cessation of a valid perfected first priority security
interest in the Trust Estate (other than the Vehicles) in favor of the Indenture
Trustee on behalf of the Noteholders and MBIA;
(f) the average Delinquency Rate for the most current three months
exceeds 20% as of each Determination Date;
(g) the average Monthly Net Default Rate for the most current three
months exceeds 4%;
(h) the Cumulative Net Default Rate as of each Determination Date
exceeds the level specified for such period in the Cumulative Net Default Table;
(i) on and after the third Payment Date, the amount on deposit in
the Reserve Account is less than 12% of the Aggregate Loan Balance as of such
Payment Date;
(j) the weighted average coupon on the outstanding portfolio of Loan
Contracts falls below 23%;
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(k) Scott Zecher shall (i) become deceased, (ii) become unable to
work, or (iii) cease to be employed by AutoInfo on a full-time basis, and a
replacement for Scott Zecher, reasonably acceptable to MBIA, has not commenced
employment within 90 days of the occurrence of any of the events in this clause
(k);
(l) the stockholder's equity of AutoInfo, calculated in accordance
with GAAP, as reflected in AutoInfo's most recent annual or quarterly
consolidated financial statements is less than $23,750,000;
(m) AutoInfo's Interest Coverage Ratio is less than 1.25:1 in any
two consecutive quarters;
(n) AutoInfo or any of its Affiliates is in payment default under
any indebtedness having an outstanding principal amount of $500,000 or more;
(o) AutoInfo realizes a net loss from operations in any two
consecutive quarters;
(p) a final, non-appealable judgment shall be entered against, or
settlements by, the Servicer, the Company or the Issuer by a court of competent
jurisdiction assessing monetary damages in excess of $500,000 and, in the case
of a judgment, such judgment shall not have been discharged or stayed within 60
days;
(q) except as permitted by the Transaction Documents, any assignment
by the Servicer of its rights and obligations under the Transaction Documents or
any attempt to make such an assignment without the express written consent of
MBIA; or
(r) the occurrence of a Re-Liening Trigger.
SECTION 6.02. Indenture Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relating to the Issuer or any other obligor upon any
of the Notes or the property of the Issuer or of such other obligor or their
creditors, the Indenture Trustee (irrespective of whether the principal of any
of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand on the Issuer for the payment of overdue principal or
interest) shall be entitled and empowered, to intervene in such proceeding or
otherwise,
(a) to file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes issued hereunder and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Indenture Trustee (including any claim for the reasonable
compensation, expenses, disbursements
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and advances of the Indenture Trustee, its agents and counsel and any other
amounts due the Indenture Trustee under Section 7.07 hereof and any other
amounts due and owing to the Noteholders) and of MBIA and the Noteholders
allowed in such judicial proceeding, and
(b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any receiver,
assignee, trustee, liquidator, or sequestrator (or other similar official) in
any such judicial proceeding is hereby authorized by MBIA and each Noteholder to
make such payments to the Indenture Trustee, and in the event that the Indenture
Trustee shall consent to the making of such payments directly to MBIA or the
Noteholders, to pay to the Indenture Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee, its agents and counsel, and any other amounts due the Indenture Trustee
under Section 7.07 hereof.
Nothing contained in this Indenture shall be deemed to authorize the
Indenture Trustee to authorize or consent to or accept or adopt on behalf of
MBIA or any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting MBIA or any of the Notes or the rights of any Holder
thereof, or to authorize the Indenture Trustee to vote in respect of the claim
of MBIA or any Noteholder in any such proceeding.
SECTION 6.03. Indenture Trustee May Enforce Claims Without
Possession of Notes.
(a) In all proceedings brought by the Indenture Trustee (and also
any proceedings involving the interpretation of any provision of this Indenture
to which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all of the Noteholders, and it shall not be necessary to make
any Noteholder a party to any such proceedings.
(b) All rights of actions and claims under this Indenture or any of
the Notes may be prosecuted and enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any proceeding
relating thereto, and any such proceedings instituted by the Indenture Trustee
shall be brought in its own name as Indenture Trustee of an express trust, and
any recovery whether by judgment, settlement or otherwise shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee, its agents and counsel, be for the ratable
benefit of the Holders of the Notes and MBIA.
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SECTION 6.04. Limitation on Suits.
No Holder of any Note shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder unless
(a) an MBIA Default has occurred and is continuing,
(b) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(c) the Controlling Holders shall have made written request to the
Indenture Trustee to institute proceedings in respect of such Event of Default
in its own name as Indenture Trustee hereunder;
(d) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity satisfactory to it against the costs, expenses and
liabilities to be incurred in compliance with such request;
(e) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of security or indemnity has failed to institute any
such proceedings; and
(f) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60 day period by the Controlling
Holders; it being understood and intended that no one or more Holders of Notes
shall have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes, or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all the
Holders of Notes.
SECTION 6.05. Unconditional Right of Noteholders to Receive
Principal and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal and interest on such Note as such principal and
interest becomes due and payable and to institute any proceeding for the
enforcement of any such payment against the Issuer on or after one year and one
day after the Stated Maturity Date, and such right shall not be impaired without
the consent of such Holder.
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SECTION 6.06. Restoration of Rights and Remedies.
If the Indenture Trustee, MBIA or any Noteholder has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Indenture Trustee, MBIA or to such Noteholder, then,
and in every case, the Issuer, the Indenture Trustee, MBIA and the Noteholders
shall, subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of the Indenture Trustee, MBIA and the Noteholders shall continue
as though no such proceeding had been instituted.
SECTION 6.07. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of
Section 2.07 hereof, no right or remedy herein conferred upon or reserved to the
Indenture Trustee, MBIA or the Noteholders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 6.08. Control by MBIA or Noteholders.
MBIA or, if an MBIA Default has occurred and is continuing, the
Controlling Holders shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee or
exercising any trust or power conferred on the Indenture Trustee; provided that,
in the case of direction by the Noteholders:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture, including, without limitation, any provision hereof which
expressly provides fair approval by a greater percentage of Outstanding
Principal Amount of all the Notes;
(b) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee which is not inconsistent with such direction; provided,
however, that, subject to Section 7.01 hereof, the Indenture Trustee need not
take any action which a Responsible Officer or Officers of the Indenture Trustee
in good faith determines might involve it in personal liability or be unjustly
prejudicial to the Controlling Holders; and
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(c) the Indenture Trustee has been furnished reasonable indemnity
satisfactory to it against costs, expenses and liabilities which it might incur
in connection therewith as provided in Section 7.01(f) hereof.
SECTION 6.09. Waiver of Certain Events by Less than All.
MBIA or, if an MBIA Default has occurred and is continuing, the
Controlling Holders may on behalf of the Holders of all the Notes waive any past
Event of Default, Re-Liening Trigger or Reserve Account Increase Event hereunder
and its consequences, except:
(a) the occurrence of the Event of Default described in 6.01(a)
hereof, or
(b) in respect of a covenant or provision hereof which under Article
Nine hereof cannot be modified or amended without the consent of the Holder of
each Outstanding Note affected.
Upon any such waiver, such Default, Re-Liening Trigger, Event of Default or
Reserve Account Increase Event shall cease to exist, and any Event of Default,
Re-Liening Trigger or Reserve Account Increase Event or other consequence
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event of
Default, Re-Liening Trigger, Event of Default or Reserve Account Increase Event
or impair any right consequent thereon.
SECTION 6.10. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Note by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Indenture Trustee for any action
taken, suffered or omitted by it as Indenture Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 6.10 shall not apply to any suit instituted
by the Indenture Trustee or MBIA, or to any suit instituted by the Controlling
Holders, or to any suit instituted by any Noteholder for the enforcement of the
payment of the principal of or interest on any Note on or after one year and one
day after the Stated Maturity Date expressed in such Note.
SECTION 6.11. Waiver of Stay or Extension Laws.
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The Issuer covenants (to the extent that it may lawfully do so) that
it will not, at any time, insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 6.12. Action on Notes.
The Indenture Trustee's right to seek and recover judgment on the
Notes or under this Indenture shall not be affected by the seeking, obtaining or
application of any other relief under or with respect to this Indenture. Neither
the lien of this Indenture nor any rights or remedies of the Indenture Trustee
or the Noteholders or MBIA shall be impaired by the recovery of any judgment by
the Indenture Trustee against the Issuer or by the levy of any execution under
such judgment upon any portion of the Trust Estate or upon any of the assets of
the Issuer.
SECTION 6.13. Delay or Omission; Not Waiver.
No delay or omission of the Indenture Trustee, MBIA or of any Holder
of any Note to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or any acquiescence therein. Every right and remedy given by this
Article Six or by law to the Indenture Trustee, MBIA or to the Noteholders may
be exercised from time to time, and as soon as may be deemed expedient, by the
Indenture Trustee, MBIA or by the Noteholders, as the case may be, subject in
each case, however, to the right of MBIA to control any such right and remedy
except as provided in Section 13.13 hereof.
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ARTICLE VII
THE INDENTURE TRUSTEE
SECTION 7.01. Certain Duties and Responsibilities of the Indenture
Trustee.
(a) Except during the continuance of an Event of Default known to
the Indenture Trustee as provided in subsection (e) below:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in the Transaction Documents,
and no implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee; and
(ii) in the absence of bad faith or negligence on its part, the
Indenture Trustee may conclusively rely as to the truth of the statements
and the correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Indenture Trustee and conforming to the
requirements hereof; but in the case of any such certificates or opinions,
which by any provision hereof are specifically required to be furnished to
the Indenture Trustee, the Indenture Trustee shall be under a duty to
examine the same and to determine whether or not they conform to the
requirements hereof.
(b) In case an Event of Default known to the Indenture Trustee, as
provided in subsection (e) below, has occurred and is continuing, the Indenture
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and shall use the same degree of care and skill in its exercise, as a
reasonable person would exercise or use under the circumstances in the conduct
of his or her own affairs.
(c) No provision hereof shall be construed to relieve the Indenture
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct or bad faith, except that:
(i) this subsection (c) shall not be construed to limit the effect
of subsection (a) of this Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Indenture
Trustee, unless it shall be proved that the Indenture Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Indenture Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of
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MBIA or the Controlling Holders relating to the time, method and place of
conducting any proceeding for any remedy available to the Indenture
Trustee, or exercising any trust or power conferred upon the Indenture
Trustee, under this Indenture, the Loan Sale Agreement or the Servicing
Agreement in accordance with the terms of this Indenture, the Loan Sale
Agreement and the Servicing Agreement; and
(iv) no provision hereof shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or reasonable indemnity satisfactory to it
against such risk or liability is not reasonably assured to it, provided
that nothing contained herein shall excuse the Indenture Trustee for
failure to perform its duties as Indenture Trustee hereunder.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Indenture Trustee shall be subject to the provisions
of this Article VII.
(e) For all purposes under this Indenture, the Indenture Trustee
shall not be deemed to have notice of any Event of Default, Default, Reserve
Account Increase Event, MBIA Default or Re-Liening Trigger unless a Responsible
Officer assigned to and working in the Corporate Trust Office has actual
knowledge thereof, or unless written notice of any event which is in fact such
an Event of Default, Default, Reserve Account Increase Event, Re-liening Trigger
or MBIA Default is received by the Indenture Trustee at the Corporate Trust
Office, and such notice references any of the Notes generally, the Issuer, the
Trust Estate or this Indenture.
(f) The Indenture Trustee shall be under no obligation to institute
any suit, or to take any remedial proceeding under this Indenture, or to enter
any appearance or in any way defend in any suit in which it may be made
defendant, or to take any steps in the execution of the trusts hereby created or
in the enforcement of any rights and powers hereunder until it shall be
indemnified to its satisfaction against any and all costs and expenses, outlays
and counsel fees and other reasonable disbursements and against all liability,
except liability that is adjudicated, in connection with any action so taken.
(g) Notwithstanding anything to the contrary contained herein, the
provisions of subsections (e) through (h), inclusive, of this Section 7.01 shall
be subject to the provisions of subsections (a) through (c), inclusive, of this
Section 7.01.
(h) The Indenture Trustee shall provide the reports and accountings
as required pursuant to Section 12.03 hereof.
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(i) If any Loan Contract becomes a Defaulted Loan Contract, the
Indenture Trustee shall, subject to the terms of the Servicing Agreement,
cooperate with the Issuer or Servicer, or at the request of MBIA, to take such
action as may be necessary to assist the Issuer or Servicer in enforcing such
payment or performance, including cooperation and/or assistance in the
institution and prosecution of appropriate proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and to proceed thereafter as provided in Article Six hereof.
SECTION 7.02. Notice of Default and Reserve Account Increase Events.
Promptly after the occurrence of any Event of Default, Default,
Re-Liening Trigger, Reserve Account Increase Event or MBIA Default known to the
Indenture Trustee (within the meaning of Section 7.01(e) hereof) which is
continuing, within one Business Day of obtaining such knowledge, the Indenture
Trustee shall transmit by telephonic or telegraphic communication confirmed by
mail to MBIA and by mail to the Rating Agencies and, within three Business Days,
to all Holders of Notes, as their names and addresses appear on the Note
Register, notice of such Event of Default, Default, Reserve Account Increase
Event, Re-Liening Trigger or MBIA Default hereunder known to the Indenture
Trustee.
SECTION 7.03. Certain Rights of Indenture Trustee.
Except as otherwise provided in Section 7.01,
(a) the Indenture Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
note or other obligation, paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(b) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced in writing and any resolution of the Board of Directors
may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture or any
Transaction Document the Indenture Trustee shall deem it desirable that a matter
be proved or established prior to taking, suffering or omitting any action
hereunder, the Indenture Trustee (unless other evidence be herein specifically
prescribed) shall be entitled to receive and may, in the absence of bad faith on
its part, rely upon an Officer's Certificate;
(d) the Indenture Trustee may consult with counsel and the written
advice of such counsel selected by the Indenture Trustee with due care or any
Opinion of Counsel
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shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Indenture Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Noteholders pursuant to this Indenture, unless such
Noteholders shall have offered to the Indenture Trustee reasonable security or
indemnity satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction;
(f) the Indenture Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document, but the Indenture Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Indenture Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuer at the sole cost and expense of the
Issuer, upon reasonable notice and at reasonable times personally or by agent or
attorney; and
(g) the Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, attorneys, custodians or nominees and shall not be liable for the
negligence or the misconduct of, or the supervision of such agents, attorneys,
custodians and nominees selected by it with due care.
SECTION 7.04. Not Responsible for Recitals or Issuance of Notes.
(a) The recitals contained in this Indenture and in the Notes,
except the certificates of authentication on the Notes, shall be taken as the
statements of the Issuer, and the Indenture Trustee assumes no responsibility
for their correctness. The Indenture Trustee makes no representations as to the
validity or condition of the Trust Estate or any part thereof, or as to the
title of the Issuer thereto or as to the security afforded thereby or hereby, or
as to the validity or genuineness of any securities at any time pledged and
deposited with the Indenture Trustee hereunder or as to the validity or
sufficiency of this Indenture or any of the Notes. The Indenture Trustee shall
not be accountable for the use or application by the Issuer of any of the Notes
or the proceeds thereof or of any money paid to the Issuer or upon Issuer Order
under any provisions hereof.
(b) Except as otherwise expressly provided herein and without
limiting the generality of the foregoing, the Indenture Trustee shall bear no
responsibility or liability for or with respect to the existence or validity of
any Vehicle or Loan Contract, the perfection of any security interest (whether
as of the date hereof or at any future time), the maintenance of or the taking
of any action to maintain such perfection, the validity of the assignment of any
portion of the Trust Estate to the Indenture Trustee or of any
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intervening assignment, the review of any Loan Contract (it being understood
that the Indenture Trustee has not reviewed and does not intend to review the
substance or form of any such Loan Contract), the performance or enforcement of
any Loan Contract, the validity and sufficiency of the Class A Note Insurance
Policy, the compliance by the Issuer or the Servicer with any covenant or the
breach by the Issuer or the Servicer of any warranty or representation made
hereunder or in any related document or the accuracy of any such warranty or
representation, any investment of monies in the Trust Accounts or any loss
resulting therefrom (other than as obligor under any Eligible Investment)
provided that such monies have been invested in accordance with Section 12.02(c)
hereof in Eligible Investments, the acts or omissions of the Issuer, the
Servicer, MBIA or any Obligor, any action of the Servicer taken in the name of
the Indenture Trustee, or the validity of the Servicing Agreement or the Loan
Sale Agreement.
(c) The Indenture Trustee shall not have any obligation or liability
under any Loan Contract by reason of, or arising out of, this Indenture or the
granting of a security interest in such Loan Contract hereunder or the receipt
by the Indenture Trustee of any payment relating to any Loan Contract pursuant
hereto, nor shall the Indenture Trustee be required or obligated in any manner
to perform or fulfill any of the obligations of the Issuer under or pursuant to
any Loan Contract, or to make any payment, or to make any inquiry as to the
nature or the sufficiency of any payment received by it, or the sufficiency of
any performance by any party, under any Loan Contract.
SECTION 7.05. May Hold Notes.
The Indenture Trustee, the Servicer, any Paying Agent, the Note
Registrar, any Authenticating Agent or any other agent of the Issuer, in its
individual or any other capacity, may become the owner or pledgee of Notes, and
if operative, may otherwise deal with the Issuer with the same rights it would
have if it were not Indenture Trustee, Servicer, Paying Agent, Note Registrar,
Authenticating Agent or such other agent.
SECTION 7.06. Money Held in Trust.
Money and investments held in trust by the Indenture Trustee or any
Paying Agent hereunder shall be held in one or more trust accounts hereunder but
need not be segregated from other funds, except to the extent required herein or
required by law. The Indenture Trustee or any Paying Agent shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Issuer or otherwise specifically provided herein.
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SECTION 7.07. Compensation and Reimbursement.
(a) The Issuer agrees:
(i) to pay the Indenture Trustee its fee for all services rendered
by it hereunder as Indenture Trustee, in the amount of the Trustee Fee
(which compensation shall not otherwise be limited by any provision of law
in regard to the compensation of a trustee of an express trust), and to
pay to the Back-up Servicer its fee for all services rendered hereunder
and under the Servicing Agreement as Back-up Servicer, in the amount of
the Back-up Servicer Fee;
(ii) except as otherwise expressly provided herein, to reimburse the
Indenture Trustee or the Back-up Servicer, as the case may be, upon its
request for all reasonable out-of-pocket costs and expenses, disbursements
and advances incurred or made by the Indenture Trustee or the Back-up
Servicer in accordance with any provision of this Indenture or the
Servicing Agreement (including the reasonable compensation and the
expenses and disbursements of the Indenture Trustee's and Back-up
Servicer's agents and counsel), except any such expense, disbursement or
advance as may be attributable to its negligence or willful misconduct;
and
(iii) to indemnify and hold harmless the Trust Estate and the
Indenture Trustee and the Back-Up Servicer and their respective directors,
officers and employees from and against any loss, liability, expense,
damage or injury (other than those attributable to a Noteholder in its
capacity as an investor in any of the Notes) sustained or suffered
pursuant to this Indenture in connection with the transactions
contemplated hereby or by reason of any acts, omissions or alleged acts or
omissions arising out of activities of the Indenture Trustee (including,
without limitation, any violation of any applicable laws by the Issuer as
a result of the transactions contemplated by this Indenture), including,
but not limited to, any judgment, award, settlement, reasonable attorneys'
fees and other expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim; provided, that the
Issuer shall not indemnify the Indenture Trustee if such loss, liability,
expense, damage or injury is due to the Indenture Trustee's gross
negligence or willful misconduct, willful misfeasance or bad faith in the
performance of duties. Any indemnification pursuant to this Section shall
only be payable from the assets of the Issuer and shall not be payable
from the assets of the Trust Estate. The provisions of this indemnity
shall run directly to and be enforceable by an injured person subject to
the limitations hereof including Section 13.14 and this indemnification
agreement shall survive the termination of this Indenture and the earlier
resignation or removal of the Indenture Trustee or the Back-Up Servicer,
as the case may be.
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SECTION 7.08. Corporate Trustee Required; Eligibility.
There shall at all times be a trustee hereunder which shall be a
corporation or association organized and doing business under the laws of the
United States of America or of any state, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$100,000,000, acceptable to MBIA, subject to supervision or examination by
Federal or state authority and having an office within the United States of
America, and which shall have a commercial paper or other short-term rating of
the highest short-term rating categories by each of the Rating Agencies, or
otherwise acceptable to each of the Rating Agencies. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Indenture Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
SECTION 7.09. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Indenture Trustee and no
appointment of a successor Indenture Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor Indenture
Trustee acceptable to MBIA under Section 7.10 hereof.
(b) The Indenture Trustee may resign at any time by giving 30 days'
written notice thereof to the Issuer, MBIA and to each Noteholder. If an
instrument of acceptance by a successor Indenture Trustee shall not have been
delivered to the Indenture Trustee within 30 days after the giving of such
notice of resignation, the resigning Indenture Trustee may petition any court of
competent jurisdiction for the appointment of a successor Indenture Trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
may prescribe, appoint a successor Indenture Trustee in compliance with Section
7.08 hereof.
(c) The Indenture Trustee may be removed by MBIA or, if an MBIA
Default has occurred and is continuing, by the Controlling Holders, at any time
if one of the following events have occurred:
(i) the Indenture Trustee shall cease to be eligible under Section
7.08 hereof and shall fail to resign after written request therefor by the
Issuer, MBIA or by any Noteholder, or
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(ii) the Indenture Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent, or a receiver of the Indenture
Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Indenture Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or
(iii) the Indenture Trustee has failed to perform its duties
hereunder or has breached any representation or warranty made herein.
(d) If the Indenture Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Indenture
Trustee for any cause with respect to any of the Notes, the Issuer by a Board
Resolution shall with the prior consent of MBIA promptly appoint a successor
Indenture Trustee reasonably satisfactory to MBIA. If no successor Indenture
Trustee shall have been so appointed by the Issuer within 30 days of notice of
removal or resignation and shall have accepted appointment in the manner
hereinafter provided, then MBIA may appoint a successor Indenture Trustee. If
MBIA shall fail to appoint a successor Indenture Trustee within 90 days or an
MBIA Default shall have occurred and is continuing, then the Controlling Holders
or the Indenture Trustee may petition any court of competent jurisdiction for
the appointment of a successor Indenture Trustee with respect to the Notes.
(e) The Issuer shall give notice in the manner provided in Sections
13.02 and 13.03 hereof of each resignation and each removal of the Indenture
Trustee and each appointment of a successor Indenture Trustee with respect to
the Notes to the Noteholders, MBIA and the Rating Agencies. Each notice shall
include the name of the successor Indenture Trustee and the address of its
Corporate Trust Office.
SECTION 7.10. Acceptance of Appointment by Successor.
Every successor Indenture Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer and the retiring Indenture Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Indenture Trustee shall become effective and such successor
Indenture Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Indenture
Trustee but, on request of the Issuer or the successor Indenture Trustee, such
retiring Indenture Trustee shall, upon payment of its reasonable out-of-pocket
costs and expenses, execute and deliver an instrument transferring to such
successor Indenture Trustee all the rights, powers and trusts of the retiring
Indenture Trustee, and shall duly assign, transfer and deliver to such successor
Indenture Trustee all property and money held by such retiring Indenture Trustee
hereunder. Upon request of any such successor Indenture Trustee, the Issuer
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Indenture Trustee all such rights, powers and
trusts.
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No successor Indenture Trustee shall accept its appointment unless
at the time of such acceptance such successor Indenture Trustee shall be
eligible under this Article. No Indenture Trustee hereunder shall be liable for
the acts or omissions of any successor Indenture Trustee hereunder.
SECTION 7.11. Merger, Conversion, Consolidation or Succession to
Business of Indenture Trustee.
Any Person into which the Indenture Trustee may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which the Indenture Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Indenture Trustee, shall be the successor of the
Indenture Trustee hereunder, provided such Person shall be otherwise qualified
and eligible under this Article, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, and notice thereof
shall be provided by the Indenture Trustee to the Noteholders, MBIA and the
Rating Agencies. In case any Notes have been authenticated, but not delivered,
by the Indenture Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Indenture Trustee may adopt such
authentication and deliver the Notes so authenticated with the same effect as if
such successor Indenture Trustee had itself authenticated such Notes.
SECTION 7.12. Co-Indenture Trustees and Separate Indenture Trustees.
At any time or times, for the purpose of meeting the legal
requirements of any jurisdiction in which any of the Trust Estate may at the
time be located, the Issuer, MBIA and the Indenture Trustee shall have power to
appoint, and, upon the written request of the Indenture Trustee, MBIA or of the
Holders representing at least 25% in Outstanding Principal Balance of all Notes,
the Issuer shall for such purpose join with the Indenture Trustee in the
execution, delivery and performance of all instruments and agreements necessary
or proper to appoint, one or more Persons approved by the Indenture Trustee and
meeting the requirements of Section 7.08 hereof, either to act as co-Indenture
Trustee, jointly with the Indenture Trustee of all or any part of such Trust
Estate, or to act as separate Indenture Trustee of any such property, in either
case with such powers as may be provided in the instrument of appointment, and
to vest in such Person or persons in the capacity aforesaid, any property,
title, right or power deemed necessary or desirable, subject to the other
provisions of this Section. If the Issuer does not join in such appointment
within 15 days after the receipt by it of a request so to do, or in case an
Event of Default has occurred and is continuing, the Indenture Trustee alone
shall have power to make such appointment. Any co-Indenture Trustee or separate
Indenture Trustee shall be acceptable to MBIA.
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Should any written instrument from the Issuer be reasonably required
by any co-Indenture Trustee or separate Indenture Trustee so appointed for more
fully confirming to such co-Indenture Trustee or separate Indenture Trustee such
property, title, right or power, any and all such instruments shall, on request,
be executed, acknowledged and delivered by the Issuer.
Every co-Indenture Trustee or separate Indenture Trustee shall, to
the extent permitted by law, but to such extent only, be appointed subject to
the following terms:
(i) the Notes shall be authenticated and delivered by, and all
rights, powers, duties and obligations under this Indenture in respect of
the custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Indenture Trustee under this
Indenture, shall be exercised solely by the Indenture Trustee;
(ii) the rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee by this Indenture in respect of any property
covered by such appointment shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee or by the Indenture
Trustee and such co-Indenture Trustee or separate Indenture Trustee
jointly, as shall be provided in the instrument appointing such
co-Indenture Trustee or separate Indenture Trustee, except to the extent
that under any law of any jurisdiction in which any particular act is to
be performed, the Indenture Trustee shall be incompetent or unqualified to
perform such act, in which event such rights, powers, duties and
obligations shall be exercised and performed by such co-Indenture Trustee
or separate Indenture Trustee;
(iii) the Indenture Trustee at any time, by an instrument in writing
executed by it, with the concurrence of the Issuer evidenced by a Board
Resolution, may accept the resignation of or remove any co-Indenture
Trustee or separate Indenture Trustee, appointed under this Section, and,
in case an Event of Default has occurred and is continuing, the Indenture
Trustee shall have power to accept the resignation of, or remove, any such
co-Indenture Trustee or separate Indenture Trustee without the concurrence
of the Issuer. Upon the written request of the Indenture Trustee, the
Issuer shall join with the Indenture Trustee in the execution, delivery
and performance of all instruments and agreements necessary or proper to
effectuate such resignation or removal. A successor to any co-Indenture
Trustee or separate Indenture Trustee that has so resigned or been removed
may be appointed in the manner provided in this Section 7.12;
(iv) no co-Indenture Trustee or separate Indenture Trustee
hereunder shall be personally liable by reason of any act or omission of
the Indenture Trustee or any other such Indenture Trustee hereunder nor
shall the Indenture Trustee be liable by reason of any act or omission of
any co-Indenture Trustee or separate
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Indenture Trustee selected by the Indenture Trustee with due care or
appointed in accordance with directions to the Indenture Trustee pursuant
to Section 6.08 hereof; and
(v) any Act of Noteholders delivered to the Indenture Trustee shall
be deemed to have been delivered to each such co-Indenture Trustee and
separate Indenture Trustee.
SECTION 7.13. Rights with Respect to the Servicer.
The Indenture Trustee's rights and obligations with respect to the
Servicer and the Back-up Servicer shall be governed by the Servicing Agreement.
SECTION 7.14. Appointment of Authenticating Agent.
The Indenture Trustee may appoint an Authenticating Agent or Agents
with respect to the Notes which shall be authorized to act on behalf of the
Indenture Trustee to authenticate Notes issued upon original issue or upon
exchange, registration of transfer or pursuant to Section 2.05 hereof, and Notes
so authenticated shall be entitled to the benefits of this Indenture and shall
be valid and obligatory for all purposes as if authenticated by the Indenture
Trustee hereunder. Wherever reference is made herein to the authentication and
delivery of Notes by the Indenture Trustee or the Indenture Trustee's
certificate of authentication or the delivery of Notes to the Indenture Trustee
for authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Indenture Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the Indenture Trustee by an
Authenticating Agent and delivery of the Notes to the Authenticating Agent on
behalf of the Indenture Trustee. Each Authenticating Agent shall be acceptable
to the Issuer, MBIA and the Noteholders and shall at all times be a corporation
having a combined capital and surplus of not less than the equivalent of
$50,000,000 and subject to supervision or examination by Federal or state
authority or the equivalent foreign authority, in the case of an Authenticating
Agent who is not organized and doing business under the laws of the United
States of America, any state thereof or the District of Columbia. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any
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merger, conversion or consolidation to which such Authenticating Agent shall be
a party, or any corporation succeeding to the corporate agency or corporate
trust business of such Authenticating Agent, shall continue to be an
Authenticating Agent without the execution or filing of any paper or any further
act on the part of the Indenture Trustee or such Authenticating Agent; provided,
such corporation shall be otherwise eligible under this Section.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Indenture Trustee, MBIA and to the Issuer. The Indenture
Trustee may at any time terminate the agency of an Authenticating Agent by
giving written notice thereof to such Authenticating Agent, MBIA and to the
Issuer. Upon receiving such a notice of resignation or upon such a termination,
or in case at any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Indenture Trustee may
appoint a successor Authenticating Agent which shall be acceptable to the Issuer
and MBIA and shall mail written notice of such appointment by first-class mail,
postage prepaid, to all Holders of Notes, if any, with respect to which such
Authenticating Agent will serve, as their names end addresses appear in the Note
Register. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Indenture Trustee agrees to pay to each Authenticating Agent
from time to time reasonable compensation for its services under this Section,
and the Indenture Trustee shall be entitled to be reimbursed for such payments,
subject to the provisions of Section 7.07 hereof.
If an appointment is made pursuant to this Section, the Notes may
have endorsed thereon, in addition to the Indenture Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
This is one of the Notes described in the within-mentioned
Indenture.
BANKERS TRUST COMPANY
As Indenture Trustee
By: ___________________________
As Authenticating Agent
By: ___________________________
Authorized Officer
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SECTION 7.15. Money for Note Payments to Be Held in Trust.
The Indenture Trustee shall execute and deliver, and if there is any
Paying Agent other than the Indenture Trustee, the Issuer will cause each Paying
Agent other than the Indenture Trustee to execute and deliver to the Indenture
Trustee, the Rating Agencies and MBIA an instrument in which such Paying Agent
shall agree with the Indenture Trustee that, subject to the provisions of this
Section, such Paying Agent will:
(i) hold all sums held by it for the payment of principal or
interest on Notes in trust for the benefit of the Noteholders entitled
thereto and MBIA until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(ii) give the Indenture Trustee, MBIA, the Rating Agencies and the
Noteholders notice of any Default by the Issuer (or any other obligor upon
the Notes) in the making of any payment of principal or interest; and
(iii) at any time during the continuance of any such Default, upon
the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Issuer Order direct any Paying Agent to pay, to the Indenture Trustee all
sums held in trust by such Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which such sums were held by such
Paying Agent; and, upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Indenture Trustee or any Paying Agent
in trust for the payment of the principal or interest on any Note and remaining
unclaimed for three years after such principal or interest has become due and
payable shall be paid to the Issuer upon written request or to MBIA (upon its
written request) if such money represents payments made by MBIA; and the Holder
of such Note shall thereafter, as an unsecured general creditor, and subject to
any applicable statute of limitations, look only to the Issuer for payment
thereof, and all liability of the Indenture Trustee, such Paying Agent or MBIA
with respect to such trust money or the related Note, shall thereupon cease;
provided, however, that the Indenture Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Issuer cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the city in which
the Corporate Trust Office is located, notice
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that such money remains unclaimed and that, after a date specified therein,
which shall be not less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Issuer or
MBIA, as applicable; and provided, further, that any amounts held that are
proceeds of a claim made under the Class A Note Insurance Policy shall be
returned to MBIA, and the Noteholders shall look only to MBIA for such payments.
The Indenture Trustee may also adopt and employ, at the expense of the Issuer,
any other reasonable means of notification of such repayment (including, but not
limited to, mailing notice of such repayment to Noteholders whose right to or
interest in monies due and payable but not claimed is determinable from the
records of any Paying Agent, at the last address as shown on the Note Register
for each such Noteholder).
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ARTICLE VIII
THE CLASS A NOTE INSURANCE POLICY
SECTION 8.01. Payments under the Class A Note Insurance Policy.
If, on the close of business on the third Business Day immediately
prior to any Payment Date with respect to the Class A Notes, the sum of amounts
on deposit in (i) the Collection Account and (ii) the Reserve Account are not
sufficient to pay the Class A Interest Payment Amount on such Payment Date in
accordance with Section 12.02(d)(v) hereof, the Indenture Trustee shall, no
later than 10:00 a.m. New York time, on the second Business Day immediately
preceding such Payment Date make a claim under the Class A Note Insurance Policy
in an amount equal to such insufficiency. In addition, if on the close of
business on the third Business Day immediately prior to any Payment Date for the
Class A Notes, the sum of amounts on deposit in (i) the Collection Account and
(ii) the Reserve Account are not sufficient to pay the Class A Principal Payment
Amount in accordance with Section 12.02(d)(viii) hereof, the Indenture Trustee
shall, no later than 10:00 a.m. New York time, on the second Business Day
immediately preceding such Payment Date, make a claim under the Class A Note
Insurance Policy in an amount equal to such insufficiency. Proceeds of claims on
the Class A Note Insurance Policy shall be deposited in the Collection Account,
shall remain uninvested and shall be used solely to pay amounts due in respect
of interest and principal on the Class A Notes on each Payment Date.
In addition, on any day that the Indenture Trustee has actual
knowledge or receives written notice that any amount previously paid to a Class
A Noteholder has been subsequently recovered from such Noteholder pursuant to a
final order of a court of competent jurisdiction that such payment constitutes
an avoidable preference within the meaning of any applicable bankruptcy law to
such Noteholder (a "Preference Amount"), the Indenture Trustee shall make a
claim within one Business Day upon the Class A Note Insurance Policy for the
full amount of such Preference Amount in accordance with the terms of the Class
A Note Insurance Policy. Any proceeds of any such Preference Amount received by
the Indenture Trustee shall be paid to the related Class A Noteholders.
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ARTICLE IX
AMENDMENTS TO INDENTURE
SECTION 9.01. Amendments without Consent of Noteholders.
The Issuer and the Indenture Trustee, with the consent of MBIA but
without the consent of the Holders of any Notes, at any time and from time to
time, may amend this Indenture for any of the following purposes:
(a) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property; or
(b) to evidence the succession of another Person to the Issuer, and
the assumption by such successor of the covenants of the Issuer herein and in
the Notes contained, in accordance with Section 3.02(o) hereof; or
(c) to add to the covenants of the Issuer, for the benefit of MBIA
and the Holders of all Notes, or to surrender any right or power herein
conferred upon the Issuer; or
(d) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee; or
(e) to cure any ambiguity with respect to any provision herein which
may be defective or inconsistent with any other provisions with respect to
matters or questions arising hereunder, which shall not be inconsistent with the
provisions hereof, provided that such action shall not adversely affect the
interests of the Holders of the Notes; or
(f) to evidence the succession of the Indenture Trustee pursuant to
Article Seven hereof; or
(g) to add events to the list of Events of Default, Reserve Account
Increase Events, or Re-Liening Triggers.
The Indenture Trustee is hereby authorized to join in the execution
of any such amendment and to make any further appropriate agreements and
stipulations that may be therein contained, but the Indenture Trustee shall not
be obligated to enter into any such amendment that affects the Indenture
Trustee's own rights, duties, liabilities, indemnities or immunities under this
Indenture or otherwise.
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Promptly after the execution by the Issuer and the Indenture Trustee
of any amendment pursuant to this Section, the Issuer shall mail to the Rating
Agencies, the Custodian, MBIA and each Noteholder a copy of such amendment.
SECTION 9.02. Amendments with Consent of Noteholders.
(a) With the consent of MBIA and the Controlling Holders, by Act of
said Holders delivered to the Issuer and the Indenture Trustee, the Issuer and
the Indenture Trustee may enter into amendments hereto for the purpose of adding
any provisions or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of the
Notes hereunder other than as described in paragraphs (a) through (g) of Section
9.01; provided, however, that no such amendment shall, without the consent of
the Holders of each outstanding Note affected thereby:
(i) change the Stated Maturity Date of any Note or the due date of
any installment of principal of, or any installment of interest on, any
Note, or reduce the principal amount thereof or the Note Interest Rate or
change any place of payment where, or the coin or currency in which, any
Note or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment; or
(ii) reduce the percentage in the Class A Note Balance or the Class
B Note Balance, the consent of the Holders of which is required for any
such amendment, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or Events
of Default or their consequences; or
(iii) impair or adversely affect the Trust Estate; or
(iv) modify or alter the provisions of the proviso to the definition
of the term "Outstanding"; or
(v) modify any of the provisions of this Section 9.02, except to
increase the percentage of Holders required for any modification or waiver
or to provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of each Holder of each Outstanding
Note affected thereby; or
(vi) permit the creation of any lien ranking prior to or on parity
with the lien of this Indenture with respect to any part of the Trust
Estate or terminate the lien of this Indenture on any property at any time
subject hereto or deprive the Holder of any Note of the security afforded
by the lien of this Indenture; or
(vii) modify any of Section 12.02(d) hereof.
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(b) The Indenture Trustee is hereby authorized to join in the
execution of any amendment pursuant to clause (a) above and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Indenture Trustee shall not be obligated to enter into any such amendment that
affects the Indenture Trustee's own rights, duties, liabilities, indemnities or
immunities hereunder. It shall not be necessary for any Act of Noteholders under
this Section to approve the particular form of any amendment, but it shall be
sufficient if such Act shall approve the substance thereof. Promptly after the
execution by the Issuer and the Indenture Trustee of any amendment pursuant to
this Section, the Issuer shall mail to the Holders of the Notes, MBIA, the
Custodian and the Rating Agencies a copy of such amendment.
SECTION 9.03. Execution of Amendments.
In executing any amendments permitted by this Article or the
modifications thereby of the trusts created by this Indenture, the Indenture
Trustee and MBIA shall be entitled to receive upon request to the Issuer, and
(subject to Section 7.01 hereof) shall be fully protected in relying in good
faith upon, an Opinion of Counsel reasonably acceptable to the Indenture Trustee
and MBIA, and an Officer's Certificate, stating that the execution of such
amendments is authorized or permitted by this Indenture. The Indenture Trustee
may, but shall not be obligated to, enter into any such amendments which affects
the Indenture Trustee's own rights, duties, indemnities or immunities hereunder
or otherwise.
SECTION 9.04. Effect of Amendments.
Upon the execution of any amendment under this Article, this
Indenture shall be modified in accordance therewith, and such amendment shall
form a part of this Indenture for all purposes; and every Holder of Notes
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 9.05. Reference in Notes to Amendments.
Notes authenticated and delivered after the execution of any
amendment pursuant to this Article may, and if required by the Indenture Trustee
shall, bear a notation in form approved by the Indenture Trustee as to any
matter provided for in such amendment. If the Issuer shall so determine, new
Notes so modified as to conform, in the opinion of the Indenture Trustee and the
Issuer, to any such amendment may be prepared and executed by the Issuer and
authenticated and delivered by the Indenture Trustee in exchange for Outstanding
Notes.
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ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. Redemption at the Option of the Servicer; Election to
Redeem.
The Servicer shall have the option to redeem all of the Outstanding
Notes of any Class at any time the Outstanding Class A Note Balance or
Outstanding Class B Note Balance of the Notes of such Class is less than 10% of
the Initial Class A Note Balance or Initial Class B Note Balance, in each case
at the applicable Redemption Price plus any fees due hereunder and all amounts
due to MBIA under the Insurance Agreement; provided, however, that the Class B
Notes may not be redeemed before the Class A Notes. MBIA shall have the same
option to redeem any Class A Notes in the absence of the exercise thereof by the
Servicer.
The Servicer or MBIA, as applicable, shall set the Redemption Date
and the Redemption Record Date for the Notes and give written notice thereof to
the Indenture Trustee pursuant to Section 10.02 hereof.
Installments of interest and principal that are due regarding the
Notes on or prior to the related Redemption Date shall continue to be payable to
the Holders of such Notes called for redemption as of the relevant Record Dates
according to their terms and the provisions of Section 2.08 hereof. The election
of the Servicer or MBIA to redeem any Notes pursuant to this Section shall be
evidenced by a Board Resolution or written notice from MBIA, respectively,
directing the Indenture Trustee to make the payment of the Redemption Price on
all of the Notes to be redeemed from monies deposited with the Indenture Trustee
pursuant to Section 10.04 hereof.
SECTION 10.02. Notice to Indenture Trustee; Deposit of Redemption
Price.
In the case of any redemption pursuant to Section 10.01 hereof, the
Servicer or MBIA, as applicable, shall, at least 15 days prior to the related
Redemption Date, notify the Indenture Trustee, MBIA and the Noteholders in
writing of such Redemption Date and shall deposit into the Redemption Account on
such notification date an amount equal to the Redemption Price of all Notes to
be redeemed on such Redemption Date plus any fees and interest due under Section
12.02(d)(i) through (vi) (and, with respect to the Class B Notes, (vii)) and all
amounts due to MBIA under the Insurance Agreement. Any notice given to the
Indenture Trustee hereunder shall include all information required by Section
10.03 hereof.
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SECTION 10.03. Notice of Redemption by the Indenture Trustee.
Upon receipt of such notice and such deposit set forth in Section
10.02 above, the Indenture Trustee shall provide notice of redemption pursuant
to Section 10.01 hereof by first-class mail, postage prepaid, mailed no later
than the Business Day following the date on which such deposit was made, to MBIA
and each Holder of Notes whose Notes are to be redeemed, at the address
specified in the Note Register.
All notices of redemption shall state:
(1) the applicable Redemption Date;
(2) the applicable Redemption Price; and
(3) that on such Redemption Date, the Redemption Price will become due and
payable upon each such Note, and that interest thereon shall cease to accrue on
such date.
Notice of redemption of Notes shall be given by the Indenture
Trustee in the name and at the expense of the Servicer or MBIA, as applicable.
Failure to give notice of redemption, or any defect therein, to any Holder of
any Note selected for redemption shall not impair or affect the validity of the
redemption of any other Note.
SECTION 10.04. Notes Payable on Redemption Date.
Notice of redemption having been given as provided in Section 10.03
hereof, the Notes to be redeemed shall, on the applicable Redemption Date,
become due and payable at the Redemption Price and on such Redemption Date
(unless the Issuer or MBIA, as applicable, shall default in the payment of the
Redemption Price) such Notes shall cease to bear interest. On the applicable
Redemption Date, the Indenture Trustee shall withdraw the applicable Redemption
Price from the Redemption Account and the Holders of such Notes shall be paid
the Redemption Price by the Paying Agent on behalf of the Servicer; provided,
however, that installments of principal and interest that are due regarding such
Notes on or prior to such Redemption Date shall be payable to the Holders of
such Notes registered as such on the relevant Record Dates according to their
terms and the provisions of Section 2.08 hereof.
If the Holders of any Note called for redemption shall not be so
paid, the principal shall, until paid, bear interest from the applicable
Redemption Date at the related Note Interest Rate.
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SECTION 10.05. Release of Loan Contracts to the Servicer.
In connection with any redemption by the Servicer permitted under
this Article Ten, the Servicer shall be permitted to obtain a release of all or
a portion of the related Loan Contracts as provided in Section 4.04 hereof to
the extent that (a) after giving effect to such release, the product of (i) the
Aggregate Loan Balance and (ii) the sum of the Class A Percentage and the Class
B Percentage equals or exceeds the Outstanding Aggregate Note Balance of all
Notes (after giving effect to such redemption) and (b) provided that, the
applicable Redemption Price shall have been deposited into the Redemption
Account as required by Section 10.02.
SECTION 10.06. Release of Loan Contracts to MBIA.
In connection with any redemption by MBIA permitted under this
Article Ten, MBIA shall be permitted to obtain a release of all or a portion of
the related Loan Contracts as provided in Section 4.04 hereof to the extent that
(a) after giving effect to such release, the product of (i) the Aggregate Loan
Balance and (ii) the Class A Percentage equals or exceeds the Class A Note
Balance of the Class A Notes (after giving effect to such redemption) and (b)
provided that, the applicable Redemption Price shall have been deposited into
the Redemption Account as required by Section 10.02.
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ARTICLE XI
THE CUSTODIAN
SECTION 11.01. Acceptance by Indenture Trustee and Appointment of
the Custodian.
(a) The Indenture Trustee hereby acknowledges the conveyance of the
Loan Assets and declares that the Indenture Trustee, through the Custodian
and/or through one or more other custodians acceptable to MBIA, which other
custodians may, with MBIA's prior written consent, include the Servicer (the
Custodian and each such other custodian a "Pledged Asset Custodian"), will hold
such Loan Assets conveyed by the Issuer, for the use and benefit of the
Noteholders and MBIA subject to the terms and provisions hereof; provided, that
in respect of the items described in clauses (i) and (v) of the definition of
"Loan Contract Files" (such items, the "Custodial File"), the Custodian shall be
the custodian. The Custodian may, upon receipt of a Request for Release of
Documents from the Servicer, release any Custodial File to the Servicer, for the
limited purpose, if necessary, of temporarily assisting the Servicer to conduct
collection and other servicing activities; provided, however, that prior to
being released to the Servicer all documents to be released in such Custodial
File shall be conspicuously stamped to reflect the sale to the Issuer and the
security interest of the Indenture Trustee in the related Loan Assets; provided,
further, that if either an Event of Default or Re-Liening Trigger shall have
occurred and be continuing, no part of any Custodial File shall be released by
the Custodian to the Servicer without MBIA's prior written consent, which shall
be evidenced by MBIA's execution of the Request for Release of Documents. Except
as noted above, no part of the Custodial File shall be delivered by the
Custodian to the Company or the Servicer or otherwise released from the
possession of the Custodian. Neither the Indenture Trustee nor any Pledged Asset
Custodian shall be under any duty or obligation to inspect, review or examine
any document, instrument, certificate, agreement or other papers to determine
that they are genuine, enforceable, or appropriate for the represented purpose
or that they are other than what they purport to be on their face.
The Indenture Trustee shall not appoint a Pledged Asset Custodian
other than itself, the Custodian or the Servicer in respect of any Loan Contract
File or Loan Asset unless such Person shall be acceptable to MBIA and shall have
entered into an agreement with the Indenture Trustee, for the benefit of the
Noteholders and MBIA, the Indenture Trustee, the Issuer, and the Servicer,
containing provisions substantially similar to Sections 11.01(b)-(e) inclusive.
(b) The Custodian shall hold and hereby acknowledges that it is
holding the Custodial File documents (except for those noted on an exception
report given to the Indenture Trustee on the Closing Date) as the agent of the
Indenture Trustee for the use and benefit of the Noteholders and MBIA with
respect thereto. The Indenture Trustee shall not have any responsibility, duty,
obligation or liability with respect to any Pledged
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Asset Custodian acting as a custodian hereunder or with respect to any document,
agreement, certificate or instrument held or purported to be held by any Pledged
Asset Custodian. Neither the Custodian nor the Indenture Trustee shall have any
responsibility or liability with respect to any Loan Asset or Loan Contract
Files not conveyed by the Issuer hereunder.
(c) The Custodian shall perform its duties as a Pledged Asset
Custodian in accordance with the terms of this Indenture, the Servicing
Agreement 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 administers files for other portfolios, if any, giving due
consideration to customary and usual standards of practice of prudent
custodians. The Custodian shall promptly report to the Indenture Trustee and to
MBIA, any failure by it to hold the complete set of Custodial Files as herein
provided and shall promptly take appropriate action to remedy any such failure.
The Custodian as a Pledged Asset Custodian, shall have and perform
the following powers and duties:
(i) hold the Custodial Files on behalf of the Indenture Trustee for
the benefit of the Noteholders and MBIA, maintain accurate records
pertaining to each Loan Contract to enable it to comply with the terms and
conditions of this Indenture, and maintain a current inventory thereof;
(ii) implement policies and procedures in accordance with the
Custodian's normal business practices with respect to the handling and
custody of the Custodial Files so that the integrity and physical
possession of the Custodial Files will be maintained; and
(iii) attend to all details in connection with maintaining custody
of the Custodial Files on behalf of the Indenture Trustee on behalf of the
Noteholders and MBIA.
(d) In acting as a Pledged Asset Custodian, the Custodian agrees
further that it does not and will not have or assert any beneficial ownership
interest in the Loan Contracts or the Custodial Files or any other Loan Asset.
The Custodian shall ensure that each original or copy of a contractual document
with an Obligor, and its master data processing records evidencing each Loan
Contract that has been released to the Servicer has been marked with a legend,
evidencing that each Loan Contract has been pledged to the Indenture Trustee for
the benefit of the Noteholders and MBIA, together with all right and title
thereto and interest therein as provided herein.
(e) The Custodian agrees to maintain any Custodial Files in its
possession at its office located in Richmond, Virginia, or at such other offices
as shall from time to time be identified by prior written notice to the
Indenture Trustee.
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SECTION 11.02. Obligations of the Custodian.
(a) With respect to the documents constituting each Custodial File
which is delivered to the Custodian or which come into the possession of the
Custodian, the Custodian is the custodian for the Indenture Trustee exclusively.
The Custodian shall hold all documents received by it constituting the Custodial
Files for the exclusive use and benefit of the Indenture Trustee on behalf of
the Noteholders and MBIA, and shall make disposition thereof only in accordance
with this Indenture, the Servicing Agreement or the instructions furnished by
the Indenture Trustee provided such instructions are consistent with this
Indenture and the Servicing Agreement unless otherwise directed in writing by
MBIA. The Custodian shall segregate and maintain continuous custody of all
documents constituting the Loan Contract Files in secure and fireproof
facilities in accordance with customary standards for such custody. The
Custodian makes no representations as to and shall not be responsible to verify
(i) the validity, legality, enforceability, sufficiency, due authorization,
recordability or genuineness of any document in the Loan Contract Files or of
any of the Loan Contracts or (ii) the collectability, insurability,
effectiveness or suitability of any Loan Contract.
(b) Upon the payment in full of any Loan Contract or redemption of
the Notes by the Issuer or MBIA, which shall be evidenced by the delivery to the
Custodian of the Request for Release of Documents, the Custodian shall promptly
release the related Custodial File to the Servicer or MBIA unless otherwise
instructed by such party.
SECTION 11.03. Certification.
(a) Within 45 days after the Closing Date, the Custodian shall
ascertain that all documents referred to in Schedule 1 hereto with respect to
Loan Contracts are in its possession, and shall deliver to the Indenture Trustee
and MBIA a certification in the form of Exhibit F to the effect that, as to each
Custodial File listed in the Loan Schedule (other than any Loan Contract paid in
full or any Loan Contract specifically identified in such certification as not
covered by such certification): (i) all documents required to be in the
Custodial Files are in its possession and (ii) such documents have been reviewed
by it and appear regular on their face and relate to such Loan Contract. In
making this certification, the Custodian shall separately list those Loan
Contracts for which an original Certificate of Title was not found in the
relevant Custodial File, subject to Section 2.03 of the Loan Sale Agreement, and
shall, within 120 days after the Closing Date deliver to the Indenture Trustee
and MBIA a certification in the form of Exhibit F to the effect that, as to each
such Custodial File (other than any Loan Contract paid in full or any Loan
Contract specifically identified in such certification as not covered by such
certification): (i) all documents required to be in the Custodial File are in
its possession and (ii) such documents have been reviewed by it and appear
regular on their face and relate to such Loan Contract.
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(b) If the Custodian during the process of reviewing the Custodial
Files, whether pursuant to clause (a) above or Section 11.04 hereof, finds any
document constituting a part of a Custodial File which is not executed, has not
been received, is unrelated to the Loan Contract identified in the Loan
Schedule, or does not conform to the requirements of clause (a) above or the
description thereof as set forth in the Loan Schedule, then the Custodian shall
promptly so notify the Issuer, the Company, MBIA and the Indenture Trustee.
The Issuer will use reasonable efforts to remedy a material defect
in a document constituting part of a Custodial File of which it is so notified
by the Custodian. If, however, within 60 days after the Custodian's notice to it
respecting such defect the Issuer has not remedied or caused the Company to
remedy the defect and the defect materially and adversely affects the interest
of the Indenture Trustee or of the Noteholders or MBIA in the related Loan
Contract, the Issuer will, on the Determination Date next succeeding the end of
such 60 day period to purchase such Loan Contract, which Purchase Price shall be
deposited in the Collection Account.
SECTION 11.04. Future Defects.
During the term of this Indenture, if the Custodian discovers any
defect with respect to the Custodial Files, the Custodian shall give written
specification of such defect to the Indenture Trustee, the Issuer, the Company
and MBIA.
SECTION 11.05. Fees of Custodian.
The Custodian shall charge such fees for its services under this
Indenture as are set forth in a separate agreement between the Custodian and the
Servicer, the payment of which fees, together with the Custodian's expenses in
connection herewith, shall be solely the obligation of the Servicer. The
Custodian shall perform its obligations under the Transaction Documents
notwithstanding nonpayment of the fees and expenses of the Custodian.
SECTION 11.06. Liability of Custodian.
Neither the Custodian nor any of its directors, officers, agents or
employees, shall be liable for any action taken or omitted to be taken by it or
them hereunder or in connection herewith in good faith and believed by it or
them to be within the purview of this Agreement, except for its or their own
negligence, lack of good faith or willful misconduct.
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SECTION 11.07. Reliance of Custodian.
In the absence of bad faith on the part of the Custodian, the
Custodian may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any request, instructions,
certificate, opinion or other document furnished to the Custodian, reasonably
believed by the Custodian to be genuine and to have been signed or presented by
the proper party or parties and conforming to the requirements of this
Indenture; but in the case of any loan document or other request, instruction,
document or certificate which by any provision hereof is specifically required
to be furnished to the Custodian, the Custodian shall be under a duty to examine
the same to determine whether or not it conforms to the requirements of this
Indenture.
SECTION 11.08. Transmission of Custodial Files.
Written instructions as to the method of shipment and shipper(s) the
Custodian is directed to utilize in connection with the transmission of files
and loan documents in the performance of the Custodian's duties hereunder shall
be delivered by the Servicer to the Custodian prior to any shipment of any files
and loan documents hereunder. Pursuant to the Servicing Agreement, the Servicer
will arrange for the provision of such services at its sole cost and expense
(or, at the Custodian's option, reimburse the Custodian for all costs and
expenses incurred by the Custodian consistent with such instructions) and will
maintain such insurance in connection with shipment of the Custodial Files
against loss or damage to files and loan documents as the Servicer deems
appropriate. Without limiting the generality of the provisions of Section 11.06
hereof, it is expressly agreed that in no event shall the Custodian have any
liability for any losses or damages to any person, including without limitation,
the Indenture Trustee, arising out of actions of the Custodian consistent with
instructions of the Servicer unless such instructions are inconsistent with the
Transaction Documents.
SECTION 11.09. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Custodian and no appointment of
a successor Custodian pursuant to this Article Eleven shall become effective
until the acceptance of appointment by the successor Custodian under Section
11.10 hereof.
(b) The Custodian may resign at any time by giving 30 days' prior
written notice thereof to the Issuer, MBIA and the Indenture Trustee. If an
instrument of acceptance by a successor Custodian shall not have been delivered
to the Custodian within 30 days after the giving of such notice of resignation,
the resigning Custodian may petition any court of competent jurisdiction for the
appointment of a successor Custodian. Such court may thereupon, after such
notice, if any, as it may deem proper and may prescribe, appoint a successor
Custodian.
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(c) The Custodian may be removed by MBIA or, if an MBIA Default has
occurred and is continuing, by the Controlling Holders, at any time if one of
the following events have occurred:
(i) the Custodian shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Custodian or of its
property shall be appointed, or any public officer shall take charge or
control of the Custodian or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, or
(ii) the Custodian has failed to perform its duties under any
Transaction Document or any side agreements with the Servicer or has
breached any representation or warranty made herein or therein.
(d) If the Custodian shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Custodian for any cause
with respect to any of the Notes, the Issuer, by a Board Resolution shall, with
the prior consent of MBIA, promptly appoint a successor Custodian reasonably
satisfactory to MBIA. If no successor Custodian shall have been so appointed by
the Issuer within 30 days of notice of removal or resignation and shall not have
accepted appointment in the manner hereinafter provided, then MBIA may appoint a
successor Custodian. If MBIA shall fail to appoint a successor Custodian within
90 days or if an MBIA Default shall have occurred and is continuing, then the
Controlling Holders may petition any court of competent jurisdiction for the
appointment of a successor Custodian with respect to the Notes.
(e) The Issuer shall give notice in the manner provided in Sections
13.02 and 13.03 hereof of each resignation and each removal of the Custodian and
each appointment of a successor Custodian to the Indenture Trustee, MBIA and the
Rating Agencies. Each notice shall include the name of the successor Custodian
and the address of its chief executive office.
SECTION 11.10. Acceptance of Appointment by Successor.
Every successor Custodian appointed hereunder shall be acceptable to
MBIA and shall execute, acknowledge and deliver to the Issuer, the Indenture
Trustee, MBIA and the retiring Custodian an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Custodian
shall become effective and such successor Custodian, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Custodian but, on request of the Issuer, the Indenture
Trustee, MBIA or the successor Custodian, such retiring Custodian shall execute
and deliver an instrument transferring to such successor Custodian all the
rights, powers and trusts of the retiring Custodian, and shall duly assign,
transfer and deliver to such successor Custodian all property and money held by
such retiring Custodian hereunder. Upon request of any such successor Custodian,
the Issuer or the
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Indenture Trustee on behalf of the Issuer shall execute any and all instruments
for more fully and certainly vesting in and confirming to such successor
Custodian all such rights, powers and trusts.
No successor Custodian shall accept its appointment unless at the
time of such acceptance such successor Custodian shall be acceptable to MBIA and
shall be eligible under this Article Eleven.
SECTION 11.11. Merger, Conversion, Consolidation or Succession to
Business of Custodian.
Any Person into which the Custodian may be merged or converted or
with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Custodian shall be a party, or any
corporation succeeding to all or substantially all of the business of the
Custodian, shall be the successor of the Custodian hereunder, provided such
Person shall be acceptable to MBIA and shall be otherwise qualified and
eligible, without the execution or filing of any paper or any further act on the
part of any of the parties hereto, and notice thereof shall be provided by the
Custodian to the Indenture Trustee, MBIA and the Rating Agencies.
SECTION 11.12. Representations and Warranties of the Custodian. The
Custodian represents and warrants to, and agrees with the Indenture Trustee,
MBIA and the Issuer, as of the Closing Date that:
(a) The Custodian is duly organized as a state banking association
under the laws of the Commonwealth of Virginia, is validly existing, in good
standing and has the corporate power and authority under the laws of the United
States of America to conduct its business as now conducted.
(b) The Custodian has full corporate power and authority under the
laws of the United States of America to enter into and perform all transactions
contemplated herein and no consent, approval, authorization or order of any
federal court or governmental agency or body governing or having jurisdiction
with respect to the Custodian's custodial powers is required for the Custodian
to enter into this Indenture and to perform its obligations hereunder.
(c) The execution, delivery and performance by it of this Indenture
(a) do not violate any provision of any law or regulation governing the banking
or the custodial powers of the Custodian or any order, writ, judgment, or decree
of any court, arbitrator, or governmental authority applicable to the Custodian
or any of its assets, (b) do not violate any provision of its corporate charter
or by-laws, or (c) do not violate any provision of, or constitute, with or
without notice or lapse of time, a default under, or result in the creation or
imposition of any lien on any of the property acquired by
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the Issuer pursuant to the provisions of any mortgage, indenture, contract,
agreement or other undertaking other than this Indenture to which it is a party.
(d) This Indenture has been duly executed and delivered by the
Custodian and constitutes the legal, valid and binding agreement of the
Custodian, enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) Nothing has come to the Custodian's attention indicating that,
with respect to the Loan Contracts and the Vehicles (i) there exist any adverse
claims, lien, or encumbrances against any of the same; (ii) any Loan Contract
was overdue or had been dishonored or subject to the circumstances described in
ss. 3.304 of the Uniform Commercial Code as in effect in the State of New York,
or (iii) there exists any other defense against or claim to the Loan Contracts
by any other person or entity. For purposes of this subsection (e), the
Custodian shall not be deemed to have notice or knowledge of the foregoing
matters unless a Responsible Officer assigned to and working in the Custodian's
Corporate Trust Administration Department shall have actual knowledge thereof or
written notice thereof is received by the Custodian in accordance herewith.
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ARTICLE XII
ACCOUNTS AND ACCOUNTING
SECTION 12.01. Collection of Money; Class B Reserve Account Deposit.
(a) Except as otherwise expressly provided herein, the Indenture
Trustee may demand payment or delivery of, and shall receive and collect,
directly and without intervention or assistance of any fiscal agent or other
intermediary, all money and other property payable to or receivable by the
Indenture Trustee pursuant hereto. The Indenture Trustee shall, upon request
from the Servicer, provide the Servicer with sufficient information regarding
the amount of collections deposited by the Indenture Trustee in the accounts
established pursuant to this Article Twelve, in order to permit the Servicer to
perform its duties under the Servicing Agreement. The Indenture Trustee shall
hold all such money and property so received by it as part of the Trust Estate
and shall apply it as provided herein. As of the Closing Date, the Servicer
shall cause all payments theretofore made with respect to the Loan Contracts
that were due on and after the Cut-Off Date and received by the Servicer to be
deposited into the Collection Account for the benefit of the Noteholders and
MBIA in accordance with the Servicing Agreement.
(b) On the Closing Date, the Issuer shall cause an amount equal to
the Class B Reserve Account Deposit to be deposited into the Class B Reserve
Account. Such amount shall be drawn from the proceeds received from the sale of
the Notes.
SECTION 12.02. Collection Account; Reserve Account; Redemption
Account; Class B Reserve Account Payments.
(a) On or prior to the Closing Date, the Indenture Trustee shall
open and maintain an Eligible Account at its Corporate Trust Office in its name
for the benefit of MBIA and the Noteholders (the "Collection Account") for
receipt of (i) payments deposited into the Collection Account in accordance with
Section 3.03 and 3.05 of the Servicing Agreement, (ii) amounts transferred from
the Reserve Account in accordance with Section 12.02(f), (iii) with respect to
the Class A Notes, proceeds of claims made under the Class A Note Insurance
Policy, in accordance with Article Eight hereof, (iv) the Purchase Price of any
Loan Contracts repurchased by the Company, the Issuer or the Servicer and (v)
any income and gain from investments in Eligible Investments. Funds in the
Collection Account shall not be commingled with any other monies. All payments
to be made from time to time to the Noteholders out of funds in the Collection
Account pursuant to this Indenture shall be made by the Indenture Trustee. All
monies deposited from time to time in the Collection Account pursuant to this
Indenture shall be held by the Indenture Trustee as part of the Trust Estate as
herein provided.
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(b) (i) On or prior to the Closing Date, the Indenture Trustee, for
the benefit of the Noteholders and MBIA, shall establish and maintain an
Eligible Account (the "Reserve Account") in its name for the benefit of MBIA and
the Noteholders for receipt of (i) the Reserve Account Initial Deposit, (ii)
deposits pursuant to Section 12.02(d)(x) and (iii) any income and gain from
investments in Eligible Investments. On the Closing Date, the Issuer will cause
to be deposited from the proceeds of the sale of the Notes the Reserve Account
Initial Deposit into the Reserve Account.
(ii) On or prior to the Closing Date, the Indenture Trustee, for the
benefit of the Noteholders, shall establish and maintain an Eligible Account
(the "Redemption Account") in its name for the benefit of the Noteholders for
receipt of funds and in anticipation of the application of such funds to a
redemption of the Notes pursuant to Section 10.02 hereof. Any monies deposited
into the Redemption Account for the purposes of redeeming Notes pursuant to
Article Ten hereof shall remain in the Redemption Account until used to redeem
the related Notes.
(iii) On or prior to the Closing Date, the Indenture Trustee, for
the benefit of the Class B Noteholders, shall establish and maintain an Eligible
Account (the "Class B Reserve Account") in its name for the benefit of the Class
B Noteholders for receipt of the Class B Reserve Account Deposit and in
anticipation of the application of such funds pursuant to Section 12.02(g)
hereof. On the Closing Date, the Issuer will cause to be deposited from the
proceeds of the sale of the Notes, an amount equal to the Class B Required
Reserve Account Amount into the Class B Reserve Account.
(c) Upon the written order of the Issuer (the "Issuer Order"), the
Indenture Trustee shall invest the funds in the Trust Accounts in Eligible
Investments; provided, however, that proceeds of claims on the Class A Note
Insurance Policy and amounts on deposit in the Redemption Account shall remain
uninvested. The Issuer Order shall specify the Eligible Investments in which the
Indenture Trustee shall invest, shall state that the same are Eligible
Investments and shall further specify the percentage of funds to be invested in
each Eligible Investment. No such Eligible Investment shall mature later than
the second Business Day preceding the next following Payment Date or relevant
Redemption Date, as applicable, or be sold or disposed of prior to its maturity.
In the absence of an Issuer Order, the Indenture Trustee shall invest funds in
the Collection Account in Eligible Investments described in clause (vi) of the
definition thereof. Eligible Investments shall be made in the name of the
Indenture Trustee for the benefit of the Noteholders and MBIA. The Indenture
Trustee shall provide to the Servicer and MBIA monthly written confirmation of
such investments, describing the Eligible Investments in which such amounts have
been invested. Any funds not so invested must be insured by the Federal Deposit
Insurance Corporation. The Indenture Trustee shall not be liable for the
selection of, or any investment loss resulting from investment of money in the
Trust Accounts in any Eligible Investment in accordance with the terms hereof
(other than in its capacity as obligor under any Eligible Investment). The
Servicer shall deposit into the relevant Trust Account the amount of any
investment losses immediately as realized.
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(d) On each Payment Date, after making all transfers and deposits to
the Collection Account pursuant to Section 12.02(a) hereof, the Indenture
Trustee shall withdraw all Available Funds on deposit in the Collection Account,
including the reinvestment income therein, and shall make the disbursements in
the following order in accordance with the provisions of and instructions on the
Monthly Servicer's Report; provided, however, that (x) the proceeds of claims
under the Class A Note Insurance Policy shall be used solely to pay the amounts
due under paragraphs (v) and (viii) of this Section 12.02(d) in accordance with
the terms of the Class A Note Insurance Policy; and (y) the Indenture Trustee
shall withdraw Available Funds from the Collection Account and make interest
payments to Class A Noteholders based on the Class A Note Balance even if it
shall not have received the Monthly Servicer's Report:
(i) first, to the Servicer, (A) the Servicer Fee then due and any
Servicing Charges and (B) from amounts received as Recoveries (prior to
reduction for out-of-pocket expenses) from any Defaulted Loan Contracts,
the amounts necessary to reimburse the Servicer for reasonable
out-of-pocket costs and expenses incurred by the Servicer (including
reasonable attorney's fees) in connection with the realization, attempted
realization or enforcement of rights and remedies upon the related
Defaulted Loan Contracts; provided, however, so long as the Company is the
Servicer, payment of one-third of the Servicer Fee shall be subordinate in
priority of payment and shall be made in the priority as set forth in the
clause (xi) below;
(ii) second, to the Back-up Servicer, (A) the Back-up Servicer Fee
then due and (B) in the event that the Back-up Servicer becomes the
Servicer, an amount equal to the costs and expenses incurred by the
Back-up Servicer in assuming the servicing role, such amount not to exceed
$50,000, to the extent such amounts have not been paid by the Servicer;
provided, however, that payment of such costs and expenses shall not cause
a draw of the Reserve Account pursuant to Section 12.02(f) hereof;
(iii) third, to the Indenture Trustee, the Indenture Trustee Fee
then due;
(iv) fourth, to MBIA, the MBIA Premium then due;
(v) fifth, to the Class A Noteholders, the Class A Interest Payment
Amount for such Payment Date, to be applied as provided in Section 2.08(a)
hereof;
(vi) sixth, to MBIA, the MBIA Reimbursement Amount for such Payment
Date, if any;
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(vii) seventh, to the Class B Noteholders, the Class B Interest
Payment Amount for such Payment Date, to be applied as provided in Section
2.08(a) hereof;
(viii) eighth, to the Class A Noteholders, the Class A Principal
Payment Amount for such Payment Date, to be applied as provided in Section
2.08(b) hereof;
(ix) ninth, in the event that an Event of Default has occurred and
has not been waived by MBIA, to the Class A Noteholders, the Additional
Class A Principal Distribution Amount for such Payment Date, up to the
Class A Note Balance on such Payment Date, to be applied as provided in
Section 2.08(b) hereof;
(x) tenth, to the Reserve Account, amounts required to fund the
Reserve Account up to the Required Reserve Account Amount;
(xi) eleventh, so long as the Company is the Servicer, to the
Servicer, the remaining one-third of the Servicer Fee then due;
(xii) twelfth, to the Indenture Trustee and the Back-up Servicer,
any other amounts due and owing the Indenture Trustee or the Back-up
Servicer as expressly provided herein;
(xiii) thirteenth, to the Class B Reserve Account amounts required
to fund the Class B Reserve Account up to the Class B Required Reserve
Account Amount;
(xiv) fourteenth, to the Class B Noteholders, the Class B Principal
Payment Amount, for such Payment Date, to be applied as provided in
Section 2.08(b) hereof;
(xv) fifteenth, the cost of re-liening if the Back-up Servicer is
acting as the Servicer or if the Servicer fails to perform its duties upon
the occurrence of a Re-Liening Trigger;
(xvi) sixteenth, in the event that the Back-up Servicer becomes the
Servicer, an amount equal to the costs and expenses incurred by the
Back-up Servicer in assuming the Servicer's role, to the extent such
amounts have not been paid by the Servicer or paid pursuant to clause (ii)
above; and
(xvii) seventeenth, to the Issuer, any remaining Available Funds.
(e) Payments on the Notes will be made by the Indenture Trustee by
check mailed by first-class mail to the Person whose name appears as the
Registered Holder of
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the Note on the Note Register at the address of such Person as it appears on the
Note Register, or by wire transfer in immediately available funds to the account
specified in writing to the Indenture Trustee by the Person whose name appears
as the Registered Holder of the Note on the Note Register received at least five
Business Days prior to the Record Date for the Payment Date on which wire
transfers will commence, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts. For this purpose, wire instructions delivered to the Indenture
Trustee by a Holder will apply to all subsequent Payment Dates until restated by
the Holder. Funds represented by checks returned undelivered will be held for
payment to the Person entitled thereto, subject to the terms hereof, at the
office or agency in the United States of America designated as such by the
Issuer for such purpose pursuant hereto.
(f) Disbursements from the Reserve Account shall be made, to the
extent funds therefor are available, only as follows, all in accordance with the
provisions and instructions contained in the Monthly Servicer Report:
(i) in the event that the Available Funds in the Collection
Account at 10:00 a.m. New York time on the Determination Date
immediately preceding any Payment Date are less than the amounts
required to be paid from the Collection Account on such Payment Date
pursuant to (A), clauses (i) through (viii) except for clauses
(ii)(B) and (vii) of Section 12.02(d) with respect to any
Determination Date on which the Class A Note Balance is greater than
zero and (B), clauses (i) through (viii) and clauses (xi) through
(xiii) of Section 12.02(d) with respect to any Determination Date on
which the Class A Note Balance is equal to zero, the Indenture
Trustee shall withdraw funds from the Reserve Account on or prior to
4:00 p.m. New York time on such Determination Date to the extent
necessary to make such payments on such Payment Date and deposit
such funds into the Collection Account;
(ii) in the event that on any Determination Date the balance
in the Reserve Account equals an amount greater than the Required
Reserve Account Amount (after giving effect to the distributions
listed in clause (i) of this Section 12.02(f) and (A), clauses (i)
through (viii) except for clause (vii) of Section 12.02(d) with
respect to any Payment Date on which the Class A Note Balance is
greater than zero, and (B), clauses (i) through (viii) and clauses
(xi) through (xiii) of Section 12.02(d) with respect to any Payment
Date on which the Class A Note Balance is equal to zero on such
Payment Date and all MBIA Reimbursement Amounts have been paid in
full), the Indenture Trustee shall withdraw funds in the Reserve
Account in such amount so that the remaining amount in the Reserve
Account after such withdrawal will equal the Required Reserve
Account Amount, and deposit such amounts in the Collection Account
as Available Funds for
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distribution on such Payment Date in accordance with the priorities
set forth in Section 12.02(d); and
(iii) on the Senior Liability Termination Date the amount then
remaining on deposit in the Reserve Account shall be applied as a
portion of the Class B Principal Payment Amount due on such date,
and the Reserve Account shall be closed.
(g) Disbursements from the Class B Reserve Account shall be made, to
the extent funds therefore are available, only as follows, all in accordance
with the provisions and instructions contained in the Monthly Servicer Report:
(i) in the event that the Available Funds in the Collection
Account at 10:00 a.m. New York time on the Determination Date
immediately preceding any Payment Date is less than the amounts
required to be paid from the Collection Account on such Payment Date
pursuant to clause (vii) of Section 12.02(d) (after giving effect to
distributions pursuant to clauses (i) through (vi) of such Section,
the Indenture Trustee shall withdraw funds from the Class B Reserve
Account (to the extent that funds are available therein) on or prior
to 4:00 p.m. New York time on such Determination Date to the extent
necessary to make such payments on such Payment Date and deposit
such funds into the Collection Account for payment in accordance
with clause (vii) of Section 12.02(d);
(ii) in the event that on any Determination Date the balance
in the Class B Reserve Account equals an amount greater than the
Class B Required Reserve Account Amount (after giving effect to any
withdrawal therefrom pursuant to clause (i) above), the Indenture
Trustee shall withdraw funds in the Class B Reserve Account in such
amount so that the remaining amount in the Class B Reserve Account
after such withdrawal will equal the Class B Required Reserve
Account Amount, and deposit such amounts in the Collection Account
as Available Funds for distribution on such Payment Date in
accordance with the priorities set forth in Section 12.02(d); and
(iii) on the Senior Liability Termination Date the amount then
remaining on deposit in the Class B Reserve Account shall be applied
as a portion of the Class B Principal Payment Amount due on such
date, and the Class B Reserve Account shall be closed.
SECTION 12.03. Reports by the Indenture Trustee.
(a) On each Payment Date the Indenture Trustee shall account to each
Holder of Notes on which payments of principal and interest are then being made
the
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amount which represents principal and the amount which represents interest, and
shall contemporaneously advise the Issuer and MBIA of all such payments. The
Indenture Trustee may satisfy its obligations under this Section 12.03 by
delivering the Monthly Servicer's Report to each such Holder of the Notes, MBIA,
the Issuer, the Rating Agencies and the Placement Agents.
(b) Upon receipt of an Issuer Order or upon an investment pursuant
to clause (vi) of the definition of Eligible Investments due to the failure of
the Issuer to provide an Issuer Order, the Indenture Trustee shall confirm the
credit rating or, if more than one credit rating has been assigned, each such
credit rating of each institution in which funds are invested pursuant to clause
(ii), (iii), (iv), (v) or (vi) of the definition of Eligible Investments.
(c) At least annually, or as otherwise required by law, the
Indenture Trustee shall distribute to Noteholders any information returns, or
other tax information as is required by applicable tax law to be distributed to
Noteholders. Such information shall be compiled by the Indenture Trustee from
information that has been provided to the Indenture Trustee by the Servicer. The
Indenture Trustee, upon written request, will furnish the Servicer with all
information known to the Indenture Trustee as may be reasonably required in
connection with the preparation by the Servicer of tax returns. In no event
shall the Indenture Trustee be liable for any liabilities, costs or expenses of
the Trust Estate or the Noteholders arising under any tax law, including,
without limitation, Federal, state, or local income or franchise taxes or any
other tax imposed on or measured by income.
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ARTICLE XIII
PROVISIONS OF GENERAL APPLICATION
SECTION 13.01. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 7.01 hereof)
conclusive in favor of the Indenture Trustee and the Issuer, if made in the
manner provided in this Section 13.01.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Registrar.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind the Holder of every
Note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, in respect of anything done, omitted or suffered to be done by
the Indenture Trustee or the Issuer in reliance thereon, whether or not notation
of such action is made upon such Note.
SECTION 13.02. Notices, etc., to Indenture Trustee, MBIA, Issuer and
Servicer.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders or other document provided or permitted hereby to
be made upon, given or furnished to, or filed with any party hereto shall be
sufficient for every purpose hereunder if in writing and telecopied or mailed,
first-class postage prepaid and addressed to the appropriate address below:
(a) to the Indenture Trustee at Four Albany Street, New York, New
York 10006 Attention: Corporate Trust and Agency Group - Structured Finance; Fax
No: (212)
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250-6439, or at any other address previously furnished in writing to the Issuer,
MBIA, the Noteholders and the Custodian; or
(b) to MBIA at MBIA Insurance Corporation, 113 King Street, Armonk,
New York 10504, Attention: Insured Portfolio Management - Structured Finance;
Fax No.: (914) 765-3810, or at any other address previously furnished in writing
by MBIA to Indenture Trustee, the Noteholders, the Custodian and the Issuer; or
(c) to the Issuer at 863 Glenrock Road, Norfolk, Virginia 23502; Fax
No.:(804) 461-3388, or at any other address previously furnished in writing to
the Indenture Trustee, MBIA, the Noteholders and the Custodian by the Issuer; or
(d) to the Custodian at Crestar Bank, 919 East Main Street, 10th
Floor, Richmond, Virginia 23219, Attention: J. Lee Judy; Fax No.: (804)
782-7855, or at any other address previously furnished in writing to the
Indenture Trustee, MBIA, the Noteholders, the Servicer and the Issuer; or
(e) to each of (i) Standard & Poors, Attention: Asset Backed
Surveillance Group, 26 Broadway, New York, NY 10004; and (ii) Moody's Investor
Service, 99 Church Street, New York, NY 10007.
SECTION 13.03. Notices to Noteholders; Waiver.
Where this Indenture provides for notice to Noteholders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Noteholder affected by such event, at his address as it appears on the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case in which notice to
Noteholders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any notice
which is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage, or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
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SECTION 13.04. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 13.05. Successor and Assigns.
All covenants and agreements in this Indenture by the Issuer shall
bind its successors and assigns, whether so expressed or not. There shall be no
assignment by the Issuer hereof, except in accordance with the provisions of
Section 3.02(n) hereof.
SECTION 13.06. Separability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 13.07. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto, the Noteholders and any
Paying Agent which may be appointed pursuant to the provisions hereof, and any
of their successors hereunder, any benefit or any legal or equitable right,
remedy, or claim under this Indenture or under the Notes, except that MBIA is an
express third party beneficiary to this Indenture and is entitled to enforce the
provisions hereof as if it were a party hereto.
SECTION 13.08. Legal Holidays.
In any case in which the date of any Payment Date or the Stated
Maturity Date of any Note shall not be a Business Day, then (notwithstanding any
other provision of a Note or this Indenture) payment of principal or interest
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the nominal date of any such
Stated Maturity Date or Payment Date and, assuming such payment is actually made
on such subsequent Business Day, no additional interest shall accrue on the
amount so paid for the period from and after any such nominal date.
SECTION 13.09. Governing Law.
This Indenture and each Note shall be construed in accordance with
and governed by the internal laws of the State of New York applicable to
agreements made and to be performed therein, without regard to the conflict of
laws provisions of any State.
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SECTION 13.10. Counterparts.
This Indenture may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
SECTION 13.11. Corporate Obligation.
No recourse may be taken, directly or indirectly, against any
incorporator, subscriber to the capital stock, stockholder, employee, officer or
director of the Issuer or of any predecessor or successor of the Issuer with
respect to the Issuer's obligations on the Notes or under this Indenture or any
certificate or other writing delivered in connection herewith.
SECTION 13.12. Compliance Certificates and Opinions.
Upon any application, order or request by the Issuer or the Servicer
to the Indenture Trustee to take any action under any provision of this
Indenture for which a specific request is required hereunder, the Issuer or the
Servicer, as applicable, shall furnish to the Indenture Trustee an Officer's
Certificate of the Issuer or the Servicer, as applicable, stating that all
conditions precedent, if any, provided for herein relating to the proposed
action have been complied with, except that in the case of any such application
or request as to which the furnishing of a different certificate is specifically
required by any provision of this Indenture relating to such particular
application or request, no additional certificate need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for herein shall include:
(a) a statement that each individual signing such certificate or
opinion has read or has caused to be read such covenant or condition and
the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, such
individual has made such examination or investigation as is necessary to
enable such individual to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
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(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 13.13. MBIA Default.
If an MBIA Default occurs and continues unremedied, MBIA's right to
consent hereunder and under any other Transaction Document and to direct the
Indenture Trustee shall be suspended until remedied and, in such event, in all
provisions of this Agreement wherein MBIA's consent or direction is required or
permitted, the consent or direction of the Controlling Holders shall be required
or permitted during such period of suspension.
SECTION 13.14. Parties not to Institute Insolvency Proceedings.
So long as this Indenture is in effect, for 366 days after the Final
Payment Date, the Indenture Trustee and the Custodian each agree that it shall
not file an involuntary petition or otherwise institute any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding or other
proceeding under any Federal or state bankruptcy or similar law against the
Issuer. Nothing hereunder shall prohibit the Indenture Trustee from filing
proofs of claim or otherwise participating in any such proceedings instituted by
any other Person.
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<PAGE>
IN WITNESS WHEREOF, the Issuer, the Custodian and the Indenture
Trustee have caused this Indenture to be duly executed by their respective
officers thereunto duly authorized as of the date and year first above written.
BANKERS TRUST COMPANY, as Indenture
Trustee
By: _______________________________
Name:
Title:
AUTOINFO RECEIVABLES COMPANY, as
Issuer
By: _______________________________
Name:
Title:
CRESTAR BANK,
as Custodian
By: _______________________________
Name:
Title:
[Indenture]
<PAGE>
EXHIBIT A
to Indenture
FORM OF CLASS A NOTE
REGISTERED $__________
No. A-_________
PPN: 052780 AA 1
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE BALANCE OF THIS NOTE AT ANY TIME MAY
BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS.
THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) SO LONG AS THIS NOTE IS ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (3) IN RELIANCE ON
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
SUBJECT TO THE RECEIPT BY THE INDENTURE TRUSTEE OF A CERTIFICATION OF THE
TRANSFEREE OR AN OPINION OF COUNSEL (SATISFACTORY TO THE INDENTURE TRUSTEE AND
THE ISSUER) TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES.
SECTION 2.06 OF THE INDENTURE DATED AS OF OCTOBER 1, 1996 (THE
"INDENTURE") BETWEEN AUTOINFO RECEIVABLES COMPANY, AS ISSUER, CRESTAR BANK, AS
CUSTODIAN AND BANKERS TRUST COMPANY, AS INDENTURE TRUSTEE, CONTAINS FURTHER
RESTRICTIONS ON THE TRANSFER AND RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS
NOTE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS NOTE,
A-1
<PAGE>
SUBJECT TO THE FOREGOING RESTRICTIONS ON TRANSFERABILITY. IN ADDITION, EACH
TRANSFEREE OF THIS NOTE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE MADE THE
REPRESENTATIONS AND AGREEMENTS SET FORTH IN SECTION 2.08(d) OF THE INDENTURE. (A
COPY OF WHICH IS AVAILABLE FROM THE INDENTURE TRUSTEE UPON REQUEST.)
AUTOINFO RECEIVABLES COMPANY
6.53% AUTO LOAN BACKED NOTES, CLASS A
AutoInfo Receivables Company, a Delaware corporation (including any
successor, the "Issuer"), for value received, hereby promises to pay to
_____________, or registered assigns, the principal sum of ______ DOLLARS
($_____), partially payable on each Payment Date in an amount equal to the
aggregate amount, if any, payable from the Collection Account in respect of
principal on the Class A Notes pursuant to Section 2.08 of the Indenture;
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the earlier of the Stated Maturity Date and the Redemption
Date, if any, pursuant to Section 10.01 of the Indenture. The Issuer will pay
interest on this Note at the rate per annum shown above or as is stated in the
Indenture, on each Payment Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
close of business on the day preceding such Payment Date, subject to certain
limitations contained in Section 2.08 of the Indenture. Interest on this Note
will accrue for each Payment Date from the most recent Payment Date (or in the
case of the first Payment Date, from the Closing Date) on which interest has
been paid to but excluding the then current Payment Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Note shall be paid in the manner specified in the
Indenture.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Policy") issued by MBIA Insurance Corporation ("MBIA"),
pursuant to which MBIA has unconditionally guaranteed payments of the Class A
Interest Shortfall Amount and the Class A Principal Shortfall Amount on each
Payment Date, all as more fully set forth in the Indenture. See also "Statement
of Insurance" attached hereto.
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
A-2
<PAGE>
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee by manual signature, this Note shall not be entitled to
any benefit under the Indenture referred to on the reverse hereof, or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Dated: October 11, 1996
AUTOINFO RECEIVABLES COMPANY
By: _____________________________________
Name: ___________________________________
Title: __________________________________
A-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Dated: October 11, 1996
BANKERS TRUST COMPANY, not in its individual capacity
but solely as Indenture Trustee
By: __________________________________________________
Authorized Signatory
A-4
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its 6.53% Auto Loan Backed Notes, Class A (herein called the
"Class A Notes" or the "Notes"), all issued under an Indenture dated as of
October 1, 1996 (such Indenture, as supplemented or amended, is herein called
the "Indenture"), between the Issuer, Crestar Bank and Bankers Trust Company,
not in its individual capacity but solely as trustee (the "Indenture Trustee",
which term includes any successor Indenture Trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights and obligations thereunder of the
Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are
subject to all terms of the Indenture. All terms used in this Note that are not
otherwise defined herein and that are defined in the Indenture shall have the
meanings assigned to them in or pursuant to the Indenture.
The Issuer shall pay interest on overdue installments of interest at
the Class A Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to
Section 10.01 of the Indenture, in whole, but not in part, at the option of the
Servicer or MBIA on any Payment Date on or after the date on which the Class A
Note Balance is less than or equal to 10% of the Initial Class A Note Balance on
the Closing Date.
Each Noteholder, by acceptance of a Note, covenants and agrees that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer or the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Indenture Trustee in its individual capacity, (ii) any owner of
a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of (a) the Indenture Trustee in its
individual capacity, (b) any holder of a beneficial interest in the Issuer, the
Indenture Trustee or of (c) any successor or assign of the Trustee in its
individual capacity, except as any such Person may have expressly agreed and
except that any such partner, owner or beneficiary shall be fully liable, to the
extent provided by applicable law, for any unpaid consideration for stock,
unpaid capital contribution or failure to pay any installment or call owing to
such entity.
It is the intent of the Issuer and the Noteholders that, for
purposes of Federal and State income tax and any other tax measured in whole or
in part by income, the Notes will qualify as indebtedness of the Issuer. The
Noteholders, by acceptance of a Note, agree to treat, and to take no action
inconsistent with the treatment of, the Notes for such tax purposes as
indebtedness of the Issuer.
Each Noteholder, by acceptance of a Note, covenants and agrees that
by accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Issuer, or join in any institution against the Issuer
of, any bankruptcy,
A-5
<PAGE>
reorganization or arrangement, insolvency or liquidation proceedings under any
United States Federal or State bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Transaction Documents.
This Note and the Indenture shall be construed in accordance with
the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note,
but solely from the Trust Estate pledged to the Indenture Trustee under the
Indenture and from the Class A Note Insurance Policy at the times, place and
rate, and in the coin or currency, herein prescribed. Notwithstanding anything
else to the contrary contained in this Note or the Indenture, the obligation of
the Issuer to pay the principal of and interest on this Note is not a general
obligation of the Issuer, nor its officers or directors, but is limited solely
to the Trust Estate pledged under the Indenture or as proscribed in the Class A
Note Insurance Policy.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Transaction Documents, neither Bankers Trust Company, in its
individual capacity, any owner of a beneficial interest in the Issuer, nor any
of their respective partners, beneficiaries, agents, officers, directors,
employees, successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Indenture Trustee for the sole purposes of binding the interests of the
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that, except as expressly provided in the Transaction Documents,
in the case of an Event of Default under the Indenture, the Holder shall have no
claim against any of the foregoing for any deficiency, loss or claim therefrom;
[Attach Statement of Insurance]
A-6
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
_____________________________________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________
_________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _______________, attorney, to transfer said Note on the books kept
for registration thereof, with full power of substitution in the premises.
ALEX. BROWN & SONS INCORPORATED
By:_____________________
Carla Brothers
Dated: October 11, 1996
A-7
<PAGE>
EXHIBIT B
to Indenture
FORM OF CLASS B NOTES
REGISTERED
$__________________________________________________________________________
NO. B-_________
PPN: 052780 AB 9
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE BALANCE OF THIS NOTE AT ANY TIME MAY
BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS.
THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) SO LONG AS THIS NOTE IS ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (3) IN RELIANCE ON
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
SUBJECT TO THE RECEIPT BY THE TRUSTEE OF A CERTIFICATION OF THE TRANSFEREE OR AN
OPINION OF COUNSEL (SATISFACTORY TO THE TRUSTEE AND THE ISSUER) TO THE EFFECT
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES.
SECTION 2.06 OF THE INDENTURE DATED AS OF OCTOBER 1, 1996 (THE
"INDENTURE") BETWEEN AUTOINFO RECEIVABLES COMPANY, AS ISSUER, CRESTAR BANK, AS
CUSTODIAN AND BANKERS TRUST COMPANY, AS INDENTURE TRUSTEE, CONTAINS FURTHER
RESTRICTIONS ON THE
B-1
<PAGE>
TRANSFER AND RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE, BY ACCEPTANCE
HEREOF, IS DEEMED TO HAVE ACCEPTED THIS NOTE, SUBJECT TO THE FOREGOING
RESTRICTIONS ON TRANSFERABILITY. IN ADDITION, EACH TRANSFEREE OF THIS NOTE, BY
ACCEPTANCE HEREOF, IS DEEMED TO HAVE MADE THE REPRESENTATIONS AND AGREEMENTS SET
FORTH IN SECTION 2.08(d) OF THE INDENTURE. (A COPY OF WHICH IS AVAILABLE FROM
THE INDENTURE TRUSTEE UPON REQUEST.)
11.31% AUTO LOAN BACKED NOTES, CLASS B
AutoInfo Receivables Company, a Delaware corporation (including any
successor, the "Issuer"), for value received, hereby promises to pay to
__________, or registered assigns, the principal sum of ________ DOLLARS
($_____), partially payable on each Payment Date in an amount equal to the
aggregate amount, if any, payable from the Collection Account in respect of
principal on the Class B Notes pursuant to Section 2.08 of the Indenture;
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the earlier of the Stated Maturity Date and the Redemption
Date, if any, pursuant to Section 10.01 of the Indenture. No payments of
interest on the Class B Notes will be made on any Payment Date until the
interest due on the Class A Notes on such Payment Date is paid in full. No
payments of principal on the Class B Notes will be made on any Payment Date
until the interest and principal due on the Class A Notes on such Payment Date
has been paid in full and certain payments are made to the Reserve Account for
the benefit of the Class A Notes. The Issuer will pay interest on this Note at
the rate per annum shown above, on each Payment Date until the principal of this
Note is paid or made available for payment, on the principal amount of this Note
outstanding on the close of business on the day preceding such Payment Date
(after giving effect to all payments of principal made on the preceding Payment
Date), subject to certain limitations contained in Section 2.08 of the
Indenture. Interest on this Note will accrue for each Payment Date from the most
recent Payment Date (or in the case of the first Payment Date, from the Closing
Date) on which interest has been paid to but excluding the then current Payment
Date. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Such principal of and interest on this Note shall be paid in the manner
specified in the Indenture.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
B-2
<PAGE>
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Note shall not be entitled to any benefit
under the Indenture referred to on the reverse hereof, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Dated: October 11, 1996
AUTOINFO RECEIVABLES COMPANY
By: ____________________________________
Name: _______________________________
Title: ______________________________
B-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Dated: October 11, 1996
BANKERS TRUST COMPANY, not in its
individual capacity but
solely as Indenture Trustee
By: __________________________________
Authorized Signatory
B-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its ___% Auto Loan Backed Notes, Class B (herein called the "Class
B Notes" or the "Notes"), all issued under an Indenture dated as of October 1,
1996 (such Indenture, as supplemented or amended, is herein called the
"Indenture"), between the Issuer, Crestar Bank and Bankers Trust Company, not in
its individual capacity but solely as trustee (the "Indenture Trustee," which
term includes any successor Indenture Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Indenture Trustee and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are not otherwise
defined herein and that are defined in the Indenture shall have the meanings
assigned to them in or pursuant to the Indenture.
The Issuer shall pay interest on overdue installments of interest at
the Class B Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to
Section 10.01 of the Indenture, in whole, but not in part, at the option of the
Servicer, on any Payment Date on or after the date on which the Class B Note
Balance is less than or equal to 10% of the Initial Class B Note Balance on the
Closing Date.
Each Noteholder, by acceptance of a Note, covenants and agrees that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer or the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Indenture Trustee in its individual capacity, (ii) any owner of
a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of (a) the Indenture Trustee in its
individual capacity, (b) any holder of a beneficial interest in the Issuer, the
Indenture Trustee or of (c) any successor or assign of the Indenture Trustee in
its individual capacity, except as any such Person may have expressly agreed and
except that any such partner, owner or beneficiary shall be fully liable, to the
extent provided by applicable law, for any unpaid consideration for stock,
unpaid capital contribution or failure to pay any installment or call owing to
such entity.
It is the intent of the Issuer, and the Noteholders that, for
purposes of Federal and State income tax and any other tax measured in whole or
in part by income, the Notes will qualify as indebtedness of the Issuer. The
Noteholders, by acceptance of a Note, agree to treat, and to take no action
inconsistent with the treatment of, the Notes for such tax purposes as
indebtedness of the Issuer.
Each Noteholder, by acceptance of a Note, covenants and agrees that
by accepting the benefits of the Indenture that such Noteholder will not at any
time institute
B-5
<PAGE>
against the Issuer, or join in any institution against the Issuer of, any
bankruptcy, reorganization or arrangement, insolvency or liquidation proceedings
under any United States Federal or State bankruptcy or similar law.
This Note and the Indenture shall be construed in accordance with
the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note,
but solely from the Trust Estate pledged to the Indenture Trustee under the
Indenture, at the times, place and rate, and in the coin or currency, herein
prescribed. Notwithstanding anything else to the contrary contained in this Note
or the Indenture, the obligation of the Issuer to pay the principal of and
interest on this Note is not a general obligation of the Issuer, nor its
officers or directors, but is limited solely to the Trust Estate pledged under
the Indenture.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Transaction Documents, neither Bankers Trust Company, in its
individual capacity, any owner of a beneficial interest in the Issuer, nor any
of their respective partners, beneficiaries, agents, officers, directors,
employees, successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Indenture Trustee for the sole purposes of binding the interests of the
Indenture Trustee in the assets of the Issuer. The Holder of this Note by the
acceptance hereof agrees that, except as expressly provided in the Transaction
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom.
B-6
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
______________________________________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________
___________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _________________________________, attorney, to transfer said Note
on the books kept for registration thereof, with full power of substitution in
the premises.
Dated:________________ _______________________*/
Signature Guaranteed:
_______________________________________________________________________________
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar,
which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
- ----------
*/ NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular without alteration, enlargement or any change whatsoever.
B-7
<PAGE>
Exhibit C
to Indenture
Form of Class A Note Insurance Policy
See Tab 8
<PAGE>
Exhibit D
to Indenture
Cumulative Net Default Table
================================================================================
Months After Closing Reserve Account Increase
Event Event of Default
- --------------------------------------------------------------------------------
Three 6.50% 7.50%
- --------------------------------------------------------------------------------
Six 9.00% 12.00%
- --------------------------------------------------------------------------------
Nine 13.50% 19.00%
- --------------------------------------------------------------------------------
Twelve 16.50% 23.00%
- --------------------------------------------------------------------------------
Fifteen 19.25% 28.75%
- --------------------------------------------------------------------------------
Eighteen 21.50% 31.25%
- --------------------------------------------------------------------------------
Twenty-One 23.50% 33.75%
- --------------------------------------------------------------------------------
Twenty-Four 25.75% 36.75%
- --------------------------------------------------------------------------------
Twenty-Seven 27.75% 39.50%
- --------------------------------------------------------------------------------
Thirty and Thereafter 30.00% 42.00%
================================================================================
<PAGE>
Exhibit E-1
to Indenture
Form of Investment Letter
(Non-Rule 144A)
Bankers Trust Company
Four Albany Street
New York, New York 10006
AutoInfo Receivables Company
863 Glenrock Road
Norfolk, Virginia 23502
Black Diamond Securities, LLC
230 Park Avenue, Suite 635
New York, New York 10169
Alex, Brown & Sons Incorporated
7 St. Paul Street
Baltimore, Maryland 21202
Re: AutoInfo Receivables Company
___% Auto Loan Backed, Class [A/B]
----------------------------------
The undersigned purchaser ("Purchaser") understands that the purchase of
the above referenced notes described on the Schedule attached hereto (the
"Notes") may be made only by institutions which are "Accredited Investors" under
Regulation D, as promulgated under the Securities Act of 1933, as amended (the
"1933 Act"), which includes banks, savings and loan associations, registered
brokers and dealers, insurance companies, investment companies, and
organizations described in Section 501(c)(3) of the Internal Revenue Code,
corporations, business trusts and partnerships, not formed for the specific
purpose of acquiring the Notes offered, with total assets in excess of
$5,000,000. The undersigned represents on behalf of the Purchaser that the
Purchaser is an "Accredited Investor" within the meaning of such definition.
Purchaser is urged to review carefully the responses, representations and
warranties it is making herein.
E-1-1
<PAGE>
Representations and Warranties
Purchaser makes the following representations and warranties in order to
permit the Trustee, AutoInfo Receivables Company ("AutoInfo"), and Black Diamond
Securities, LLC to determine its suitability as a purchaser of Notes and to
determine that the exemption from registration relied upon by AutoInfo under
Section 4(2) of the 1933
Act is available to it.
1. The execution and delivery of this Representation Letter has been duly
authorized by the Purchaser by all necessary corporate action on its part,
including due authorization and approval by the Board of Directors or other
governing body of the Purchaser.
2. The Purchaser understands that the Notes have not been and will not be
registered under the 1933 Act in reliance upon the exemption provided in Section
4(2) of the 1933 Act or any other applicable exemption, that the Notes have not
and will not be registered or qualified under the securities or "blue sky" laws
of any jurisdiction, that the Notes may be resold (which resale is not currently
contemplated) or otherwise transferred only if so registered or qualified or if
an exemption from registration or qualification is available, that AutoInfo is
not required to register the Notes and that any transfer must comply with
Section 2.06 of the Indenture relating to the Notes.
3. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale of the Notes.
4. The Purchaser is a sophisticated institutional investor and has
knowledge and experience in financial and business matters and is capable of
evaluating the merits and risks of its investment in the Notes and is able to
bear the economic risk of such investment. The Purchaser has been given such
information concerning the Notes, the underlying retail installment contracts
and AutoInfo as it has requested.
5. The Purchaser is acquiring the Notes as principal for its own account
(or for the account of one or more other institutional investors for which it is
acting as duly authorized fiduciary or agent) for the purpose of investment and
not with a view to or for sale in connection with any distribution thereof,
subject nevertheless to any requirement of law that the disposition of the
Purchaser's property will at all times be and remain within its control.
6. The Purchaser represents that either (a) it is not (i) an employee
benefit plan (as defined in section 3(3) of the Employee Retirement Security Act
of 1974, as amended ("ERISA")) subject to the provisions of Title I of ERISA,
(ii) a plan described in section 4975(e)(1) of the Internal Revenue Code of
1986, as amended (the "Code") or (iii) an entity whose underlying assets are
deemed to be assets of a plan described in (i) or (ii) above by reason of such
plan's investment in the entity (any such entity described in
E-1-2
<PAGE>
clauses (i) through (iii), a "Benefit Plan Entity") or (b) the Purchaser's
purchase and holding of the Notes with the assets of a Benefit Plan Entity will
be covered by a Department of Labor Class Exemption.
7. The Purchaser understands that such Note will bear a legend as set
forth in the form of Note included in the Indenture.
8. The Purchaser agrees that it will obtain from any purchaser of the
Notes from it substantially the same representations, warranties and agreements
contained in the foregoing paragraphs 1 through 7 and in this paragraph 8.
E-1-3
<PAGE>
The representations and warranties contained herein will be binding upon
the heirs, executors, administrators and other successors of the undersigned. If
there is more than one signatory hereto, the obligations, representations,
warranties and agreements of the undersigned are made jointly and severally.
Executed at _________________________, this ________ day of _____________,
199_.
_________________________
Purchaser's Name (Print)
By_______________________
Signature
Its______________________
_________________________
Address of Purchaser
_________________________
Purchaser's Taxpayer
Identification Number
E-1-4
<PAGE>
Bankers Trust Company
Four Albany Street
New York, New York 10006
AutoInfo Receivables Company
863 Glenrock Road
Norfolk, Virginia 23502
Black Diamond Securities, LLC
230 Park Avenue, Suite 635
New York, New York 10169
Alex. Brown & Sons Incorporated
7 St. Paul Street
Baltimore, Maryland 21202
Re: AutoInfo Receivables Company
11.31% Auto Loan Backed Notes, Class B
--------------------------------------
Dear Sirs:
SunAmerica Life Insurance Company (the "Purchaser") is today purchasing in
a private resale from AutoInfo Receivables Company (the "Issuer") the above
captioned notes (the "Notes"), issued pursuant to the Indenture dated as of
October 1, 1996 between AutoInfo Receivables Company as issuer (the "Company"),
AutoInfo Finance of Virginia, Inc., Crestar Bank and Bankers Trust Company, as
trustee (the "Trustee").
In connection with the purchase of the Notes, the Purchaser hereby
represents and warrants to you as follows:
1. The execution and delivery of this Representation Letter has been duly
authorized by the Purchaser by all necessary corporate action on its part.
E-2-1
<PAGE>
2. The Purchaser understands that the Notes have not been and will not be
registered under the Securities Act of 1933, as amended (the "1933 Act"), in
reliance upon the exemption provided in Section 4(2) of the 1933 Act or any
other applicable exemption, that the Notes have not and will not be registered
or qualified under the securities or "blue sky" laws of any jurisdiction, that
the Notes may be resold (which resale is not currently contemplated) or
otherwise transferred only if so registered or qualified or if an exemption from
registration or qualification is available, that AutoInfo Receivables Company is
not required to register the Notes and that any transfer must comply with
Section 2.06 of the Indenture relating to the Notes.
3. The Purchaser is not acquiring the Notes with a view to, or for resale
in connection with, a distribution that would constitute a public offering
within the meaning of the 1933 Act or a violation of the 1933 Act or any state
securities law (subject to the understanding that disposition of the Purchaser's
property will remain at all times within its control). The Purchaser is not an
affiliate of the Trustee, any custodian of the Notes or the Company or any
affiliate thereof.
4. The Purchaser agrees that if at some time it wishes to dispose of or
exchange any of the Notes, it will not transfer or exchange any of the Notes
unless such transfer or exchange is in accordance with the provisions of Section
2.06 of the Indenture.
5. The Purchaser is a qualified institutional buyer as defined in Rule
144A of the 1933 Act and has completed either of the forms of certification to
that effect attached hereto as Annex 1 or Annex 2; it is aware that the sale to
it is being made in reliance on Rule 144A; it is acquiring the Notes for its own
account or for the account of a qualified institutional buyer, it understands
that such Notes may be resold, pledged or transferred only (i) to a person who
the Purchaser reasonably believes is a qualified institutional buyer that
purchases for its own account or for the account of a qualified institutional
buyer to whom notice is given that the resale, pledge or transfer is being made
in reliance on Rule 144A; or (ii) pursuant to another exemption from
registration under the 1933 Act.
6. Neither the Purchaser nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of any Note, any interest in
any Note to, or solicited any offer to buy or accept a transfer, pledge or other
disposition of any Note any interest in any Note with, any person in any manner,
or made any general solicitation by means of general advertising or in any other
manner, or taken any other action, which would constitute a distribution of the
Notes under the 1933 Act or which would render the disposition of any Note a
violation of Section 5 of the 1933 Act or any state securities law, require
registration or qualification pursuant thereto, nor has it authorized or will it
authorize any person to act, in such manner with respect to the Notes.
7. The Purchaser represents that either (a) it is not (i) an employee
benefit plan (as defined in section 3(3) of the Employee Retirement Security Act
of 1974, as amended
E-2-2
<PAGE>
("ERISA") subject to the provisions of Title I of ERISA, (ii) a plan described
in section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the
"Code"), or (iii) an entity whose underlying assets are deemed to be assets of a
plan described in (i) or (ii) above by reason of such plan's investment in the
entity (any such entity described in clauses (i) through (iii), a "Benefit Plan
Entity") or (b) the Purchaser's purchase and holding of the Notes with the
assets of a Benefit Plan Entity will be covered by an ERISA statutory exemption
Department of Labor Administrative Exemption.
8. The Purchaser understands that there is no market, nor is there any
assurance that a market will develop, for the Notes and that the Issuer does not
have any obligation to make or facilitate any such market (or to otherwise
repurchase the Notes from the Purchaser) under any circumstances.
9. The Purchaser has consulted with its own legal counsel, independent
accountants and financial advisors to the extent it deems necessary regarding
the tax consequences to it of ownership of the Notes, is aware that its taxable
income with respect to the Notes in any accounting period may not correspond to
the cash flow (if any) from the Notes for such period, and is not purchasing the
Notes in reliance on any representations of the Issuer or its counsel with
respect to tax matters.
10. The Purchaser has reviewed the Private Placement Memorandum (the
"Placement Memorandum") dated October 11, 1996, with respect to the Notes, and
the agreements and other materials referred to therein, and has had the
opportunity to ask questions and receive answers concerning the terms and
conditions of the transactions contemplated by the Placement Memorandum and to
obtain additional information necessary to verify the accuracy and completeness
of any information furnished to the Purchaser or to which the Purchaser had
access.
11. The Purchaser hereby further agrees to be bound by all the terms and
conditions of the Notes as provided in the Indenture.
E-2-3
<PAGE>
12. If the Purchaser sells any of the Notes, the Purchaser will obtain
from any subsequent purchaser the same representations contained in this
Representation Letter.
Very truly yours,
SUNAMERICA LIFE INSURANCE COMPANY
Dated: October 11, 1996
By: ____________________________________________________________
Name:
Title:
E-2-4
<PAGE>
Qualified Institutional Buyer Status Under SEC Rule 144A
(Buyers other than investment companies)
Bankers Trust Company
Four Albany Street
New York, New York 10006
AutoInfo Receivables Company
863 Glenrock Road
Norfolk, Virginia 23502
Black Diamond Securities, LLC
230 Park Avenue, Suite 635
New York, New York 10169
Alex. Brown & Sons Incorporated
7 St. Paul Street
Baltimore, Maryland 21202
Name of Buyer: SunAmerica Life Insurance Company ("Buyer")
I hereby certify that as indicated below, I am the _______________ officer
of Buyer.
In connection with purchases by Buyer from time to time, I hereby certify
to you and, if you act as broker for one or more customers, to such customers,
that Buyer is a "qualified institutional buyer" as defined in Rule 144A under
the Securities Act of 1933 ("Rule 144A") because (i) Buyer owned and/or invested
on a discretionary basis $__________(1) in securities (except for the excluded
securities referred to below) as of the end of Buyer's most recent fiscal year
(such amount being calculated in accordance with Rule 144A) and (ii) Buyer
satisfies the criteria in the category marked below.
- ----------
(1) Buyer must own and/or invest on a discretionary basis at least $100,000,000
in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.
E-2-5
<PAGE>
Corporation, etc. Buyer is a corporation (other than a bank, savings and
loan association or similar institution), Massachusetts or similar
business trust, partnership, or charitable organization described in
Section 501(c)(3) of the Internal Revenue Code.
Bank. Buyer (a) is a national bank or banking institution organized under
the laws of any State, territory or the District of Columbia, the business
of which is substantially confined to banking and is supervised by the
State or territorial banking commission or similar official or is a
foreign bank or equivalent institution, and (b) has an audited net worth
of at least $25,000,000 as demonstrated in its latest annual financial
statements, a copy of which is attached hereto.
Savings and Loan. Buyer (a) is a savings and loan association, building
and loan association, cooperative bank, homestead association or similar
institution, which is supervised and examined by a State or Federal
authority having supervision over any such institution or is a foreign
savings and loan association or equivalent institution and (b) has an
audited net worth of at least $25,000,000 as demonstrated in its latest
annual financial statements, a copy of which is attached hereto.
Broker-dealer. Buyer is a dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934.
Insurance Company. Buyer is an insurance company whose primary and
predominant business activity is the writing of insurance or the
reinsuring of risks underwritten by insurance companies and which is
subject to supervision by the insurance commissioner or a similar official
or agency of a State, territory or the District of Columbia.
State or Local Plan. Buyer is a plan established and maintained by a
State, its political subdivisions, or any agency or instrumentality of a
State or its political subdivisions, for the benefit of its employees.
ERISA Plan. Buyer is an employee benefit plan within the meaning of Title
I of the Employee Retirement Income Security Act of 1974.
Investment Advisor. Buyer is an investment advisor registered under the
Investment Advisers Act of 1940.
The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with Buyer, (ii) securities that are part of an
unsold allotment to or subscription by Buyer (if Buyer is a dealer), (iii)
securities issued or guaranteed by the U.S. or any instrumentality thereof, (iv)
bank deposit notes and certificates of deposit, (v)
E-2-6
<PAGE>
loan participations, (vi) repurchase agreements, (vii) securities owned but
subject to a repurchase agreement and (viii) currency, interest rate and
commodity swaps.
For purposes of determining the aggregate of securities owned and/or
invested on a discretionary basis by Buyer, Buyer used the cost of such
securities to Buyer and did not include any of the securities referred to in the
preceding paragraph.
Further, in determining such aggregate amount, Buyer may have included
securities owned by subsidiaries of Buyer, but only if such subsidiaries are
consolidated with Buyer in its financial statements prepared in accordance with
generally accepted accounting principles and if the investments of such
subsidiaries are managed under Buyer's direction. However, such securities were
not included if Buyer is a majority-owned, consolidated subsidiary of another
enterprise and Buyer is not itself a reporting company under the Securities
Exchange Act of 1934.
Buyer acknowledges that it is familiar with Rule 144A and understands that
you and your customers (if you act as a broker for one or more customers) are
and will continue to rely on the statements made herein because one or more
sales by you for your own account or your customer's account to Buyer may be in
reliance on Rule 144A.
___ ___ Will Buyer be purchasing Rule 144A
Yes No securities only for Buyer's own account?
If the answer to this question is "no", Buyer agrees that, in connection
with any purchase of securities sold to Buyer for the account of a third party
(including any separate account) in reliance on Rule 144A, Buyer will only
purchase for the account of a third party that at the time is a "qualified
institutional buyer" within the meaning of Rule 144A. In addition, Buyer agrees
that Buyer will not purchase securities for a third party unless Buyer has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.
Buyer agrees to notify you of any changes in the information and
conclusions herein. Until such notice is given to you, Buyer's purchase of
securities from you, or through you from your customers, will constitute a
reaffirmation of the foregoing certifications and acknowledgments as of the date
of such purchase.
E-2-7
<PAGE>
Further, if Buyer is a bank or savings and loan as provided above, Buyer
agrees that it will furnish you with updated annual financial statements
promptly after they become available.
Date: October 11, 1996 Very truly yours,
SUNAMERICA LIFE INSURANCE
COMPANY
By __________________________________
Name:
Title:
E-2-8
<PAGE>
Annex 2 to Exhibit E-2
Bankers Trust Company
Four Albany Street
New York, New York 10006
AutoInfo Receivables Company
863 Glenrock Road
Norfolk, Virginia 23502
Black Diamond Securities, LLC
230 Park Avenue, Suite 635
New York, New York 10169
Alex, Brown & Sons Incorporated
7 St. Paul Street
Baltimore, Maryland 21202
Name of Buyer: ("Buyer")
Name of Investment Adviser: ("Adviser")
I hereby certify that, as indicated below, I am the President, Chief
Financial Officer or Senior Vice President of Buyer or, if Buyer is a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act of 1933
("Rule 144A") because Buyer is part of a Family of Investment Companies (as
defined below), of Adviser.
In connection with purchases by Buyer from time to time, I hereby certify
to you and, if you act as broker for one or more customers, to such customers,
that Buyer is a "qualified institutional buyer" as defined in Rule 144A under
the Securities Act of 1933 ("Rule 144A") because (i) Buyer is an investment
company registered under the Investment Company Act of 1940 and (ii) as marked
below, Buyer alone, or Buyer's Family of Investment Companies, owned at least
$100,000,000 in securities (other than the excluded securities referred to
below) as of the end of Buyer's most recent fiscal year.
Buyer owned $__________ in securities (other than the excluded
securities referred to below) as of the end of Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule
144A).
Buyer is part of a Family of Investment Companies which owned in the
aggregate $__________ in securities (other than the excluded
securities
E-2-1
<PAGE>
referred to below) as of the end of Buyer's most recent fiscal year
(such amount being calculated in accordance with Rule 144A).
For purposes of determining the amount of securities owned by Buyer or Buyer's
Family of Investment Companies, I used the cost of such securities.
The term "Family of Investment Companies" as used herein means two or more
registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with Buyer or are part of Buyer's Family of
Investment Companies, (ii) securities issued or guaranteed by the U.S., or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.
On behalf of Buyer, I acknowledge that Buyer is familiar with Rule 144A
and understands that you and your customers (if you act as a broker for one or
more customers) are and will continue to rely on the statements made herein
because one or more sales to Buyer by you for your own account or your
customer's account will be in reliance on Rule 144A. In addition, on behalf of
Buyer, I agree that, in connection with any purchase of securities sold by or
through you in reliance on Rule 144A, Buyer will only purchase for Buyer's own
account.
E-2-2
<PAGE>
Finally, on behalf of Buyer or Adviser (as appropriate), I also agree to
notify you of any changes in the information and conclusions herein. Until such
notice is given to you, Buyer's purchase from time to time of securities from
you, or through you from your customers, will constitute a reaffirmation of the
foregoing certifications and acknowledgements by me as of the date of such
purchase.
Date: __________________ Very truly yours,
_______________________________________
Name:
Title:
On behalf of:
_______________________________________
Name of Buyer:
or
_______________________________________
Name of Adviser:
E-2-3
<PAGE>
EXHIBIT F
to Indenture
FORM OF CERTIFICATION
[To be addressed to the Indenture Trustee and MBIA]
Re: The Indenture dated as of October 1, 1996 (the "Indenture"), by and among
AutoInfo Receivables Company, as Issuer, Bankers Trust Company, as
Indenture Trustee and Crestar Bank, as Custodian.
Ladies and Gentlemen:
In accordance with the provisions of Section 11.03 of the
above-referenced Indenture, the undersigned, as the Custodian, hereby certifies
that as to each Custodial File (other than any Loan Contract paid in full or any
Loan Contract listed on the attachment hereto) it has reviewed the documents in
such Custodial File and has determined that (i) all documents required to be
delivered to it pursuant to Section 11.03 of the Indenture are in its possession
and (ii) such documents have been reviewed by it and appear regular on their
face and related to such Loan Contracts. The Custodian makes no representations
as to and shall not be responsible to verify (i) the validity, legality,
enforceability, sufficiency, due authorization, recordability or genuineness of
any of the documents in the Custodial File or of any of the Loan Contracts or
(ii) the collectability, insurability, effectiveness or suitability of any such
Loan Contracts.
CRESTAR BANK, Custodian
By: ___________________________
Name:
Title:
F-1
<PAGE>
Schedule 1
List of Loan Contracts
See Tab 12
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS.................................................................. 2
SECTION 1.01. Definitions............................................ 2
ARTICLE II
THE NOTES.................................................................... 23
SECTION 2.01. Form Generally......................................... 23
SECTION 2.02. Denomination........................................... 23
SECTION 2.03. Execution, Authentication, Delivery and Dating......... 23
SECTION 2.04. Temporary Notes........................................ 24
SECTION 2.05. Registration, Registration of Transfer and Exchange.... 24
SECTION 2.06. Limitation on Transfer and Exchange.................... 25
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Note.............. 26
SECTION 2.08. Payment of Principal and Interest; Principal and
Interest Rights Preserved...................................... 27
SECTION 2.09. Persons Deemed Owner................................... 29
SECTION 2.10. Cancellation........................................... 29
SECTION 2.11. Tax Treatment.......................................... 29
ARTICLE III
ISSUER REPRESENTATIONS, WARRANTIES AND COVENANTS............................. 30
SECTION 3.01. Representations, Warranties and Covenants of the
Issuer......................................................... 30
SECTION 3.02. Covenants.............................................. 32
SECTION 3.03. Representations and Warranties Regarding the Loan
Assets......................................................... 37
SECTION 3.04. Limitation on Liability of Directors, Officers, or
Employees of the Issuer........................................ 37
ARTICLE IV
ISSUANCE OF NOTES; REMOVAL OF COLLATERAL..................................... 38
SECTION 4.01. Conditions to Issuance of Notes........................ 38
SECTION 4.02. Security for Notes..................................... 39
SECTION 4.03. Removals of Loan Contracts............................. 40
i
<PAGE>
Page
----
SECTION 4.04. Releases............................................... 41
SECTION 4.05. Trust Estate........................................... 41
ARTICLE V
SATISFACTION AND DISCHARGE................................................... 42
SECTION 5.01. Satisfaction and Discharge of Indenture................ 42
SECTION 5.02. Application of Trust Money............................. 42
ARTICLE VI
DEFAULTS..................................................................... 44
SECTION 6.01. Events of Default...................................... 44
SECTION 6.02. Indenture Trustee May File Proofs of Claim............. 45
SECTION 6.03. Indenture Trustee May Enforce Claims Without
Possession of Notes............................................ 46
SECTION 6.04. Limitation on Suits.................................... 47
SECTION 6.05. Unconditional Right of Noteholders to Receive
Principal and Interest......................................... 47
SECTION 6.06. Restoration of Rights and Remedies..................... 48
SECTION 6.07. Rights and Remedies Cumulative......................... 48
SECTION 6.08. Control by MBIA or Noteholders......................... 48
SECTION 6.09. Waiver of Certain Events by Less than All.............. 49
SECTION 6.10. Undertaking for Costs.................................. 49
SECTION 6.11. Waiver of Stay or Extension Laws....................... 49
SECTION 6.12. Action on Notes........................................ 50
SECTION 6.13. Delay or Omission; Not Waiver.......................... 50
ARTICLE VII
THE INDENTURE TRUSTEE........................................................ 51
SECTION 7.01. Certain Duties and Responsibilities of the Indenture
Trustee........................................................ 51
SECTION 7.02. Notice of Default and Reserve Account Increase
Events......................................................... 53
SECTION 7.03. Certain Rights of Indenture Trustee.................... 53
SECTION 7.04. Not Responsible for Recitals or Issuance of Notes...... 54
SECTION 7.05. May Hold Notes......................................... 55
SECTION 7.06. Money Held in Trust.................................... 55
SECTION 7.07. Compensation and Reimbursement......................... 55
SECTION 7.08. Corporate Trustee Required; Eligibility................ 56
SECTION 7.09. Resignation and Removal; Appointment of Successor...... 57
SECTION 7.10. Acceptance of Appointment by Successor................. 58
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SECTION 7.11. Merger, Conversion, Consolidation or Succession to
Business of Indenture Trustee.................................. 58
SECTION 7.12. Co-Indenture Trustees and Separate Indenture
Trustees....................................................... 59
SECTION 7.13. Rights with Respect to the Servicer.................... 60
SECTION 7.14. Appointment of Authenticating Agent.................... 61
SECTION 7.15. Money for Note Payments to Be Held in Trust............ 62
ARTICLE VIII
THE CLASS A NOTE INSURANCE POLICY............................................ 64
SECTION 8.01. Payments under the Class A Note Insurance Policy....... 64
ARTICLE IX
AMENDMENTS TO INDENTURE...................................................... 65
SECTION 9.01. Amendments without Consent of Noteholders.............. 65
SECTION 9.02. Amendments with Consent of Noteholders................. 66
SECTION 9.03. Execution of Amendments................................ 67
SECTION 9.04. Effect of Amendments................................... 67
SECTION 9.05. Reference in Notes to Amendments....................... 67
ARTICLE X
REDEMPTION OF NOTES.......................................................... 68
SECTION 10.01. Redemption at the Option of the Servicer; Election to
Redeem........................................................ 68
SECTION 10.02. Notice to Indenture Trustee; Deposit of Redemption
Price......................................................... 68
SECTION 10.03. Notice of Redemption by the Indenture Trustee........ 69
SECTION 10.04. Notes Payable on Redemption Date..................... 69
SECTION 10.05. Release of Loan Contracts to the Servicer............ 70
SECTION 10.06. Release of Loan Contracts to MBIA.................... 70
ARTICLE XI
THE CUSTODIAN................................................................ 71
SECTION 11.01. Acceptance by Indenture Trustee and Appointment of
the Custodian................................................. 71
SECTION 11.02. Obligations of the Custodian......................... 73
SECTION 11.03. Certification........................................ 73
SECTION 11.04. Future Defects....................................... 74
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SECTION 11.05. Fees of Custodian.................................... 74
SECTION 11.06. Liability of Custodian............................... 74
SECTION 11.07. Reliance of Custodian................................ 74
SECTION 11.08. Transmission of Custodial Files...................... 75
SECTION 11.09. Resignation and Removal; Appointment of Successor.... 75
SECTION 11.10. Acceptance of Appointment by Successor............... 76
SECTION 11.11. Merger, Conversion, Consolidation or Succession to
Business of Custodian.......................................... 76
SECTION 11.12. Representations and Warranties of the Custodian...... 77
ARTICLE XII
ACCOUNTS AND ACCOUNTING...................................................... 79
SECTION 12.01. Collection of Money; Class B Reserve Account
Deposit........................................................ 79
SECTION 12.02. Collection Account; Reserve Account; Redemption
Account; Class B Reserve Account Payments...................... 79
SECTION 12.03. Reports by the Indenture Trustee..................... 84
ARTICLE XIII
PROVISIONS OF GENERAL APPLICATION............................................ 86
SECTION 13.01. Acts of Noteholders.................................. 86
SECTION 13.02. Notices, etc., to Indenture Trustee, MBIA, Issuer and
Servicer....................................................... 86
SECTION 13.03. Notices to Noteholders; Waiver....................... 87
SECTION 13.04. Effect of Headings and Table of Contents............. 88
SECTION 13.05. Successor and Assigns................................ 88
SECTION 13.06. Separability......................................... 88
SECTION 13.07. Benefits of Indenture................................ 88
SECTION 13.08. Legal Holidays....................................... 88
SECTION 13.09. Governing Law........................................ 88
SECTION 13.10. Counterparts......................................... 89
SECTION 13.11. Corporate Obligation................................. 89
SECTION 13.12. Compliance Certificates and Opinions................. 89
SECTION 13.13. MBIA Default......................................... 90
SECTION 13.14. Parties not to Institute Insolvency Proceedings...... 90
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EXHIBITS
Exhibit A Form of Class A Note
Exhibit B Form of Class B Note
Exhibit C Form of Class A Note Insurance Policy
Exhibit D Cumulative Net Default Table
Exhibit E Form of Investment Letter
Exhibit F Form of Custodian Certification
Schedule 1 List of Loan Contracts
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SERVICING AGREEMENT
dated as of
October 1, 1996
by and among
AUTOINFO FINANCE OF VIRGINIA, INC.
Servicer
AUTOINFO RECEIVABLES COMPANY
Issuer
BANKERS TRUST COMPANY
Indenture Trustee and Back-Up Servicer
and
CRESTAR BANK
Custodian
<PAGE>
This SERVICING AGREEMENT (the "Servicing Agreement"), dated as of
October 1, 1996, is by and among AutoInfo Finance of Virginia, Inc., a Virginia
corporation (the "Servicer"), AutoInfo Receivables Company, a Delaware
corporation (the "Issuer"), Crestar Bank (the "Custodian") and Bankers Trust
Company, a New York banking corporation, not in its individual capacity but
solely as back-up servicer (in such capacity, the "Back-up Servicer"), and as
indenture trustee (in such capacity, the "Indenture Trustee").
The Issuer has entered into an Indenture dated as of October 1, 1996
(the "Indenture"), with the Indenture Trustee, and the Custodian, pursuant to
which the Issuer has issued its Class A Auto Loan Backed Notes and its Class B
Auto Loan Backed Notes (collectively, the "Notes").
The Issuer and AutoInfo Finance of Virginia, Inc. (the "Company")
have entered into a Loan Sale Agreement dated as of October 1, 1996 (the "Loan
Sale Agreement"), providing for, among other things, the contribution and sale
by the Company to the Issuer of all of its right, title and interest in and to
certain Loan Assets which the Issuer is pledging to the Indenture Trustee, and
in which the Issuer will be granting to the Indenture Trustee a security
interest, as security for the Notes. As a precondition to the effectiveness of
such Loan Sale Agreement, the Loan Sale Agreement requires that the Servicer,
the Custodian, the Issuer, the Indenture Trustee and the Back-up Servicer enter
into this Servicing Agreement to provide for the servicing of the Loan Assets.
In order to further secure the Notes, the Issuer is granting to the
Indenture Trustee a security interest in, among other things, the Issuer's
rights derived under this Servicing Agreement and the Loan Sale Agreement, and
the Servicer agrees that all covenants and agreements made by the Servicer
herein with respect to the Loan Assets shall also be for the benefit and
security of the Indenture Trustee, MBIA and all holders from time to time of the
Notes. For its services under this Servicing Agreement, the Servicer, the
Back-up Servicer, the Indenture Trustee and the Custodian will receive the
compensation described herein or in the Indenture.
ARTICLE ONE
DEFINITIONS
Section 1.01 Defined Terms.
Except as otherwise specified or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Servicing Agreement, and the definitions of such terms are
equally applicable both to the singular and plural forms of such terms and to
the masculine, feminine and neuter genders of such terms. Capitalized terms used
but not otherwise defined herein shall have the respective meanings assigned to
such terms in the Indenture or, if not defined therein, in the Loan Sale
Agreement.
"Annual Percentage Rate or APR": With respect to a Loan Contract,
the rate per annum of finance charges stated in such Loan Contract as the
"annual percentage rate" (within the meaning of the Federal Truth-in-Lending
Act); provided, however, that if after the Closing Date, the rate per annum with
respect to a Receivable as of the Closing Date is reduced as a result of
<PAGE>
(i) an insolvency proceeding involving the Obligor or (ii) the Soldiers' and
Sailors' Civil Relief Act of 1940, the Annual Percentage Rate or APR shall refer
to such reduced rate.
"Back-up Servicer": shall initially mean Bankers Trust Company,
until a successor Person shall have become the Back-up Servicer pursuant to the
applicable provisions of this Servicing Agreement, and thereafter "Back-up
Servicer" shall mean such successor Person.
"Back-up Servicer Officer": shall mean any Responsible Officer of
the Indenture Trustee.
"Collection Records": shall mean all manually prepared or computer
generated records relating to collection efforts or payment histories with
respect to the Loan Contracts.
"Company": shall mean AutoInfo Finance of Virginia, Inc. and all
successors thereto in accordance with the terms of the Loan Sale Agreement.
"Credit and Collection Policy": shall mean the credit extension
policies and procedures maintained by the Servicer and the administration and
collection practices maintained by the Servicer as in effect on the Closing
Date, as set forth in Exhibit C hereto.
"Eligible Servicer": shall mean AutoInfo Finance of Virginia, Inc.,
the Back-Up Servicer or any Person that (i) (A) is satisfactory to the Indenture
Trustee and MBIA, (B) services not less than $25,000,000 in aggregate
outstanding principal amount of sub-prime auto paper and (C) has a net worth of
not less than $1,000,000, which at the time of its appointment as Servicer, (ii)
is servicing a portfolio of motor vehicle retail installment sales contracts
and/or motor vehicle installment loans, (iii) is legally qualified and has the
capacity to service the Loan Contracts, (iv) has demonstrated the ability
professionally and competently to service a portfolio of motor vehicle retail
installment sales contracts and/or motor vehicle installment loans similar to
the Loan Contracts with reasonable skill and care, and (v) is qualified and
entitled to use, pursuant to a license or other written agreement, and agrees to
maintain the confidentiality of, the software which the Servicer uses in
connection with performing its duties and responsibilities under this Servicing
Agreement or otherwise has available software which is adequate to perform its
duties and responsibilities under this Servicing Agreement.
"Falk": shall mean Falk Finance Company.
"Indenture": shall mean the Indenture, dated as of October 1, 1996
by and among the Issuer, the Indenture Trustee and the Custodian, as amended
from time to time in accordance with the terms thereof.
"Indenture Trustee": shall mean Bankers Trust Company, until a
successor Person shall have become the Indenture Trustee pursuant to the
applicable provisions of the Indenture, and thereafter "Indenture Trustee" shall
mean such successor Person.
"Insurance Agreement Event of Default" shall mean an "Event of
Default" as such term is defined in the Insurance Agreement.
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"Issuer": shall mean AutoInfo Receivables Company and all successors
thereto in accordance with the terms of the Indenture.
"Loan Sale Agreement": shall mean the Loan Sale Agreement, dated as
of October 1, 1996 by and between the Company and the Issuer, as amended from
time to time in accordance with the terms thereof.
"Lockbox Account": An account maintained on behalf of the Indenture
Trustee by the Lockbox Bank pursuant to Section 3.03.
"Lockbox Agreement": Lockbox Agreement dated as of October 11, 1996
by and among the Lockbox Bank and the Servicer, as amended, modified or
supplemented, or any other agreement, in form and substance acceptable to the
Issuer and MBIA.
"Lockbox Bank": Crestar Bank, Richmond, Virginia or any other
depository institution named by the Servicer and acceptable to the Issuer and so
long as an MBIA Default shall not have occurred and be continuing, MBIA.
"Monthly Records": All records and data maintained by the Servicer
with respect to the Loan Contracts, including the following with respect to each
Loan Contract; the account number; Obligor name; Obligor address; Obligor home
phone number; original Loan Balance; original term; Annual Percentage Rate;
current Loan Balance; current remaining term; origination date; first payment
date; final scheduled payment date; next payment due date; date of most recent
payment; collateral description; days currently delinquent; amount of Scheduled
Payment; and past due late charges.
"Monthly Servicer's Report": shall mean the report prepared by the
Servicer pursuant to Section 4.01 hereof and substantially in the form of
Exhibit A hereof.
"Officer's Certificate": shall mean a certificate signed by the
Chairman of the Board, the Vice-Chairman of the Board, the President, a Vice
President, the Treasurer or the Secretary of the Servicer.
"Request for Release of Documents": shall mean the request prepared
by the Servicer substantially in the form of Exhibit B hereto.
"Servicer": shall mean AutoInfo Finance of Virginia, Inc., until a
successor Person shall have become the Servicer pursuant to the applicable
provisions of this Servicing Agreement, and thereafter "Servicer" shall mean
such successor Person.
"Servicer Default": shall mean any occurrence or circumstance which
with notice or the lapse of time or both would be a Servicer Event of Default
under this Servicing Agreement.
"Servicer Event of Default": shall mean each of the occurrences or
circumstances enumerated in Section 6.01 hereof.
"Servicer State of Incorporation": shall mean the state of
incorporation of the Servicer, which, as of the Closing Date, is the State of
Virginia.
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"Servicer Termination Notice": shall mean the notice described in
Section 6.01 hereof.
"Servicing Agreement": shall mean this Servicing Agreement, and all
amendments hereto.
"Servicing Officer": shall mean those officers of the Servicer
involved in, or responsible for, the administration and servicing of the Loan
Contracts, as identified on the list of Servicing Officers furnished by the
Servicer to the Indenture Trustee, the Back-up Servicer, and MBIA from time to
time.
"Sub-Servicer": Any Person with whom the Servicer enters into a
Sub-Servicing Agreement.
"Sub-Servicing Agreement": Any written contract between the Servicer
and any Sub-Servicer as set forth in Section 3.10 hereof, relating to servicing,
administration or collection on the Loan Contracts as provided in Article 3.
ARTICLE TWO
SERVICER REPRESENTATIONS AND WARRANTS
Section 2.01 Representations and Warranties.
The Servicer makes the following representations and warranties to
the Indenture Trustee and MBIA as of the Closing Date, which shall survive the
Closing Date:
(a) The Servicer is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Virginia and has all
licenses necessary to carry on its business as now being conducted and is
licensed, qualified and in good standing in each state in which a Vehicle is
located if the laws of such state require licensing or qualification in order to
conduct business of the type conducted by the Servicer and perform its
obligations as Servicer hereunder; the Servicer has the power and authority to
execute and deliver this Servicing Agreement and to perform in accordance
herewith; the execution, delivery and performance of this Servicing Agreement by
the Servicer and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary action on the part of the
Servicer. This Servicing Agreement evidences the valid, binding and enforceable
obligation of the Servicer, and all requisite action has been taken by the
Servicer to make this Servicing Agreement valid, binding and enforceable upon
the Servicer in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other, similar laws relating to or
affecting creditors' rights generally or the application of equitable principles
in any proceeding, whether at law or in equity;
(b) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
Federal, state or other governmental authority or agency (other than any such
actions, approvals, etc. under any state securities laws, real estate
4
<PAGE>
syndication or "Blue Sky" statutes, as to which the Servicer makes no such
representation or warranty), that are necessary in connection with the execution
and delivery by the Servicer of the documents to which it is a party, have been
duly taken, given or obtained, as the case may be, are in full force and effect,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by each of this Servicing
Agreement, the Indenture, the Insurance Agreement and the other documents on the
part of the Servicer and the performance by the Servicer of its obligations as
Servicer under this Servicing Agreement and such of the other 4s to which
it is a party;
(c) The consummation of the transactions contemplated by this
Servicing Agreement will not result in the breach of any terms or provisions of
the charter or by-laws of the Servicer or result in the breach of any term or
provision of, or conflict with or constitute a default under or result in the
acceleration of any obligation under, any material agreement, indenture or loan
or credit agreement or other material instrument to which the Servicer or its
property is subject, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Servicer or its property is subject;
(d) There is no action, suit, proceeding or investigation pending
or, to the best of the Servicer's knowledge, threatened against the Servicer
which, either in any one instance or in the aggregate, may result in any
material adverse change in the business, operations, financial condition,
properties or assets of the Servicer or in any material impairment of the right
or ability of the Servicer to carry on its business substantially as now
conducted, or in any material liability on the part of the Servicer or which
would draw into question the validity of this Servicing Agreement or the Loan
Contracts or of any action taken or to be taken in connection with the
obligations of the Servicer contemplated herein, or which would be likely to
impair materially the ability of the Servicer to perform under the terms of this
Servicing Agreement; the Servicer has no liability and foresees no liability in
the future arising from the suit entitled Chisolm v. Charlie Falk's Auto
Wholesale, Inc., case # 2:93-CV-632, E.D. Virginia and the stipulation with
respect thereto filed September 29, 1994.
(e) 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 default might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Servicer or its properties or might have consequences that
would materially and adversely affect its performance hereunder;
(f) The Loan Contract Files for each Loan Contract have been
transferred to the Custodian pursuant to the terms of this Servicing Agreement,
the Loan Sale Agreement or the Indenture.
(g) The Servicer is not an investment company which is required to
register under the Investment Company Act of 1940, as amended.
(h) The Servicer has serviced the Loan Contracts and Vehicles in a
manner consistent with industry standards for sub-prime motor vehicle loans and
motor vehicles similar to the Loan Contracts and Vehicles, and in any event in a
prudent and commercially reasonable
5
<PAGE>
manner, and has conducted its servicing operations in a manner consistent with
industry standards for servicing of sub-prime automobile loan portfolios.
ARTICLE THREE
ADMINISTRATION AND SERVICING OF LOAN CONTRACTS
Section 3.01 Responsibilities of Servicer.
(a) The Servicer, for the benefit of MBIA and the Noteholders, shall
be responsible for, and shall, in accordance with its customary servicing
procedures, pursue the managing, servicing, administering, enforcing and making
of collections on the Loan Contracts, the Vehicles and any Insurance Policies,
the enforcement of the Indenture Trustee's security interest in the Loan
Contracts and the Vehicles Granted and assigned pursuant to the Indenture, the
sale and repossession of a Vehicle upon default of the related Loan Contract and
the enforcement of all other remedies under the Loan Contracts, in accordance
with the standards and procedures set forth in this Servicing Agreement and any
related provisions of the Indenture and the Loan Sale Agreement. The Servicer's
responsibilities shall include collecting and posting of all payments,
responding to inquiries of Obligors, investigating delinquencies, sending
payment statements to Obligors, complying with the terms of the Lockbox
Agreement, accounting for collections and furnishing monthly and annual
statements to the Back-up Servicer, the Indenture Trustee, MBIA, the Rating
Agencies and the Noteholders with respect to payments, providing appropriate
federal income tax information to the Indenture Trustee for use in providing
information to the Noteholders or MBIA, maintaining Insurance Policies, and
maintaining the perfected security interest of the Indenture Trustee in the
Trust Estate. The Servicer (at its expense), acting alone or through a
Sub-Servicer, shall have full power and authority, acting at its sole
discretion, to do any and all things in connection with such managing,
servicing, administration, enforcement, collection and sale of the Vehicles that
it may deem necessary or desirable, including the prudent delegation of such
responsibilities. Without limiting the generality of the foregoing, the
Servicer, in its own name or in the name of a Sub-Servicer, shall, and is hereby
authorized and empowered by the Indenture Trustee, subject to Section 3.02
hereof, to execute and deliver (on behalf of itself, the Noteholders, the
Indenture Trustee or any of them) any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Loan Contracts and any files or
documentation pertaining to the Loan Assets. The Servicer, acting alone or
through a Sub-Servicer, also may, in its sole discretion, waive any late payment
charge or penalty, or any other collection fees that may be payable in the
ordinary course of servicing any Loan Contract. Notwithstanding the foregoing,
neither the Servicer, nor any Sub-Servicer, shall, except pursuant to a judicial
order from a court of competent jurisdiction, or as otherwise expressly provided
in this Servicing Agreement, release or waive the right to collect the Scheduled
Payments or any unpaid balance on any Loan Contract. The Indenture Trustee
shall, at the expense of the Servicer, furnish the Servicer, or at the request
of the Servicer, any Sub-Servicer, with any powers of attorney and other
documents necessary or appropriate to enable the Servicer or Sub-Servicer to
carry out its servicing and administrative duties hereunder, and the Indenture
Trustee shall not be responsible for the Servicer's or Sub-Servicer's
application thereof. Notwithstanding the appointment by the Servicer of a
Sub-Servicer hereunder, the Servicer shall remain primarily liable for the full
performance of its obligations hereunder.
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(b) The Servicer (or a Sub-Servicer) shall conduct any Loan Contract
management, servicing, administration, collection or enforcement actions in the
following manner:
(i) The Servicer, as agent for and on behalf of the
Issuer, with respect to any Defaulted Loan Contract shall follow the
Credit and Collection Policy and such practices and procedures as
are normal and consistent with the Servicer's standards and
procedures relating to its own motor vehicle loan contracts, and
interests in motor vehicles that are similar to the Loan Contracts
and the Vehicles, and in any event, consistent with the standard of
care described in Section 3.02 hereof, including without limitation,
the taking of appropriate actions to foreclose or otherwise
liquidate any such Defaulted Loan Contract, together with the
related Vehicle, to collect any Guaranty Amounts, and to enforce the
Issuer's rights under the Loan Sale Agreement. All gross Recoveries
in respect of any such Loan Contract and the related Vehicle
received by the Servicer shall be remitted to the Indenture Trustee
for deposit in the Collection Account pursuant to Section 3.03
hereof.
(ii) The Servicer may sue to enforce or collect upon Loan
Contracts as agent for the Noteholders and the Trust Estate and for
the benefit of MBIA. If the Servicer elects to commence a legal
proceeding to enforce a Loan Contract, the act of commencement shall
be deemed to be an automatic assignment of the Loan Contract to the
Servicer for purposes of collection only, and a Servicing Officer
shall deliver by facsimile a Request for Release of Documents,
substantially in the form of Exhibit B hereto, to the Custodian
requesting delivery to the Servicer of the Loan Contract File and/or
the related Certificate of Title or Application for Certificate of
Title, as applicable. Upon receipt of such delivery request, the
Custodian shall release such Loan Contract File, the related
Certificate of Title, and/or the Application for Certificate of
Title, as applicable, to the Servicer within 48 hours of receipt of
such request (receipt being deemed to have occurred upon
confirmation of facsimile transmission). All documents contained in
the Loan Contract File shall be conspicuously stamped prior to
release to the Servicer to show the sale of the Loan Contracts to
the Issuer and the security interest of the Indenture Trustee
therein. Upon release of such items, the Servicer is authorized to
execute an instrument in satisfaction of such Loan Contract and to
do such other acts and execute such other documents it deems
necessary to discharge the Obligor thereunder and release any
security interest in the Vehicle related thereto. The Servicer shall
determine in accordance with the standard of care described in
Section 3.02 hereof, when a Loan Contract has been paid in full. If
in any enforcement suit or legal proceeding it is held that the
Servicer may not enforce a Loan Contract on the ground that it is
not a real party in interest or a holder entitled to enforce the
Loan Contract, then the Indenture Trustee on behalf of the
Noteholders and MBIA shall, at the Servicer's request and expense,
take such steps as the Servicer or the Issuer deems necessary, and
the Servicer shall instruct the Indenture Trustee in writing to
enforce the Loan Contract, including bringing suit in its name or
the name of the Issuer, as beneficial owner of the Loan Contract, or
in the names of the Noteholders or MBIA, as third party
beneficiaries thereunder, and the Indenture Trustee shall be
indemnified by the Servicer for any such action taken; provided,
however, that if
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a Servicer Event of Default shall have occurred and is continuing,
MBIA, so long as an MBIA Default has not occurred and is continuing,
shall direct the Indenture Trustee with respect to the enforcement
of the Loan Contract; provided further that neither the Indenture
Trustee nor the Servicer shall bring suit naming the Noteholders or
MBIA without the prior written consent of MBIA so long as no MBIA
Default shall have occurred and be continuing.
(iii) The Servicer shall exercise any rights of recourse
against third parties that exist with respect to any Loan Contract
in accordance with the Servicer's usual practice and in any event,
consistent with the standard of care described in Section 3.02
hereof. In exercising recourse rights, the Servicer is authorized on
the Indenture Trustee's behalf to reassign the Loan Contract to the
person against whom recourse exists to the extent necessary, and at
the price set forth in the document creating the recourse. The
Servicer will not reduce or diminish such recourse rights, except to
the extent that it exercises such right;
(iv) [Reserved]
(v) The Servicer may waive, modify or vary any terms of
any Loan Contract or consent to the postponement of strict
compliance with any such term if in the Servicer's reasonable and
prudent determination such waiver, modification or postponement is
necessary to avoid a default on such Loan Contract or will maximize
the amount to be received with respect to such Loan Contract, or is
otherwise not materially adverse to the Noteholders or MBIA;
provided, however, that (A) the Servicer shall not forgive any
Scheduled Payment and (B) the Servicer shall not (1) permit any
modification with respect to any Loan Contract that would decrease
the Scheduled Payment or the annual percentage rate, (2) defer a
total of more than two Scheduled Payments for any Loan Contract and
provided, further, that any such extension does not extend the final
Scheduled Payment on such Loan Contract beyond six months
immediately preceding the Stated Maturity of the Class A Notes, (3)
reduce the Loan Balance (except in connection with actual payments
attributable to such Loan Balance), or (4) prevent the complete
amortization of the Loan Balance from occurring by six months
preceding the Stated Maturity Date of the Class A Notes. The
Servicer shall provide the Back-Up Servicer, MBIA and the Indenture
Trustee with an amendment to the Loan Schedule reflecting any
modification of any Scheduled Payment;
(vi) The Servicer shall not consent to the termination of
any Loan Contract in connection with loss of or damage to the
related Vehicle unless the Obligor has paid an amount not less than
an amount equal to the Loan Balance of such Loan Contract plus any
accrued interest thereon, or if less, the maximum amount legally
collectible under the related Loan Contract.
(vii) In the event that the Servicer or any Sub-Servicer in
the enforcement of any Loan Contract takes possession of a Vehicle
from an Obligor, the Servicer shall use its best efforts to sell
such Vehicle promptly and consistent
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with the standard of care set forth in Section 3.02 hereof. Any
Recoveries related thereto shall be deposited in accordance with
Section 3.03 hereof;
(viii) Notwithstanding any provision to the contrary
contained in this Servicing Agreement, the Servicer or any
Sub-Servicer shall use its best efforts to exercise any right under
a Loan Contract to accelerate the unpaid Scheduled Payments due, or
to become due, thereunder in such a manner as to maximize the net
proceeds available to the Trust Estate; provided, however, that the
Servicer will not accelerate any Scheduled Payment unless permitted
to do so by the terms of the Loan Contract or under applicable law;
and
(ix) If an Obligor makes a partial prepayment, such
prepayment shall be applied to reduce the Loan Balance of the
related Loan Contract when received and such Obligor may defer
payment of as many as the two next succeeding Scheduled Payments,
provided that the partial prepayment was in an amount at least equal
to the Scheduled Payments deferred.
(c) The Servicer shall not make any material change to its Credit
and Collection Policy without the prior written consent of MBIA.
(d) With respect to any part of the Loan Contract Files in
possession of the Servicer, the Servicer shall hold such items together with any
and all other documents that the Servicer would keep on file with respect to a
loan contract held for its own account in its capacity as Servicer for the
benefit of the Issuer, the Indenture Trustee, MBIA and the Noteholders. Such
possession by the Servicer is for the sole purpose of servicing the related Loan
Contract. Such items together with any and all other documents that the Servicer
would keep on file with respect to a loan contract held for its own account
shall be held and maintained by the Servicer at the offices of the Servicer
located at the address of the Servicer set forth in Section 8.04 hereof and in
accordance with the standard of care set forth in Section 3.02 hereof. In
addition, such items shall be segregated from other loan contracts and related
documents in the Servicer's possession that are not part of the Trust Estate.
Any document in the Loan Contract File held by the Servicer shall be
conspicuously stamped with a legend stating "Assigned to and the Property of
AutoInfo Receivables Company and pledged to Bankers Trust Company as Indenture
Trustee on behalf of the Noteholders and MBIA".
Section 3.02 Servicer Standard of Care.
In managing, administering, servicing, enforcing and making
collections on the Loan Contracts and the Vehicles pursuant to this Servicing
Agreement, the Servicer will exercise that degree of skill and care consistent
with industry standards for the servicing of sub-prime motor vehicle loan
portfolios, and that which the Servicer customarily exercises with respect to
similar sub-prime motor vehicle loan contracts and interests in motor vehicle
loans owned or originated by it in accordance with the Credit and Collection
Policy, and in any event, in a prudent and commercially reasonable manner. The
Servicer shall punctually perform all of its obligations and agreements under
this Servicing Agreement and 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 materially impair the rights of MBIA or the Noteholders in any
Loan Contracts or payments thereunder.
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Section 3.03 Accounts.
(a) Lockbox Account. (i)(A) Prior to the Closing Date, the Servicer
shall (1) establish and maintain the Lockbox Account, (2) enter into the Lockbox
Agreement and (3) within 10 Business Days of the Closing Date, notify the
related Obligors to remit all payments with respect to the Loan Contracts to the
Lockbox Account. If, at any time, the Lockbox Account ceases to be maintained at
the Lockbox Bank, the Servicer shall within ten Business Days of obtaining
actual knowledge of such cessation establish a new lockbox account which shall
be an Eligible Account with a new Lockbox Bank, transfer any cash
10
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT ("Agreement") made as of the 11th day of
October, 1996 by and between AutoInfo, Inc., a Delaware corporation (the
"Company") and SunAmerica Life Insurance Company ("SunAmerica ").
WITNESSETH
WHEREAS, SunAmerica owns in the aggregate Warrants to purchase up to
159,095 shares of the Company's Common Stock, $.01 par value per share (the
"Warrants"), pursuant to a Warrant by and between the Company and SunAmerica
dated the date hereof ( the "Warrant Agreement"); and
WHEREAS, in connection with its issuance of the Warrant, the Company has
agreed to grant to SunAmerica certain registration rights with respect to the
shares issuable upon exercise of the Warrant as set forth in this Registration
Rights Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and other valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the "Securities Act" (as defined
herein).
"Common Stock" shall mean the Common Stock, $.01 par value per share, of
the Company, as constituted as of the date of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Majority Holders" shall mean persons holding in the aggregate more than
fifty percent (50%) of the total number of Registrable Shares.
"Registrable Shares" shall mean the shares of Common Stock of the Company
issued upon exercise of the Warrant.
"Registration Expenses" shall mean the expenses so described in Section 5.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 5.
2. [Section intentionally omitted]
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3. Registration. (a) The Majority Holders may on one occasion make a
written request for a registration under the Securities Act and state securities
laws of all or part of the Registrable Shares (a "Demand Registration"). Such
request will specify the number of Registrable Shares to be sold and will also
specify the intended method of disposition thereof. The Company will use its
best efforts (subject to the provisions of this Agreement) to effect, as soon as
practicable after such request, all such registrations, qualifications and
compliances under the Securities Act and state securities laws (including
without limitation, filings required to effect a registration pursuant to the
Securities Act if available or pursuant to any applicable exemption) of the
Registrable Shares which the Company has been so requested to register by the
Majority Holders. Such request will also specify the number of shares of
Registrable Shares to be registered and the intended method of disposition
thereof. If (x) the Company intends to make a registered offering of its
securities at the same time that the Majority Holders request a Demand
Registration, as determined in good faith by the Board of Directors of the
Company, or (y) the Company has received a request for a Demand Registration
from the holders of other registration rights prior to the date of such request,
then the Company may defer its obligation under this section 3(a) for a period
of not more than 120 days if the Board of directors of the Company shall
determine that filing such a Registration Statement would have material adverse
consequences to the Company. The Company shall not for any reason be obligated
to effect more than one Demand Registration pursuant to this Section 3(a).
If the Majority Holder requesting a Demand Registration so elects, the
offering of the Registrable Shares pursuant to the Demand Registration may be in
the form of an underwritten offering. The Company shall have the right to select
the managing underwriter in connection with such offering; provided, however,
that such managing underwriter and additional investment bankers and managers
must be reasonably satisfactory to the Majority Holder. If the proposed sale by
the Majority Holder is to be effected pursuant to an underwritten public
offering, the right of any holder to registration pursuant to this Section 3(a)
shall be conditioned upon such holder's participation in such underwriting and
the inclusion of such holder's Registrable Shares in the underwriting to the
extent requested, unless otherwise mutually agreed by the Company and the
Majority Holder, to the extent provided herein. The Company and the holders
proposing to distribute their securities through such underwriting shall enter
into an agreement in customary form with the underwriter(s) selected for such
underwriting, and shall execute powers of attorney and custodial agreements in
customary form for selling stockholders.
Notwithstanding the foregoing, the Majority Holder shall not have the
right to make demand for registration of the Registrable Shares, if, in the
reasonable opinion of counsel to the Company, reasonably satisfactory to the
Majority Holder and addressed thereto that all of their Registrable Shares may
be sold at the time of such demand in reliance upon Rule 144 under the
Securities Act of 1933, as amended, or other similar provision during any three
month period. The expense of any such legal opinion shall be borne by the
Company.
(b) If the Company at any time proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Registrable Shares for sale to the public), then at each such
time it will give written notice to holders of outstanding Registrable Shares of
its intention to do so. Upon the written request of any such holder, received by
the Company within 10 business days after the giving of any such notice by the
Company, to register any of such holder's Registrable Shares, the Company will
use its best efforts to cause the Registrable Shares as to which registration
shall have been so requested to be included in the securities to be covered by
the registration statement proposed to be filed by the Company, all to the
extent requisite to permit the sale or other disposition by the holder (in
accordance with its written request) of such Registrable Shares so registered
("Piggy-Back Registration Rights"). The
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foregoing provisions notwithstanding, (i) the Company may withdraw any
registration statement referred to in this Section 3(b) without thereby
incurring any liability to the holders of Registrable Shares, and (ii) the
inclusion of shares of Registrable Shares under such Piggy-Back Registration
Rights is subject to the cut back provisions of Section 3(c) below.
(c) If the managing underwriter of an offering described in Section 3(b)
above advise the Company that the size of the offering that the Majority Holder,
the Company and any other persons intend to make, is such that the success of
the offering could be adversely affected by inclusion of all or part of the
Registrable Shares requested to be included, then the amount of Registrable
Shares to be offered shall be reduced to the extent necessary to reduce the
total number of shares of Registrable Shares to be included in such offering to
the amount recommended in good faith by the managing underwriter, for the
accounts of the selling SunAmerica , provided that any such reductions shall be
made in the following priorities:
First, the number of shares of Common Stock requested to be registered by
the holders requesting Piggy-Back Registration and any holders of Common Stock
whose rights are pari passu with the registration rights of such holders
requesting Piggy-Back Registration shall be reduced as required;
Second, the number of shares of Common Stock to be registered by the
holders of registration rights having priority over the registration rights of
the holders having Piggy-Back Registration shall be reduced as required; and
then
Third, the number of shares of Common Stock requested to be registered for
the account of any person requesting Demand Registration, if any, shall be
reduced as required.
Within the categories set forth above for reductions of the number of
shares of Common Stock to be registered, the reductions shall be pro rata in
relation to the number of shares of Common Stock to be registered, unless other
rights exist among such persons.
(d) The Company will not grant to any person on or after the date hereof,
and prior to the registration of all of the Registrable Securities, a piggy-back
registration right which by its terms is senior in any respect as it relates to
cut-back provisions to the Piggy-Back Registration Rights.
4. Registration Procedures. If and whenever the Company is required by
the provisions of Section 3 above to use its best efforts to effect the
registration of Registrable Shares under the Securities Act, the Company will,
as expeditiously as possible, or in any event no later than ninety (90) days
after the end of the period within which request for registration may be given
to the Company :
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby, determined as hereinafter provided;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for the period
specified in subsection (a) above and comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Shares covered
by such registration statement in accordance with the sellers' intended method
of disposition set forth in such registration statement for such period;
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<PAGE>
(c) furnish to each seller of Registrable Shares, and to each underwriter
such number of copies of the registration statement and the prospectus included
therein, including each preliminary prospectus, as such persons reasonably may
request in order to facilitate the public sale or other disposition of the
Registrable Shares covered by such registration statement;
(d) use its best efforts to register or qualify the Registrable Shares
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Registrable Shares or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request;
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to list the Registrable Shares covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify each seller of Registrable Shares and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
For purposes of Sections 4(a) and 4(b) above, the period of distribution
of Registrable Shares in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Registrable Shares
in any other registration shall be deemed to extend until the earlier of the
sale of all Registrable Shares covered thereby and 270 days after the effective
date thereof.
In connection with each registration hereunder, the sellers of Registrable
Shares will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as shall be reasonably
necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Section 3 above covering
an underwritten public offering, the Company and each seller agree to enter into
a written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
5. Expenses. All expenses incurred by the Company in complying with
Section 3 above, including without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company and
independent public accountants for the Company, fees and expenses incurred in
connection with complying with state securities or "blue sky" laws, up to $7,500
of fees and disbursements of one special counsel to the sellers of Registrable
Shares, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars and costs of insurance are called
"Registration Expenses." All underwriting discounts and selling commissions
applicable to the sale of Registrable Shares and fees and disbursements of
counsel to the sellers of Registrable Shares in excess of the $7,500 payable by
the Company as set forth in this provision are called "Selling Expenses."
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The Company will pay all Registration Expenses in connection with each
registration statement relating to the Demand Registration and each Piggy-Back
Registration under Section 3 above. All Selling Expenses in connection with each
Demand and Piggy-Back Registration under Section 3 above shall be borne by the
participating sellers in proportion to the number of shares sold by each.
6. Indemnification and Contribution. (a) In the event of a registration of
any of the Registrable Shares under the Securities Act pursuant to Section 3
above, the Company will indemnify and hold harmless each seller of such
Registrable Shares thereunder, each underwriter of such Registrable Shares
thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities, or actions in
respect thereof, arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Shares was registered under the Securities Act
pursuant to Section 4 above, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such seller, each such underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such seller, any such underwriter or any such controlling
person in writing specifically for use in such registration statement or
prospectus.
(b) In the event of a registration of any of the Registrable Shares under
the Securities Act pursuant to Section 3 above, each seller of such Registrable
Shares thereunder, severally and not jointly, will indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the registration
statement, each director of the Company against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities, or actions in respect
thereof, arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Registrable Shares was registered under the Securities Act pursuant
to Section 3 above, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer, director and controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that such seller will be liable hereunder in any such
case if and only to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
information pertaining to such seller, as such, furnished in writing to the
Company by such seller specifically for use in such registration statement or
prospectus; and provided further, however, that the liability of each seller
hereunder shall be limited to the proportion of any such loss, claim, damage,
liability or expense which is equal to the proportion that the public offering
price of the shares sold by such seller under such registration statement bears
to the total public offering price of all securities sold thereunder, but not in
any event to exceed the proceeds
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received by such seller from the sale of Registrable Shares covered by such
registration statement.
(c) Promptly after receipt by a party indemnified hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 6 and shall only relieve it
from any liability which it may have to such indemnified party under this
Section 6 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 6 for any legal expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified parties shall have the
right to select one separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 6 but it is judicially determined, by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal, that such indemnification may not be
enforced in such case, the fact that this Section 6 provides for indemnification
in such case notwithstanding, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
6, then and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject, after contribution from others, in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that in any such case, (x) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Registrable Shares offered by it pursuant to such registration statement;
and (y) no person or entity guilty of fraudulent misrepresentation, within the
meaning of Section 11(f) of the Securities Act, will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
7. Changes in Common Stock. If, and as often as, there is any change in
the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization where the Company is the surviving entity, appropriate
adjustment shall be made in the provisions hereof so that the rights
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and privileges granted hereby to the holders of Registrable Shares shall
continue with respect to the Common Stock as so changed.
8. Representations and Warranties of the Company. The Company represents
and warrants to each other party to this Agreement as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or by-laws of the Company or any
provision of any indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a breach of or
constitute, with due notice or lapse of time or both, a default under any such
indenture, agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company; and
(b) This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms.
9. Rule 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company will
file the reports required to be filed by it, and in the manner required to be
filed by it, under the Securities Act and the Exchange Act (or, if the Company
is not required to file such reports, will, upon the request of any holder of
Registrable Shares, make publicly available other information) and will take
such further action as any holder of Registrable Shares may reasonably request,
all to the extent required from time to time to enable such holder to sell
Registrable Shares without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time (b) any similar rule or regulation
hereafter adopted by the Commission ("Rule 144"). Upon the reasonable request of
any holder of Registrable Shares, the Company will deliver to such holder
written statement as to whether it has complied with such requirements.
10. Miscellaneous. (a) All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not; provided, however, that registration rights
conferred herein on the holders of Registrable Shares shall only inure to the
benefit of a transferee of Registrable Shares if such transferee agrees to be
bound by the provisions of the Warrant and this Agreement.
(b) Except as otherwise expressly provided herein, any notice required or
desired to be served, given or delivered hereunder shall be in writing, and
shall be deemed to have been validly served, given or delivered upon the earlier
of (i) personal delivery to the address set forth below, (ii) in the case of
mailed notice, three (3) days after deposit in the United States mails, with
proper postage for certified mail, return receipt requested, prepaid, or (iii)
in the case of notice by Federal Express or other reputable overnight courier
service, one (1) business day after delivery to such courier service, addressed
to the party to be notified as follows:
if to the Company or the SunAmerica , at the address of such party set
forth in the Warrant Agreement to which it is a party;
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if to any subsequent holder of Registrable Shares, to it at such address
as may have been furnished to the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Registrable Shares) or to
the holders of Registrable Shares (in the case of the Company) in accordance
with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to conflict-of-laws principles
which would require the application of the laws of another jurisdiction.
(d) This Agreement may not be amended or modified, and no provision hereof
may be waived, without the written consent of the Company and the Majority
Holders.
(e) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) The obligations of the Company to register shares of Registrable
Shares under Section 3 above shall terminate on October 31, 2001.
(g) If requested in writing by the underwriters for any underwritten
public offering of securities of the Company, each holder of Registrable Shares
who is a party to this Agreement shall agree not to sell publicly any shares of
Registrable Shares or any other shares of Common Stock (other than shares of
Registrable Shares or other shares of Common Stock being registered in such
offering), without the consent of such underwriters, for a period of not more
than 45 days following the effective date of the registration statement relating
to such offering.
(h) The provisions of Section 4(a) above to the contrary notwithstanding,
the Company's obligation to file a registration statement, or cause such
registration statement to become and remain effective, shall be suspended for a
period not to exceed 90 days in any 12-month period if there exists at the time
material non-public information relating to the Company which, in the reasonable
opinion of the Company, should not be disclosed.
(i) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(j) As used in this Agreement, the masculine, feminine or neutral gender
and the singular or plural number shall be deemed to include the others whenever
the context so indicates or requires.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the date first written above.
AutoInfo, Inc.
By: __________________________
Scott Zecher, President
SunAmerica Life Insurance Company
By: __________________________
Yvonne Stevens, Authorized Agent
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COMMON STOCK PURCHASE WARRANT
Warrant No. S-1
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on October 31, 2001.
WARRANT TO PURCHASE COMMON STOCK OF
AUTOINFO, INC.
FOR VALUE RECEIVED, AUTOINFO, INC., a Delaware corporation, (the
"Company"), hereby certifies that OKGBD & Co., as nominee for SunAmerica Life
Insurance Company, or its permitted assigns, (the "Holder") is entitled to
purchase from the Company, at any time, or from time to time, commencing on the
date hereof, and prior to 5:00 p.m., Eastern Standard Time, on October 31, 2001,
a total of 159,095 (subject to adjustment as provided herein) fully paid and
nonassessable shares of the Common Stock, par value $.01 per share, of the
Company for an aggregate purchase price of $429,556.50 (subject to adjustment as
provided herein). (Hereinafter, (i) said Common Stock, together with any other
equity securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock", (ii) the shares of
the Common Stock purchasable hereunder are referred to as the "Warrant Shares",
(iii) the aggregate purchase price payable hereunder for the Warrant Shares is
referred to as the "Aggregate Warrant Price", (iv) the price payable hereunder
for each of the Warrant Shares is referred to as the "Per Share Warrant Price",
(v) this Warrant, and all warrants hereafter issued in exchange or substitution
for this Warrant, are referred to as the "Warrant" and (vi) the holder of this
Warrant is referred to as the "Holder"). The Per Share Warrant Price is subject
to adjustment as hereinafter provided. Except as otherwise provided in Section
3, in the event of any such adjustment, the number of Warrant Shares shall be
adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price
in effect immediately after such adjustment.
1. Exercise of Warrant. This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on the date hereof (the
"Commencement Date") and prior to 5:00 p.m., Eastern Standard Time, on October
31, 2001, by the Holder of this Warrant by the surrender of this Warrant (with
the subscription form at the end hereof duly executed) at the address set forth
in Subsection 9 (a) hereof, together with proper payment of the Aggregate
Warrant Price, or the proportionate part thereof if this Warrant is exercised in
part. Payment for Warrant Shares shall be made (i) in cash, by certified or
official bank check
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or wire transfer payable to the order of the Company, (ii).by Net-Issue
Exercise (as hereinafter defined), or (iii) by any combination of (i) or (ii). A
"Net-Issue Exercise" means a "cashless" exercise by a holder by delivery of a
subscription form instructing the Company to retain, in payment of the Per Share
Warrant Price (or portion thereof), a number of Warrant Shares (the "Payment
Shares") equal to the quotient of the aggregate Per Share Warrant Price of the
Warrants then being exercised by Net-Issue Exercise divided by the Market Price
(as hereinafter defined) of such shares as of the date of exercise, and to
deduct the number of Payment Shares from the Warrant Shares to be delivered to
such holder If this Warrant is exercised in part, this Warrant must be exercised
for a minimum of 1,000 shares of the Common Stock, and the Holder is entitled to
receive a new Warrant covering the number of Warrant Shares in respect of which
this Warrant has not been exercised and setting forth the proportionate part of
the Aggregate Warrant Price applicable to such remaining Warrant Shares. Upon
such surrender of this Warrant, the Company will issue a certificate or
certificates in the name of the Holder for the largest number of whole shares of
the Common Stock to which the Holder shall be entitled and, (a) in lieu of any
fractional share of the Common Stock to which the Holder shall be entitled, cash
equal to the fair value of such fractional share (determined in such reasonable
manner as the Board of Directors of the Company shall determine), or (b) deliver
a new Warrant for the proportionate part thereof in respect of which this
Warrant has not been exercised, if this Warrant is exercised in part, pursuant
to the provisions of this Warrant.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and in
reserve, free from preemptive rights, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the shares of the Common
Stock as from time to time shall be receivable upon the exercise of the Warrant.
The Company covenants and agrees that all shares of Common Stock which are
issuable hereunder will, upon issuance, be duly authorized and issued, fully
paid and non-assessable.
3. Anti-Dilution Provisions.
(a) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, including options
and other securities convertible into, or exchangeable for Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the Per Share Warrant Price in effect
immediately prior to such action shall be adjusted so that if the Holder
surrendered this Warrant for exercise immediately thereafter the Holder would be
entitled to receive the number of shares of Common Stock or other capital stock
of the Company which he would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this subsection (a) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made pursuant to this
subsection (a), the Holder of this Warrant shall become entitled to receive
shares of two or more classes of capital stock or shares of Common Stock and
other capital stock of the Company, the Board of Directors (whose determination
shall be conclusive and shall be described in a written notice to the Holder of
this Warrant promptly after such adjustment) shall in good faith determine the
allocation of the adjusted Per Share Warrant Price between or among shares of
such classes of capital stock or shares of Common Stock and other capital stock;
provided that the effect thereof does not materially adversely affect the value
of this Warrant.
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(b) In case of any reorganization, consolidation or merger to which the
Company is a party, other than a merger or consolidation in which the Company is
the continuing corporation, or in case of any sale or conveyance to another
entity of the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), the Holder shall have the right thereafter
to convert this Warrant into the kind and amount of securities, cash or other
property which he would have owned or have been entitled to receive immediately
after such reorganization, consolidation, merger, statutory exchange, sale or
conveyance had such Warrant been converted immediately prior to the effective
date of such reorganization, consolidation, merger, statutory exchange, sale or
conveyance and in any such case, if necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Section 3 with
respect to the rights and interests thereafter of the Holder to the end that the
provisions set forth in this Section 3 shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of stock
or other securities or property thereafter deliverable on the conversion of this
Warrant. The above provisions of this subsection (b) shall similarly apply to
successive reorganizations, consolidations, mergers, statutory exchanges, sales
or conveyances. Notice of any such reorganization, consolidation, merger,
statutory exchange, sale or conveyance and of said provisions so proposed to be
made, shall be mailed to the Holder not less than 30 days prior to such event. A
sale of all or substantially all of the assets of the Company for a
consideration consisting primarily of securities shall be deemed a consolidation
or merger for the foregoing purposes.
(c) If the Company shall, at any time after the date hereof issue any
shares of Common Stock, other than Excluded Shares (as defined in subsection (h)
below), for a consideration per share less than the Market Price in effect
immediately prior to such issuance, then (i) the Per Share Warrant Price in
effect immediately prior to each such instance shall forthwith be adjusted to a
price equal to the Per Share Warrant Price then in effect multiplied by the
quotient obtained by dividing (a) an amount equal to the sum of (1) the total
number of shares of Common Stock outstanding on a fully diluted basis
immediately prior to such issuance multiplied by the Market Price in effect
immediately prior to such issuance, plus (2) the consideration received by the
Company upon such issuance, by (b) the total number of shares of Common Stock
outstanding on a fully diluted basis immediately after such issuance multiplied
by the Market Price in effect immediately prior to such issuance, and (ii) the
number of shares of Common Stock then issuable upon the exercise of Warrant
shares outstanding immediately prior to each such issuance shall forthwith be
adjusted by adding a number of shares of Common Stock equal to the product of
(a) the number of shares of Common Stock issuable upon the exercise of Warrant
Shares outstanding immediately prior to such issuance, times (b) the quotient
obtained by dividing (1) an amount equal to the Per Share Warrant Price in
effect immediately prior to such issuance less the Per Share Warrant Price in
effect immediately after such issuance, by (2) the Per Share Warrant Price in
effect immediately after such issuance.
(d) For the purpose of any adjustment of the Per Share Warrant Price
and the number of shares of Common Stock issuable upon exercise of the Warrants
pursuant to the clause (c), the following provisions shall be applicable:
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(i) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash received by the Company
therefor.
(ii) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall be
deemed to be the "fair value" of such consideration as determined in the good
faith judgment of the Board of Directors of the Company.
(iii) In the case of the issuance of (x) options to purchase or rights to
subscribe for Common Stock, (y) securities by their terms convertible into or
exchangeable for Common Stock or (z) options to purchase or rights to subscribe
for such convertible or exchangeable securities:
(1) the aggregate maximum number of shares of Common Stock deliverable
upon exercise of such options to purchase or rights to subscribe for Common
Stock shall be deemed to have been issued at the time such options or rights
were issued and for a consideration equal to the consideration (determined in
the manner provided in subdivisions (i) and (ii) above), if any, received by the
Company upon the issuance of such options or rights plus the minimum purchase
price provided in such options or rights for the Common Stock covered thereby;
(2) the aggregate maximum number of shares of Common Stock deliverable
upon conversion of or in exchange for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration received by the Company for any such securities and related
options or rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be received by
the Company upon the conversion or exchange of such securities or the or the
exercise of any related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (i) and (ii) above);
(3) on any change in the number of shares or exercise price of Common
Stock deliverable upon exercise of any such options or rights or conversions of
or exchange for such convertible or exchangeable securities, other than a change
resulting from the antidilution provisions thereof, the Per Share Warrant Price
and the number of shares of Common Stock issuable upon exercise of the Warrants
shall forthwith be readjusted to such Per Share Warrant Price and to such number
of shares as would have obtained had the adjustment made at the time of the
issuance of such options, rights or securities not converted prior to such
change been made upon the basis of such change; and
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(4) on the expiration of any such options or rights, the termination of
any such rights to convert or exchange or the expiration of any options or
rights related to such convertible or exchangeable securities, the Per Share
Warrant Price and the number of shares of Common Stock issuable upon exercise of
the Warrants shall forthwith be readjusted to such Per Share Warrant Price and
to such number of shares as would have obtained had such options, rights,
securities, or options or rights related to such securities not been issued.
(e) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of the Holder of this
Warrant in accordance with this Section 3, the Company shall promptly prepare a
certificate of an officer of the Company, setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or modification, a
brief statement of the facts requiring such adjustment or modification and the
manner of computing the same and cause a copy of such certificate to be mailed
to the Holder.
(f) If the Board of Directors of the Company shall declare any dividend
or other distribution in cash or property (including securities other than
Common Stock) with respect to the Common Stock, the Company shall mail notice
thereof to the Holder not less than 15 days prior to the record date fixed for
determining shareholders entitled to participate in such dividend or other
distribution.
(g) (i) If any event occurs of the type contemplated by the provisions
of this Section 3 but not expressly provided for by such provisions, the Board
of Directors, or, at the election of holders of a majority of the Warrants, an
appraiser (to be selected by the Board of Directors with the consent of such
holders of Warrants), will determine whether to make appropriate adjustments to
the terms and conditions of the Warrants as may be necessary fully to carry out
the adjustments contemplated by Section 3 hereof.
(ii) the Company will not, by amendment of its Certificate of
Incorporation or by-laws or through any reorganization, transfer of assets,
reclassification, merger, dissolution, issue or sale of securities or otherwise,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by the Company hereunder but will at all times in good
faith assist in the carrying out of all the provisions hereof and in the taking
of all such actions as may be necessary or appropriate in order to protect the
rights of the holders of the Warrants against impairment.
(h) For purposes of this Section 3, "Excluded Shares" shall mean (i)
all shares issued upon (a) exercise or conversion of any other warrants
outstanding on the date hereof, (b) exercise of any options outstanding on the
date hereof, and (c) the issuance of shares of Common Stock or options to
purchase such shares, to officers and employees or former employees of the
Company and its subsidiaries pursuant to any equity incentive plan, agreements
or other arrangements.
(i) Definition of Market Price. "Market Price" shall mean either:
(1) if shares of the Common Stock are listed or admitted to trading on
any exchange or quoted through NASDAQ or any similar organization, the
average
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of the daily closing prices per share of the Common Stock for the 20
consecutive trading days immediately preceding the date of public
announcement of the event giving rise to adjustment under this Section
3 or, if no such public announcement is made with respect to such
event, the average of the daily closing prices per share of the Common
Stock for the 20 consecutive trading days immediately preceding the day
as of the which "Market Price" is being determined. The closing price
of each day shall be the last sale price regular way or, in case no
such sale takes place on such day, the average of the closing bid and
asked prices regular way, in either case on the New York Stock
Exchange, or, if shares of the Common Stock are not listed or admitted
to trading on the New York Stock Exchange, on the principal national
securities exchange or national market on which the shares are listed
or admitted to trading or quoted, or if the shares are not so listed or
admitted to trading or quoted, the average of the highest reported bid
and lowest reported asked prices as furnished by the National
Association of Securities Dealers, Inc. through NASDAQ or through a
similar organization if NASDAQ is no longer reporting such information;
or
(2) if such shares of common Stock are not listed or admitted to
trading on any exchange or quoted through NASDAQ or any similar
organization, such value shall be determined by the Board of Directors
of the Company, in good faith and in the exercise of reasonable
business judgment, without taking into consideration any premium for
share representing control of the Company, any discount for any
minority interest therein or any restrictions on transfer under Federal
and applicable state securities laws or otherwise, which determination
shall be conclusive, and which determination of valuation shall be sent
in writing by the Board of Directors to the registered holders of
Warrants outstanding.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be duly and properly authorized, validly issued and outstanding, fully paid and
non-assessable, and not subject to preemptive rights, and the Company will take
all such actions as may be necessary to assure that the par value or stated
value, if any, per share of the Common Stock is at all time equal to or less
than the then Per Share Warrant Price. The Company further covenants and agrees
that it will pay, when due and payable, any and all Federal and state stamp or
similar taxes that may be payable in respect of the issue of any Warrant Share
or certificate therefor.
5. Transfer.
(a) Securities Laws. Neither this Warrant nor the Warrant Shares
issuable upon the exercise hereof have been registered under the Securities Act,
of 1933, as amended (the "Securities Act"), or under any state securities laws,
and unless so registered, may not be transferred, sold, pledged, hypothecated or
otherwise disposed of unless an exemption from such registration is available.
In the event the Holder desires to transfer this Warrant or any
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of the Warrant Shares issued, the Holder must give the Company prior written
notice of such proposed transfer including the name and address of the proposed
transferee. Such transfer may be made only (i) upon receipt by the Company of an
opinion of counsel reasonably satisfactory to the Company to the effect that the
proposed transfer will not violate the provisions of the Securities Act, as
amended, or the rules and regulations promulgated under either such act; or (ii)
if the Warrant or Warrant Shares to be sold or transferred have been registered
under the Securities Act and there is in effect a current prospectus meeting the
requirements of Subsection 10(a) of the Securities Act, which is being or will
be delivered to the purchaser or transferee at or prior to the time of delivery
of the certificates evidencing the Warrant or Warrant Shares to be sold or
transferred.
(b) Conditions to Transfer. Prior to any such proposed transfer, and as
a condition thereto, if such transfer is not made pursuant to an effective
registration statement under the Securities Act, the Holder will, if requested
by the Company, deliver to the Company (i) an investment covenant signed by the
proposed transferee, (ii) an agreement by such transferee to the impression of
the restrictive investment legend set forth herein on the certificate or
certificates representing the securities acquire by such transferee and (iii) an
agreement by such transferee that the Company may place a "stop transfer order"
with its transfer agent or registrar.
(c) Transfer. Except as restricted hereby, this Warrant and the Warrant
Shares issued may be transferred by the Holder in whole or in part at any time
or from time to time. Upon surrender of this Warrant to the Company or at the
office of its stock transfer agent, if any, with assignment documentation duly
executed and funds sufficient to pay any transfer tax, and upon compliance with
the foregoing provisions, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such instrument of
assignment, and this Warrant shall promptly be canceled. Any assignment,
transfer, pledge, hypothecation or other disposition of this Warrant attempted
contrary to the provisions of this Warrant, or any levy of execution, attachment
or other process attempted upon the Warrant, shall be null and void and without
effect.
(d) Legend and Stop Transfer Orders. Unless the Warrant Shares have
been registered under the Securities Act, or the Company shall have received an
opinion of counsel satisfactory to the Company to the effect that it is not
required, upon exercise of any part of the Warrant and the issuance of any of
the shares of Warrant Shares, the Company shall instruct its transfer agent to
enter stop transfer orders with respect to such shares, and all certificates
representing Warrant Shares shall bear on the face thereof substantially the
following legend, insofar as is consistent with Delaware law:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE
OPINION OF COUNSEL TO THE HOLDER HEREOF IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO COUNSEL TO THE COMPANY, IS EXEMPT FROM REGISTRATION UNDER
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
6. Listing of Common Stock. The Company covenants and agrees for the
benefit of the Holders and each other holder of any Common Stock issued
upon
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exercise of the Warrants, that at the time of and in connection with the
listing of Common Stock on any national securities exchange, it will, at
its expense, use its best efforts to cause the shares of Common Stock
issuable form time to time upon exercise of the Warrants to be approved
for listing, subject to notice of issuance, and will provide prompt notice
to each such exchange of the issuance thereof from time to time.
7. Registration Rights. The Holder has been granted certain registration
with respect to the Common Stock underlying this Warrant as more fully described
in that certain Registration Rights Agreement of even date herewith between the
Holder and the Company.
8. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
9. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
10. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by first-class
mail, postage prepaid, addressed to:
(a) the Company at 1600 Route 208, Fair Lawn, New Jersey 07410, Attn.:
President, or such other address as the Company has designated in writing to the
Holder, or
(b) the Holder at One SunAmerica Center Los Angeles, CA 90067-6022,
Attn.: Yvonne Stevens, or such other address as the Holder has designated in
writing to the Company.
11. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
12. Applicable Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
principles of conflicts of law thereof.
13. Gender and Number. As used in this Warrant, the masculine, feminine or
neuter gender and the singular or plural number shall be deemed to include the
others whenever the context so indicates or requires.
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IN WITNESS WHEREOF, AUTOINFO, INC., has caused this Warrant to be signed
by its President and its corporate seal to be hereunto affixed and attested by
its Assistant Secretary this 11th day of October, 1996.
ATTEST: AUTOINFO, INC.
__________________________ By: __________________________
Kenneth S. Rose Scott Zecher
Assistant Secretary President
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SUBSCRIPTION
The undersigned, _________________________, pursuant to the provisions of the
foregoing Warrant agrees to subscribe for the purchase of ___________________
shares of the Common Stock of AUTOINFO, INC. covered by said Warrant, and makes
payment therefor in full at the price per share provided by said Warrant.
Dated:___________________ Signature: _________________________
Address: _________________________
_________________________
ASSIGNMENT
FOR VALUE RECEIVED _________________________, hereby sells, assigns and
transfers unto _________________ the foregoing Warrant and all rights evidenced
thereby, and does irrevocably constitute and appoint __________________,
attorney, to transfer said Warrant on the books of AUTOINFO, INC.
Dated:___________________ Signature: _________________________
Address: _________________________
_________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby assigns and transfers
unto _______________ the right to purchase _________ shares of the Common Stock
of AUTOINFO, INC. by the foregoing Warrant, and a proportionate part of said
Warrant and the rights evidenced hereby, and does irrevocably constitute and
appoint _________________, attorney, to transfer that part of said Warrant on
the books of AUTOINFO, INC.
Dated:___________________ Signature: _________________________
Address: _________________________
_________________________
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LOAN, SECURITY AND SERVICING AGREEMENT
dated as of December 9, 1996
among
AUTOINFO FINANCE OF VIRGINIA, INC.
as Borrower and as Servicer,
and
CAR LOAN CO., INC., as Borrower and as Servicer,
and
CS FIRST BOSTON MORTGAGE CAPITAL CORP.,
as Lender
================================================================================
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TABLE OF CONTENTS
Page
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ARTICLE I
CERTAIN DEFINITIONS............................ 2
SECTION 1.1. Certain Definitions..................................... 2
ARTICLE II
LOAN PROCEDURES............................. 12
SECTION 2.1. Advances................................................ 12
SECTION 2.2. Promissory Note......................................... 12
SECTION 2.3. Advance Procedure....................................... 12
SECTION 2.4. Recordkeeping........................................... 13
SECTION 2.5. Joint and Several....................................... 13
SECTION 2.6. Certain Waivers......................................... 13
SECTION 2.7. Fees.................................................... 14
ARTICLE III
CONDITIONS............................... 15
SECTION 3.1. Initial Advance......................................... 15
SECTION 3.2. All Advances............................................ 16
SECTION 3.3. Termination of Advance Commitment....................... 18
ARTICLE IV
PRINCIPAL AND INTEREST.......................... 19
SECTION 4.1. Interest................................................ 19
SECTION 4.2. Prepayments............................................. 19
SECTION 4.3. Borrowing Base Deficiency as of a
Determination Date... .............................. 19
SECTION 4.4. Collateral Value Deficiency............................. 19
ARTICLE V
COLLATERAL............................... 20
SECTION 5.1. Grant of Security Interest.............................. 20
SECTION 5.2. Change of Location or Name.............................. 20
SECTION 5.3. Deliveries; Further Assurances.......................... 20
SECTION 5.4. Delivery of Receivable Files............................ 20
SECTION 5.5. Hypothecation or Pledge of Collateral................... 20
ARTICLE VI
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TABLE OF CONTENTS
(continued)
Page
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ACCOUNTS; COLLECTIONS......................... 22
SECTION 6.1. Establishment of Lock-Boxes and
Settlement Accounts................................. 22
SECTION 6.2. Collections............................................. 22
ARTICLE VII
REPRESENTATIONS AND WARRANTIES..................... 23
SECTION 7.1. Representations and Warranties
as to each Borrower................................. 23
SECTION 7.2. Representations and Warranties
Regarding the Receivables........................... 26
SECTION 7.3. Vendor's Single Interest Policy......................... 31
ARTICLE VIII
AFFIRMATIVE COVENANTS.......................... 32
SECTION 8.1. Corporate Existence; Foreign Qualification.............. 32
SECTION 8.2. Books, Records and Inspections.......................... 32
SECTION 8.3. Accounting Methods; Financial Records................... 32
SECTION 8.4. Reporting Requirements.................................. 33
SECTION 8.5. Taxes and Obligations................................... 35
SECTION 8.6. Business................................................ 36
SECTION 8.7. Payments on Receivables................................. 36
SECTION 8.8. Notation of Lien........................................ 36
SECTION 8.9. Further Assurances...................................... 36
SECTION 8.10 Minimum Net Worth....................................... 36
SECTION 8.11 Limitations on Debt..................................... 37
ARTICLE IX
NEGATIVE COVENANTS............................ 38
SECTION 9.1. Liens................................................... 38
SECTION 9.2. Impairment of Rights.................................... 38
SECTION 9.3. Waiver, Amendments, Etc................................. 38
SECTION 9.4. No Mergers.............................................. 38
SECTION 9.5. Insolvency.............................................. 39
SECTION 9.6. Extension or Amendment of Receivables................... 39
SECTION 9.7. Change in Business, Credit Policy or
Servicing Policies.................................. 39
SECTION 9.8. Investments............................................. 39
SECTION 9.9. Negative Pledges........................................ 39
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TABLE OF CONTENTS
(continued)
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ARTICLE X
EVENTS OF DEFAULT....................................... 40
SECTION 10.1. Events of Default.............................. 40
Section 10.1.1 Non-Payment of Advances........................ 40
Section 10.1.2 Non-Payment of Other Amounts................... 40
Section 10.1.3 Events of Bankruptcy........................... 40
Section 10.1.4 Non-Compliance With Provisions................. 40
Section 10.1.5 Representations and Warranties................. 40
Section 10.1.6 Servicer Default............................... 41
Section 10.1.7 Judgments...................................... 41
Section 10.1.8 Litigation..................................... 41
Section 10.1.9 Material Adverse Change........................ 41
Section 10.1.10 Notice of Lien................................. 41
Section 10.1.11 Defaults on Other Indebtedness................. 42
Section 10.1.12 Invalidity of Related Agreements............... 42
Section 10.1.13 Change of Control.............................. 42
Section 10.1.14 Commitment..................................... 42
Section 10.1.15 Effect on Security Interest.................... 42
Section 10.1.16 Failure to Provide Assurance................... 42
Section 10.1.17 Default on Other Agreements.................... 42
Section 10.1.18 Going Concern.................................. 43
Section 10.1.19 Amendment to Credit Policy..................... 43
Section 10.1.20 Amendment to Fee Agreement
with Custodian.............................. 43
Section 10.1.21 Failure to Obtain or Maintain
Vendor's Single Interest Policy............. 43
SECTION 10.2. Effect of Event of Default.............................. 43
SECTION 10.3. Remedies................................................ 43
SECTION 10.4. Application of Proceeds................................. 45
SECTION 10.5. Reimbursement........................................... 45
SECTION 10.6 Power of Attorney.................................. 46
SECTION 10.7 Right of Set-off................................... 47
SECTION 10.8 Rights and Remedies Cumulative..................... 47
ARTICLE XI
SERVICER................................. 48
SECTION 11.1. Representations and Warranties of each Servicer.... 48
SECTION 11.2. Indemnities of Servicer............................ 49
iii
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TABLE OF CONTENTS
(continued)
Page
----
SECTION 11.3. Merger or Consolidation of or Assumption
of the Obligations of a Servicer............... 50
SECTION 11.4. Servicer Not to Resign............................. 50
SECTION 11.5. Fidelity Bond, Errors and Omissions Insurance or Crime
Coverage Insurance........................................... 51
ARTICLE XII
ADMINISTRATION AND SERVICING OF RECEIVABLES........... 52
SECTION 12.1. Duties of Servicer; Standard of Care............... 52
SECTION 12.2. Collection and Allocation of Receivable Payments... 53
SECTION 12.3. Realization Upon Receivables....................... 53
SECTION 12.4. Physical Damage Insurance; Other Insurance......... 53
SECTION 12.5. Maintenance of Security Interests in
Financed Vehicles.............................. 54
SECTION 12.6. Additional Covenants of Servicer................... 54
SECTION 12.7. Monthly Servicing Fee.............................. 54
SECTION 12.8. Monthly Servicing Report. ......................... 54
SECTION 12.9. Semi-Annual Statement as to Compliance;
Notice of Default.............................. 54
SECTION 12.10. Independent Certified Public
Accountant's Report............................ 55
SECTION 12.11. Interim Certified Public
Accountant's Reports........................... 55
SECTION 12.12. Servicer Expenses.................................. 56
SECTION 12.13. Access to Certain Documentation and
Information Regarding Receivables.............. 56
SECTION 12.14. Documents Maintained by Servicer................... 56
ARTICLE XIII
SERVICER DEFAULT............................. 57
SECTION 13.1. Servicer Default................................... 57
SECTION 13.2. Appointment of Successor Servicer.................. 58
SECTION 13.3. Action Upon Certain Failures of the Servicer....... 59
ARTICLE XIV
THE LENDER................................ 60
SECTION 14.1. CSFB's Authority................................... 60
SECTION 14.2. Degree of Care..................................... 60
iv
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TABLE OF CONTENTS
(continued)
Page
----
ARTICLE XV
GENERAL.................................. 61
SECTION 15.1. Survival........................................... 61
SECTION 15.2. Waiver; Amendments................................. 61
SECTION 15.3. Confirmations...................................... 61
SECTION 15.4. Notices............................................ 61
SECTION 15.5. Costs, Expenses and Taxes.......................... 61
SECTION 15.6. Indemnification.................................... 62
SECTION 15.7. FORUM SELECTION AND CONSENT TO
JURISDICTION................................................. 62
SECTION 15.8. Governing Law; Severability........................ 63
SECTION 15.9. JURY TRIAL......................................... 63
SECTION 15.10. Successors and Assigns............................. 63
SECTION 15.11. Headings........................................... 64
v
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SCHEDULES
SCHEDULE 7.1(f) Consents, Licenses, Approvals or Authorizations
SCHEDULE 7.1(k) Ownership of Each Borrower
SCHEDULE 7.1(l) Business Locations; Tradenames
SCHEDULE 7.2(p) Location of Receivable Files
SCHEDULE 11.1(h) Consents, Licenses, Approvals or Authorizations
SCHEDULE I Receivable Information List
SCHEDULE II Names and Address For Communications Between Parties
EXHIBITS
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Borrowing Request
EXHIBIT C Form of Monthly Servicing Report
EXHIBIT D Form of Confirmation Letter
vi
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LOAN, SECURITY AND SERVICING AGREEMENT
--------------------------------------
THIS LOAN, SECURITY AND SERVICING AGREEMENT (this "Agreement"), is
dated as of December 9, 1996, and is entered into among AUTOINFO FINANCE OF
VIRGINIA, INC., a Virginia corporation ("AutoInfo Finance"), CAR LOAN CO., INC.,
a Connecticut corporation ("Car Loan Co.") (AutoInfo Finance and Car Loan Co.
are referred to herein collectively, the "Borrowers" and each a "Borrower"), and
CS FIRST BOSTON MORTGAGE CAPITAL CORP., a New York corporation ("CSFB").
BACKGROUND
----------
1. Each Borrower is a company in the business of purchasing from
Dealers motor vehicle retail financing agreements for new and used automobiles.
2. Each Borrower intends to purchase Receivables (capitalized terms
used herein shall have the meaning assigned thereto in Section 1.1) from Dealers
and desires to obtain from CSFB financing for such purchases of Receivables.
3. CSFB is willing to make Advances to the Borrowers on the terms and
conditions set forth in this Agreement.
4. The Advances made to each Borrower will be secured by all of such
Borrower's right, title and interest in and to, among other things, (a) the
Receivables owned by it and financed with Advances made hereunder and all monies
at any time paid or payable thereon or in respect thereof, (b) the security
interests in the Financed Vehicles granted by Obligors pursuant to the
Receivables, (c) certain insurance proceeds relating to the Financed Vehicles
and the Obligors, (d) the Related Agreements, (e) certain additional property
specified in this Agreement and (f) all income and proceeds of the foregoing.
5. Accordingly, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and subject to the terms and conditions hereof,
the parties hereto agree as follows:
<PAGE>
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1. Certain Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, whenever
capitalized shall have the meanings set forth below. In addition, any
capitalized words and phrases not defined herein shall have the meanings
specified in the Custody Agreement:
"Accepted Servicing Standards" shall have the meaning specified in
Section 12.1.
"Accrued Interest" means, with respect to any Advance as of any day,
an amount equal to the sum of (a) the product of (i) the Applicable Rate for
such Advance, (ii) the principal balance of such Advance outstanding on such day
and (iii) a fraction (A) the numerator of which is the actual number of days
from and including the Advance Date on which such Advance was made to but
excluding the date of determination and (B) the denominator of which is 360,
plus (b) all Accrued Interest with respect to such Advance which was due but not
paid on the immediately preceding Distribution Date (with interest thereon, to
the extent permitted by applicable law, at the Late Payment Rate).
"Advance" shall have the meaning specified in Section 2.1.
"Advance Date" means the date on which an Advance is made by CSFB to a
Borrower.
"Advance Rate Percentage" shall mean, with respect to a Receivable, a
fraction, expressed as a percentage, the numerator of which is the purchase
price paid by the applicable Borrower to the Dealer for such Receivable net of
any fees (including fees paid to the Dealer) and expenses paid by such Borrower
in connection with the acquisition of such Receivable by such Borrower, and the
denominator of which is the Amount Financed under such Receivable.
"Affiliate" of any Person means any Person who directly or indirectly
controls, is controlled by, or is under direct or indirect common control with
such Person. For purposes of this definition of "Affiliate", the term "control"
(including the terms "controlling, "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause a direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Eligible Receivables.
"Agreement" means this Agreement, as the same may be amended and
supplemented from time to time.
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"Amount Financed" means, with respect to a Receivable, the aggregate
amount originally advanced to the Obligor under the Receivable toward the
purchase price of the Financed Vehicle plus any related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
rate of finance charges stated in the Receivable.
"Applicable Cutoff Date" with respect to any Receivable shall have the
meaning specified in the Borrowing Request listing such Receivable in the
Schedule of Receivables.
"Applicable Rate" with respect to each Interest Period commencing
prior to the Commitment Termination Date, shall mean an interest rate equal to
LIBOR plus 3.00% and, with respect to each Interest Period commencing on or
after the Commitment Termination Date, shall mean an interest rate equal to the
Prime Rate plus 3.00% as determined on the Commitment Termination Date.
"Authorized Officers" means any person whose name appears on a list of
Authorized Officers delivered to CSFB, the Borrowers, the Servicers and the
Custodian, as the same may be amended from time to time.
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978, as amended
from time to time, and as codified as 11 U.S.C. Section 101, et seq.
"Borrowing Base" shall mean, as of any date of determination, the
lesser of (i) the product of (x) the weighted average of all Advance Rate
Percentages for all Eligible Receivables and (y) the Aggregate Principal Balance
for all Eligible Receivables and (ii) the Collateral Value of all Eligible
Receivables.
"Borrowing Base Deficiency" shall mean, as of any date of
determination, the amount by which (a) the aggregate principal balance of all
outstanding Advances exceeds (b) the Borrowing Base.
"Borrowing Request" means a request for an Advance delivered pursuant
to Section 2.3 by a Borrower in the form set forth in Exhibit B.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in the City of New York, the State of New York,
the State of Virginia or the State of Connecticut or the State in which the
principal place of business of CSFB or the Borrowers is located shall be
authorized or obligated by law, executive order, or governmental decree to be
closed.
"Casualty" means, with respect to a Financed Vehicle, the total loss
or destruction of such Financed Vehicle as determined by the Servicer.
3
<PAGE>
"Change in Control" means, with respect to each Borrower, either (i) a
change of control or ownership of such Borrower shall have occurred other than
in connection with and as a result of the issuance and sale by such Borrower of
common stock, or (ii) the chief executive officer of such Borrower ceases to be
employed by such Borrower and functioning in such capacity and a successor
reasonably acceptable to CSFB shall not have been immediately employed by such
Borrower and commenced functioning in such capacity; provided, however, that in
the event such chief executive officer ceases to be employed as a result of
death or physical or mental disability, then such Borrower shall have thirty
(30) days from such cessation to employ a successor chief executive officer
reasonably acceptable to CSFB.
"Collateral" shall mean (i) all right, title and interest of each
Borrower in and to the Receivables; (ii) all Liquidation Proceeds received with
respect to such Receivables; (iii) all right, title and interest of each
Borrower in and to the security interests in the Financed Vehicles granted by
Obligors pursuant to the Receivables and any other interest of each Borrower in
the Financed Vehicles, including, without limitation, the certificates of title
with respect to the Financed Vehicles; (iv) all right, title and interest of
each Borrower under any Insurance Policies; (v) all right, title and interest of
each Borrower in and to any proceeds from claims on any physical damage,
repossession loss, credit life and credit accident, vendor's single interest and
health insurance policies or certificates relating to the Financed Vehicles or
the Obligors, if any such policy is in effect; (vi) all right, title and
interest of each Borrower in, to and under the Related Agreements; (vii) all
right, title and interest of Borrower in and to refunds for the costs of
extended service contracts with respect to Financed Vehicles, refunds of
unearned premiums with respect to credit life and credit accident and health
insurance policies or certificates covering an Obligor or Financed Vehicle or
such Obligor's obligations with respect to a Financed Vehicle and any recourse
to Dealers for any of the foregoing; (viii) the Receivable File related to each
Receivable; (ix) all amounts and property from time to time held in or credited
to the Settlement Accounts; (x) all amounts and property from time to time held
in the Lock-Boxes and representing collections on or proceeds of the
Receivables; (xi) the income and proceeds of any and all of the foregoing; and
(xii) all documents, books, records and other information (including, without
limitation, computer programs, tapes, discs, customer lists, credit files,
ledger cards, computer software and hardware, electronic data processing
software, printouts and other computer materials and records) of each Borrower
evidencing or containing information regarding any of the foregoing.
"Collateral Value" shall mean, with respect to a Receivable, the value
of such Receivable as determined in good faith from time to time (but in no
event less frequently than monthly) by CSFB in its sole discretion.
"Collateral Value Deficiency Notice" shall have the meaning assigned
thereto in Section 8.12.
"Collection Period" means, with respect to any Distribution Date, the
calendar month preceding the month in which such Distribution Date occurs.
"Commitment Amount" means One Hundred Million Dollars ($100,000,000).
4
<PAGE>
"Commitment Termination Date" means the earliest to occur of (i) the
Distribution Date occurring in the 36th calendar month following the date of
this Agreement, (ii) at CSFB's or the Borrowers' (on a joint basis) option, the
date on which either CSFB or the Borrowers (on a joint basis) give notice of
termination pursuant to Section 3.3(b), (iii) the date CSFB gives notice of
termination pursuant to Section 3.3(c), and (iv) the date on which termination
occurs or is deemed to occur pursuant to Section 10.2.
"Computer File" means the computer tape or listing generated by or on
behalf of the applicable Borrower which provides information relating to the
Receivables in a format as may be requested by CSFB, including, without
limitation, the information set forth in Schedule I.
"Confirmation" means a confirmation of the terms of a request for an
Advance delivered pursuant to Section 2.3 by the Lender in the form of Exhibit
D.
"Credit Policy" means, with respect to each Borrower, the credit
origination policies or underwriting guidelines of such Borrower, as modified
without violating the terms of this Agreement or as otherwise consented to by
CSFB, delivered by such Borrower to CSFB prior to the date of this Agreement and
from time to time thereafter pursuant to Section 8.4(a)(x).
"Custodian" means Crestar Bank, Richmond, Virginia, a Virginia banking
corporation, or its successors and (to the extent permitted under the Custody
Agreement) assigns as custodian under the Custody Agreement.
"Custodian Fee" means the fee and expenses of the Custodian payable by
the Borrowers in accordance with an existing agreement between the Borrowers and
the Custodian.
"Custodian's Office" means the office of the Custodian, which shall
initially be located at 919 East Main Street, 10th Floor, Richmond, Virginia
23219.
"Custody Agreement" means that certain Custody Agreement dated as of
December 9, 1996 among the Borrowers, CSFB and the Custodian.
"Dealer" means, with respect to a Receivable, any licensed motor
vehicle dealer who sold a Financed Vehicle to an Obligor and who originated such
Receivable that was acquired by a Borrower.
"Dealer Agreement" means an agreement between a Borrower and a Dealer
relating to the sale of motor vehicle retail financing agreements (and
installment notes, if any) pursuant to which such Borrower acquires Receivables
and all documents and instruments relating thereto.
"Dealer Assignment" means, with respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to the applicable
Borrower.
"Defaulted Receivable" means, on any date of determination, any
Receivable with respect to which (i) an Obligor has failed to make a Scheduled
Payment for sixty (60) days or more, (ii)
5
<PAGE>
the Servicer has repossessed the Financed Vehicle, or (iii) such Receivable is
in default and the applicable Servicer has determined in good faith that
payments under such Receivable are not likely to be resumed.
"Determination Date" means, with respect to any Distribution Date, the
third (3rd) Business Day prior to such Distribution Date.
"Distribution Date" means, for each Collection Period, the fifteenth
(15th) day of the following month, or if such day is not a Business Day, the
next following Business Day, commencing on January 15, 1997.
"Eligible Account" means a segregated account that is maintained with
a depository institution acceptable to CSFB.
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed
as to the full and timely payment of principal and interest by, the
United States of America or any agency thereof;
(b) demand deposits, time deposits or certificates of
deposit of any depository institution or trust company incorporated
under the laws of the United States of America or any State thereof
(or any domestic branch of a foreign bank) and subject to supervision
and examination by Federal or State banking or depository institution
authorities; provided, however, that at the time of the investment or
contractual commitment to invest therein, the commercial paper or
other short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person
other than such depository institution or trust company) thereof shall
have a credit rating from each of Moody's and Standard & Poor's in the
highest investment category granted thereby;
(c) commercial paper having, at the time of the investment
or contractual commitment to invest therein, a rating from each of
Moody's and Standard & Poor's in the highest investment category
granted thereby;
(d) bankers' acceptances issued by any depository
institution or trust company referred to in clause (b) above;
(e) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed as to the full and
timely payment by, the United States of America or any agency or
instrumentality thereof the obligations of which are backed by the
full faith and credit of the United States of America, in either case
entered into with (i) a depository institution or trust company
(acting as principal) described in clause (b) or (ii) a depository
institution or trust company whose commercial paper or other short
term and long term unsecured debt obligations are rated not less than
the highest investment category granted by Moody's and Standard &
Poor's;
6
<PAGE>
(f) money market mutual funds registered under the
Investment Company Act of 1940, as amended, having a rating, at the
time of such investment, from each of Moody's and Standard & Poor's in
the highest investment category granted thereby; and
(g) any other investment as may be acceptable to CSFB, as
evidenced by a writing to that effect, as may from time to time be
confirmed in writing to the Custodian by CSFB.
"Eligible Receivable" shall mean, with respect to a Receivable, on any
date of determination, a Receivable that complies in all respects with the
representations and warranties set forth in Section 7.2 and which Receivable is
not a Defaulted Receivable or a Liquidated Receivable.
"ERISA" means the Employee Retirement Income Security Act of 1974,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Event of Bankruptcy" shall be deemed to have occurred with respect to
a Person if either:
(a) a case or other proceeding shall be commenced, without
the application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding
up, or composition or readjustment of debts of such Person, the
appointment of a trustee, receiver, custodian, liquidator, assignee,
sequestrator or the like for such Person or all or any substantial
part of its assets, or any similar action with respect to such Person
under any law relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debts, and such case or
proceeding shall continue undismissed, or unstayed and in effect, for
a period of 60 consecutive days; or an order for relief in respect of
such Person shall be entered in an involuntary case under the federal
bankruptcy laws or other similar laws now or hereafter in effect; or
(b) such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency,
reorganization, debt arrangement, dissolution or other similar law now
or hereafter in effect, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) for such Person or
for any substantial part of its property, or shall make any general
assignment for the benefit of creditors or shall fail to or admit in
writing its inability to pay its debts generally as they become due
or, if such Person is a corporation or similar entity, its board of
directors shall vote to implement any of the foregoing.
"Event of Default" means an event specified in Section 10.1.
"Financed Vehicle" means a new or used automobile, together with all
accessions thereto, securing an Obligor's indebtedness under a Receivable.
7
<PAGE>
"Financial Statements" means the financial statements, documents,
reports and other information delivered pursuant to Section 8.4.
"Guarantor" means AutoInfo, Inc., or any successor thereto.
"Guaranty Agreement" means the guaranty dated as of December 9, 1996,
issued by the Guarantor, AutoInfo, Inc., for the benefit of CSFB.
"Holder" means CSFB and any other person to which CSFB has assigned or
transferred an interest in the Promissory Note, and their respective successors
and assigns.
"Insurance Policy" means, with respect to a Receivable, any insurance
policy (including the insurance policies described in Section 7.2(m)) benefiting
the holder of the Receivable providing loss or physical damage and credit life,
credit disability, theft, mechanical breakdown or similar coverage with respect
to the Financed Vehicle or the Obligor.
"Interest Period" means, with respect to any Advance, the period from
and including the Advance Date with respect to such Advance to but excluding the
next succeeding Distribution Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Late Payment Rate" as of any day shall mean an annual interest rate
equal to three (3) percentage points above the Prime Rate, each change in such
rate to take effect simultaneously with any change in such Prime Rate.
"Lender" means CS First Boston Mortgage Capital Corp. or any successor
or assign thereto.
"LIBOR" means for each Interest Period the offered rate for United
States dollars with a maturity of one month which appears on Dow Jones Telerate
Service page 3750 as of 9:00 A.M. New York City time, on the day that is the
first LIBOR Determination Date of the calendar month in which the Advance Date
occurs; provided, however, that if such rate does not appear on the Dow Jones
Telerate Service page 3750 (or such other page as may replace that page on that
service) or if such service is no longer offered, the rate for United States
dollars with a maturity of one month quoted by such other service as may be
selected by CSFB on each LIBOR Determination Date.
"LIBOR Determination Date" means any day other than a Saturday, Sunday
or any other day on which banking institutions in the City of London, England
are required or authorized by law to be closed.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
8
<PAGE>
"Liquidated Receivable" means, with respect to any date of
determination, a Receivable as to which (i) sixty (60) days have elapsed since
the applicable Servicer repossessed the Financed Vehicle, (ii) the applicable
Servicer has determined in good faith that all amounts it expects to recover
have been received, or (iii) the Financed Vehicle has been sold and the proceeds
received.
"Liquidation Proceeds" means, with respect to a Liquidated Receivable,
the monies collected from whatever source, whether during or after the
Collection Period in which such Receivable became a Liquidated Receivable, net
of the reasonable costs of liquidation plus any amounts required by law to be
remitted to the Obligor; provided that, in no event shall the Liquidation
Proceeds with respect to any Receivable be less than zero.
"Lock-Box" means a segregated post-office box designated as such,
established and maintained pursuant to the applicable Lock-Box Agreement and
identified in Section 6.1(a).
"Lock-Box Agreement" means the agreement dated December 9, 1996,
between the Lock-Box Bank and AutoInfo Finance or the agreement dated December
9, 1996 between the Lock-Box Bank and Car Loan Co., as each agreement may be
amended, modified or supplemented from time to time.
"Lock-Box Bank" means Crestar Bank, Norfolk, Virginia, at which each
Lock-Box is established and maintained, as specified in Section 6.1(a).
"Maximum Advance Amount" means the excess of the Borrowing Base over
the principal balance of all outstanding Advances.
"Minimum Advance Amount" shall mean One Million Dollars ($1,000,000).
"Monthly Servicing Fee" means the fee payable to each Servicer for
services rendered by it during the respective Collection Period, determined
pursuant to Section 12.7.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) in respect of which a Borrower makes contributions
or has liability.
"Obligations" means all obligations of the Borrowers to CSFB arising
under or in connection with this Agreement, the Promissory Note or any other
Related Agreement, in each case, howsoever created, arising or evidenced,
whether direct or indirect, joint or several, joint and several, absolute or
contingent, or now or hereafter existing, or due or to become due, including,
without limitation, interest accruing after the filing of a bankruptcy petition,
whether or not allowed as a claim.
"Obligor" means, with respect to a Receivable, the purchaser or
co-purchasers of the related Financed Vehicle or any other Person who owes or
may be liable for payments under such Receivable.
9
<PAGE>
"Officer's Certificate" means a certificate signed by the chairman of
the board, the president, any vice chairman of the board, any vice president,
the treasurer, the controller or any assistant treasurer or any assistant
controller of a Borrower or a Servicer, as appropriate.
"Opinion of Counsel" means a written opinion of counsel (who may be
counsel to the Borrower or Servicer) which counsel and opinion shall be
acceptable to CSFB in form and substance.
"Pension Plan" means any Plan (other than a Multiemployer Plan)
subject to Title IV of ERISA, which is maintained by a Borrower or in respect of
which such Borrower has liability.
"Person" means any individual, corporation, limited liability company
or partnership, estate, partnership, joint venture, association, joint stock
company, trust, unincorporated organization, or government or any agency or
political subdivision thereof.
"Plan" means an "employee benefit plan" within the meaning of Section
3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the
Internal Revenue Code.
"Potential Event of Default" means an event or circumstance which,
with the giving of notice, the passage of time, or both, would constitute an
Event of Default or Servicer Default.
"Prime Rate" means, with respect to any date of determination, the
daily prime loan rate as reported in The Wall Street Journal as most recently
available as of the date of determination or, if such rate is not published for
any reason, a daily prime loan rate from a comparable financial publication.
"Principal Balance" means, with respect to a Receivable, as of any
date of determination, the Amount Financed minus the sum of the following
amounts determined without duplication, (i) that portion of all amounts received
on or prior to such date and allocable to principal in accordance with the terms
of the Receivable; (ii) any refunded portion of extended warranty protection
plan costs or of physical damage, credit life, or credit accident or health
insurance premiums included in the Amount Financed; and (iii) any prepayment in
full or any partial prepayments applied to reduce the Principal Balance of such
Receivable.
"Promissory Note" has the meaning specified in Section 2.2.
"Rating Agency" shall mean Standard & Poor's and Moody's or any other
nationally recognized rating agency as may be designated by CSFB from time to
time.
"Receivable" means each motor vehicle retail financing agreement or
contract (and any related note or installment note and security agreement) for a
Financed Vehicle which shall appear on Schedule A to any Borrowing Request
(which Schedule A may be in the form of microfiche or computer file) and which
is the subject of this Agreement, and all interest, rights and obligations
thereunder including all proceeds thereof.
10
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"Receivable File" shall have the meaning assigned thereto in the
Custody Agreement.
"Receivable Information List" means the list of Receivables delivered
by a Borrower to the Custodian, substantially in the form of Schedule I, setting
forth categories of information contained in such Schedule I with respect to
each Receivable, possession of which is maintained by the Custodian pursuant to
the terms of the Custody Agreement.
"Related Agreements" shall mean this Agreement, the Promissory Note,
each Dealer Agreement, each Dealer Assignment, the Custody Agreement and each
Lock-Box Agreement.
"Related Collection Period" means, with respect to any date of
determination, the Collection Period most recently ended as of such date.
"Scheduled Payment" means, for any Collection Period for any
Receivable, the amount indicated in such Receivable as required to be paid by
the Obligor in such Collection Period (without giving effect to deferments of
payments pursuant to Section 12.2 or any rescheduling of payments in any
insolvency or similar proceedings).
"Schedule of Receivables" means the list of Receivables attached as
Schedule A to a Borrowing Request.
"Servicer" means AutoInfo Finance of Virginia, Inc., or Car Loan Co.,
Inc., as applicable, and each successor thereto, in the capacity as servicer for
its respective Receivables pursuant to the terms of this Agreement.
"Servicer Default" has the meaning specified in Section 13.1.
"Servicing Policies" means the servicing and collection policies and
procedures of each Servicer delivered to CSFB by the initial Servicers prior to
the date of this Agreement or, if and when applicable, by a successor servicer
prior to the date on which such successor servicer commenced servicing the
Receivables pursuant to this Agreement.
"Servicing Rate" shall be 3.00% per annum.
"Settlement Account" means an account designated as such, established
and maintained pursuant to Section 6.1(b) and the Custody Agreement.
"Standard Poor's" means Standard & Poor's Ratings Services, a Division
of the McGraw Hill Companies.
"State" means any State of the United States of America, or the
District of Columbia.
"Structuring Advisory Fee" means the structuring advisory fee in the
amount of $750,000.00 in consideration of advisory services provided by CSFB to
each of the Borrowers and AutoInfo, Inc., with respect to the advice on the
method of financing Receivables and other sub-
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prime auto loans in their respective portfolios, including, among other
services, advice and consultations regarding structuring options and transaction
costs and valuation reviews.
"Subordinated Debt" shall have the meaning assigned thereto in Section
8.11.
"Trust Receipt" shall have the meaning assigned thereto in the Custody
Agreement.
"UCC" shall mean the Uniform Commercial Code as in effect in the
applicable jurisdiction.
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ARTICLE II
LOAN PROCEDURES
SECTION 2.1. Advances. Subject to the terms and conditions of this
Agreement, CSFB has agreed to make advances (each, an "Advance" and
collectively, the "Advances") to the Borrowers from time to time prior to the
Commitment Termination Date; provided, that (a) the amount of any Advance on an
Advance Date shall not exceed the Maximum Advance Amount, and (b) the aggregate
principal amount of all Advances outstanding to the Borrowers on any day shall
not exceed the Commitment Amount on such Advance Date. Each Advance shall mature
and be payable in full on the Commitment Termination Date. Each Borrower shall
deliver a Borrowing Request in the form of Exhibit B to CSFB and the Custodian
and as specified in Section 2.3 below.
On each Distribution Date the outstanding principal amounts of all
Advances to each of the Borrowers (after giving effect to all principal payments
made on such Advances on such Distribution Date) will be aggregated and
automatically consolidated into a single Advance to the Borrowers (i.e., the
Advance Date with respect to such consolidated Advance (for which no additional
Borrowing Request shall be required) will be such Distribution Date for purposes
of determining the Applicable Rate and calculating Accrued Interest) which will
accrue interest at the Applicable Rate for the related Interest Period.
SECTION 2.2. Promissory Note. The Advances shall be evidenced by a
promissory note issued by the Borrowers (as from time to time supplemented,
extended or replaced, the "Promissory Note"), substantially in the form set
forth in Exhibit A, with appropriate insertions, dated as of the date of this
Agreement, payable to the order of CSFB and its assigns.
SECTION 2.3. Advance Procedure.
(a) A Borrower shall deliver to CSFB and Custodian a Borrowing Request
(in the form of Exhibit B) and a Computer File no later than 12:00 p.m., New
York City time, at least two (2) Business Days prior to the proposed Advance
Date specified in such Borrowing Request. Each Borrowing Request shall be
irrevocable, and shall (i) specify, among other things, (w) the amount of the
proposed Advance, (x) the proposed Advance Date, (y) the aggregate Principal
Balance of the Receivables subject to such Advance as of the Applicable Cutoff
Date, and (z) the weighted average Advance Percentage Rate for such Receivables
and (ii) contain attached thereto a Schedule of Receivables listing such
Receivables. No Advance shall be for an initial aggregate principal amount of
less than the Minimum Advance Amount.
(b) When CSFB determines that the Receivables identified in the
Schedule of Receivables attached to the Borrowing Request are Eligible
Receivables, CSFB will confirm the terms of each Advance by delivering a written
confirmation to the applicable Borrower on or before the related Advance Date,
in the form of Exhibit D (a "Confirmation"). On the terms and subject to the
conditions of the Confirmation and this Agreement, on or before 2:00 p.m., New
York City time, on the Advance Date, CSFB shall, in accordance with the
applicable Borrower's wiring instructions set forth in the related Borrowing
Request, transfer on the same day in
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immediately available funds to the applicable Borrower's account specified in
such Borrowing Request the amount specified in such Confirmation.
(c) Each Borrowing Request made pursuant to this Section 2.3 shall
constitute the applicable Borrower's representation and warranty that all of the
applicable conditions contained in Article III will, after giving effect to such
Advance, be satisfied and be true and correct. A Borrower's acceptance of funds
advanced by CSFB on the Advance Date shall be deemed such Borrower's
acknowledgment of and agreement with such Confirmation, and upon acceptance of
such funds advanced by CSFB, the applicable Borrower shall execute such
Confirmation where provided therein and return the original executed copy of
such Confirmation to CSFB within forty-eight (48) hours following the funding of
such Advance.
(d) Any Confirmation by CSFB shall be deemed to have been received by
the applicable Borrower (i) on the date sent if given by telecopy, telex or
other telecommunication device capable of transmitting or creating a written
record directly to the office of such Borrower, and (ii) on the Business Day
following the day sent if sent by a nationally recognized overnight courier
service.
SECTION 2.4. Recordkeeping. CSFB shall record in its records, or at
its option on a schedule attached to the Promissory Note, the date and amount of
each Advance made hereunder, each repayment thereof, and the other information
provided for thereon. The aggregate unpaid principal amount so recorded shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on the
Promissory Note. The failure so to record any such information or any error in
so recording any such information shall not, however, limit or otherwise affect
the obligations of the Borrowers hereunder or under the Promissory Note to repay
the principal amount of all Advances made to it, together with all interest
accruing thereon, and any other amounts payable hereunder and under any other
Related Agreements.
SECTION 2.5. Joint and Several. The Advances made by CSFB to any of
the Borrowers shall be deemed to be made to the Borrowers jointly and severally
and accordingly shall constitute the joint and several obligations of the
Borrowers. Any obligations of the Borrowers to make payments to CSFB hereunder,
under the Promissory Note and under any other Related Agreements shall be the
joint and several obligations of the Borrowers.
SECTION 2.6. Certain Waivers. Each Borrower hereby waives presentment,
demand for payment, notice of dishonor and protest, notice of the creation of
any of the Obligations and all other notices whatsoever to such Borrower with
respect to the Obligations. The obligations of the Borrowers under this
Agreement, the Promissory Note and the other Obligations shall not be affected
by (i) the failure of CSFB or the holder of the Promissory Note or holders of
any of the Obligations to assert any claim or demand or to exercise or enforce
any right, power or remedy against a Borrower or the Collateral or Guarantor or
otherwise, (ii) any extension or renewal for any period (whether or not longer
than the original period) or exchange of any of the Obligations or the release
or compromise of any obligation of any nature of any Person with respect
thereto, (iii) the surrender, release or exchange of all or any part of any
property (including the Collateral) securing payment and performance of any of
the Obligations or the compromise or extension or
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renewal for any period (whether or not longer than the original period) of any
obligations of any nature of any Person with respect to any such property
(including the Collateral), and (iv) any other act, matter or thing which would
or might, in the absence of this provision, operate to release, discharge or
otherwise affect the obligations of a Borrower.
SECTION 2.7. Fees.
(a) In the event that a Borrower or its parent, AutoInfo,
Inc., does not use or engage CSFB or any of its Affiliates in any
manner with respect to a securitization or other disposition involving
any of the applicable Receivables subject to this Agreement, such
Borrower shall pay, upon release of CSFB's security interest in the
related Receivables, a fee equal to the following (the "Exit Fee"):
(i) if the related Receivables have in the aggregate an outstanding
principal balance of $25,000,000 or less at the time of such release,
the Exit Fee shall be an amount equal to the product of (x) 1.0% and
(y) such outstanding principal balance; (ii) if the related
Receivables have in the aggregate an outstanding principal balance
greater than $25,000,000 but less than or equal to $50,000,000 at the
time of such release, the Exit Fee shall be an amount equal to the
product of (x) .75% and (y) such outstanding principal balance; and
(iii) if the related Receivables have in the aggregate an outstanding
principal balance greater than $50,000,000 at the time of such
release, the Exit Fee shall be .50% of such outstanding principal
balance; provided, however, that in the event CSFB elects to terminate
this Agreement pursuant to Section 3.3(b) or Section 3.3(c), such
Borrower shall not be obligated to pay an Exit Fee upon release of
CSFB's security interest in the related Receivables.
(b) Upon execution of this Agreement, the Borrowers shall
pay to CSFB the Structuring Advisory Fee in immediately available
funds in accordance with the wire instructions provided by CSFB. The
Structuring Advisory Fee is non-refundable.
(c) In the event a Borrower or its parent, AutoInfo, Inc.,
uses or engages CSFB or any of its Affiliates as lead manager in a
securitization transaction or other disposition involving the
applicable Receivables subject to this Agreement, such parties shall
enter into a separate agreement and a securitization fee arrangement
referred to and set forth in the letter dated October 31, 1996 between
CSFB and AutoInfo, Inc.
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ARTICLE III
CONDITIONS
SECTION 3.1. Initial Advance. The effectiveness of this Agreement and
the obligation of CSFB to make the initial Advance to each Borrower shall be
subject to the delivery of each of the following documents, on or prior to such
effectiveness, in form and substance satisfactory to CSFB:
(a) Promissory Note. The Promissory Note duly executed by
the Borrowers in an original maximum principal amount equal to the
Commitment Amount;
(b) Organizational Documents. The articles of incorporation
of each Borrower, each duly certified by the Secretary of State of the
jurisdiction of its formation together with a copy of the bylaws of
each Borrower, each duly certified by the Secretary or an Assistant
Secretary of each Borrower;
(c) Resolutions. Copies of resolutions of the Board of
Directors of each Borrower authorizing or ratifying the execution,
delivery and performance of this Agreement, the Promissory Note, the
Custody Agreement and those documents and matters required of it with
respect thereto, duly certified by the Secretary or Assistant
Secretary of each Borrower;
(d) Consents. Certified copies of all documents evidencing
any necessary corporate action, consents and governmental approvals
(if any) with respect to this Agreement;
(e) Incumbency and Signatures. A certificate of the
Secretary or an Assistant Secretary of each Borrower certifying the
names of the individual or individuals authorized to sign this
Agreement, the Promissory Note and the other Related Agreements to be
executed by such party, together with a sample of the true signature
of each such individual (CSFB may conclusively rely on each such
certificate until formally advised by a like certificate of any
changes therein);
(f) Opinions of Counsel. Opinions of Counsel from counsel to
the Borrowers acceptable to CSFB covering such matters as CSFB shall
reasonably request and satisfactory in form and substance to CSFB;
(g) Good Standing Certificates. Certificates of good
standing for each Borrower in the jurisdiction of its organization and
the jurisdiction of its principal place of business;
(h) Search Reports. A written search report from a Person
satisfactory to CSFB listing all effective financing statements that
name each Borrower as debtor or assignor and that are filed in the
jurisdictions in which filings were made pursuant to subsection (i)
below, together with copies of such financing statements, and tax and
judgment lien search
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reports from a Person satisfactory to CSFB showing no evidence of any
tax or judgment liens filed against each Borrower;
(i) Evidence. With respect to Receivables that are chattel
paper, evidence of the filing of proper financing statements on Form
UCC-1 with the State of Virginia and the State of Connecticut, as
applicable, each indicating the Receivables as collateral, each
executed by the applicable Borrower and each naming the applicable
Borrower as debtor and CSFB as secured party, or other similar
instruments or documents, as may be necessary or, in the reasonable
opinion of CSFB, desirable under the UCC of all applicable
jurisdictions to perfect the interest of CSFB in the Collateral;
(j) No Material Adverse Change. A certificate of the chief
financial officer of each Borrower certifying that since March 31,
1996, there has been no material adverse change in the financial
condition, business or results of operations of each such Borrower;
(k) Establishment of Settlement Accounts; Lock-Boxes.
Evidence, in form and substance satisfactory to CSFB, that (i) the
Settlement Accounts have been established by the Custodian in
accordance with the terms of this Agreement, the Custody Agreement and
the applicable Lock-Box Agreements, (ii) the Lock-Boxes have been
established with the applicable Lock-Box Banks in accordance with the
applicable Lock-Box Agreements, and (iii) the applicable Lock-Box
Agreements, in form and substance satisfactory to CSFB, have been
executed and delivered by the parties thereto;
(l) Payment of Fees. The Borrowers shall have paid to CSFB
the Structuring Advisory Fee in accordance with Section 2.7(b);
(m) Warrant. A Warrant Agreement, in form and substance
satisfactory to CSFB, shall have been executed and delivered by
AutoInfo, Inc.;
(n) Custody Agreement. A Custody Agreement to cover the
Receivables, in form and substance satisfactory to CSFB, shall have
been executed and delivered by the parties thereto; and
(o) Consent and Release. Each Borrower shall have obtained:
(i) a consent of FINOVA Capital Corporation ("FINOVA") to (x) the
execution, delivery and performance by each Borrower of this Agreement
and the other Related Agreements and (y) the execution, delivery and
performance of AutoInfo, Inc. of the Guaranty; and (ii) a release of
FINOVA's security interest in Receivables pledged or to be pledged to
CSFB under this Agreement, in form and substance satisfactory to CSFB.
SECTION 3.2. All Advances. All Advances (including the initial
Advance) shall be subject to the further conditions precedent that:
(a) CSFB shall have received (i) from the applicable
Borrower a completed Borrowing Request and Computer File and (ii) from
the Custodian a Trust Receipt
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containing the Custodian's certification described therein and in the
form attached to the Custody Agreement;
(b) prior to the delivery of the Borrowing Request to CSFB,
the applicable Borrower shall have delivered to the Custodian in
accordance with the terms hereof and the Custody Agreement, the
Borrowing Request, the Receivable File and related Computer File with
respect to each Receivable listed on the Schedule of Receivables
attached to the applicable Borrowing Request; and
(c) on the date of such Advance, the following statements
shall be true and correct, and the applicable Borrower, by accepting
the amount of such Advance, shall be deemed to have represented and
warranted that:
(i) the representations and warranties contained
in Section 7.1 with respect to such Borrower are true and
correct in all material respects (to the extent that any
such representation or warranty does not incorporate a
materiality limitation in its terms) on and as of such date
or dates as are set forth in Sections 7.1, which
representations and warranties shall survive as specified
therein;
(ii) the representations and warranties contained
in Section 7.2 are true and correct in all respects on and
as of such date or dates as set forth in Section 7.2, which
representations and warranties shall survive as specified
therein;
(iii) no Potential Event of Default, Event of
Default, Servicer Default, or Borrowing Base Deficiency has
occurred which is continuing and would remain in existence
after, or would result from, the making of such Advance or
from the application of the proceeds of such Advance;
(iv) no selection procedures adverse to the
interest of CSFB shall have been utilized in selecting the
Receivables;
(v) the Commitment Termination Date shall not have
occurred;
(vi) all collections received by the applicable
Borrower or the applicable Servicer on or after the
Applicable Cutoff Date with respect to the Receivables shall
have been deposited into the applicable Settlement Account;
(vii) the Applicable Cutoff Date with respect to
the Receivables shall be no more than ten (10) Business Days
prior to the Advance Date;
(viii) CSFB shall have received payment of all its
fees and reimbursement for all its out-of-pocket costs
incurred in connection with entering into or enforcing this
Agreement, including reasonable attorneys fees, provided
that CSFB has delivered to the Borrowers an invoice therefor
setting forth the amounts payable in reasonable detail;
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(ix) such Advance shall be for an amount at least
equal to the Minimum Advance Amount;
(x) the aggregate amount of all Advances
outstanding to the Borrowers at any one time shall not
exceed the Commitment Amount; and
(xi) CSFB shall have received such other documents
and instruments, and the Borrowers and the Servicers shall
have taken all such other actions and delivered all such
other instruments, documents and agreements as CSFB shall
reasonably request.
SECTION 3.3. Termination of Advance Commitment.
(a) The commitment by CSFB to advance to the Borrowers hereunder shall
terminate on the Commitment Termination Date, whereupon the Promissory Note and
all other Obligations shall become immediately due and payable.
(b) The Borrowers (acting jointly) and CSFB each shall have the option
("Termination Option") to terminate in whole on December 9, 1997 (the "First
Termination Date") or on December 9, 1998 (the "Second Termination Date") the
commitment by CSFB to advance hereunder, unless such commitment is terminated
earlier in accordance with the terms of this Agreement. The Borrowers (acting
jointly) or CSFB may exercise their respective Termination Option only upon
delivery to the party not exercising its Termination Option a written notice at
least fifteen (15) Business Days prior to the First Termination Date or the
Second Termination Date, as the case may be. In the event CSFB and the Borrowers
(acting jointly) do not exercise their respective Termination Option prior to
the First Termination Date, CSFB and the Borrowers (acting jointly) shall still
have the right to exercise their respective Termination Option with respect to
the Second Termination Date.
(c) Notwithstanding anything to the contrary contained herein, CSFB
shall at any time have the right, exercised by written notice to the Borrowers,
to terminate in whole or in part its commitment to advance hereunder if it
determines in good faith, in its sole discretion, that there is no financing
available to CSFB.
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ARTICLE IV
PRINCIPAL AND INTEREST
SECTION 4.1. Interest. Each Borrower shall pay interest, at the
Applicable Rate in effect from time to time, on the unpaid principal amount of
each Advance for the period commencing on the date such Advance is made to such
Borrower until such Advance is paid in full. Interest will be calculated on the
basis of the actual number of days in the related Interest Period and a 360 day
year and will be payable on each Distribution Date.
SECTION 4.2. Prepayments. Each Borrower shall be entitled to prepay
any outstanding Advance (plus Accrued Interest thereon) in whole or in part on
any Business Day specified by such Borrower with at least seven (7) Business
Days' prior written notice to CSFB, provided that such Borrower prepays such
outstanding Advance in whole or in part on such Business Day, provided, further
that each prepayment shall be subject to payment by such Borrower on such
Business Day of an Exit Fee in accordance with the terms and conditions of
Section 2.7(a), which Exit Fee shall be separate and in addition to any such
prepayment amounts. The amounts so prepaid (excluding any Exit Fee) shall be
applied to Accrued Interest and other charges accrued on such Advances to the
day such prepayment shall have been received by CSFB, in such order as CSFB
shall determine in its sole discretion, and then to the outstanding principal
amounts of such Advances.
SECTION 4.3. Borrowing Base Deficiency as of a Determination Date. If,
on a Determination Date, a Borrowing Base Deficiency exists as of such
Determination Date, then, on the next succeeding Distribution Date the amount of
such Borrowing Base Deficiency shall be satisfied out of the Settlement Accounts
in accordance with the terms of the Custodial Agreement.
SECTION 4.4. Collateral Value Deficiency. If CSFB, at any time other
than on a Determination Date, determines, in its sole discretion, that the
Collateral Value of the Receivables in the aggregate is less than the product of
(x) the aggregate weighted average of all Advance Rate Percentages for all such
Receivables and (y) the aggregate Principal Balance of all such Receivables
("Collateral Value Deficiency"), the Borrowers shall, upon receipt of notice
("Collateral Value Deficiency Notice") from CSFB of a Collateral Value
Deficiency, transfer to CSFB, as additional Collateral, either cash or
additional Eligible Receivables in the amount equal to the amount of such
Collateral Value Deficiency specified in such notice prior to 4:00 p.m. New York
City time on the date of such notice, provided such notice is given to the
Borrowers at or prior to 1:00 p.m. New York City time; provided, further, that
if such notice is given after 1:00 p.m. New York City time, the Borrowers shall
transfer such cash or additional Eligible Receivables prior to 4:00 p.m. New
York City time on the Business Day immediately following the date of such
notice.
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ARTICLE V
COLLATERAL
SECTION 5.1. Grant of Security Interest. As security for the prompt
and complete repayment of the principal of and interest on the Advances and the
performance of the Obligations hereunder, each Borrower hereby grants to CSFB a
continuing, first-priority security interest in all of such Borrower's right,
title and interest in and to each item constituting the Collateral whether now
owned or hereafter acquired.
SECTION 5.2. Change of Location or Name. So long as any of the
Obligations shall remain outstanding or the Commitment Termination Date shall
not have occurred, each Borrower will not change (a) the location of its
principal place of business, chief executive office or its consolidated records
concerning its business and financial affairs, or (b) its legal name or the name
under or by which it conducts its business, in each case without first giving
CSFB at least thirty (30) days' advance written notice thereof and having taken
any and all actions required to maintain and preserve the first priority
perfected Lien of CSFB on the Collateral, as evidenced by an Opinion of Counsel
satisfactory to CSFB; provided, however, that notwithstanding the foregoing,
each Borrower shall not change the location of its principal place of business,
chief executive office or its consolidated records concerning its business and
financial affairs to any place in Louisiana or outside the United States of
America.
SECTION 5.3. Deliveries; Further Assurances. Each Borrower agrees that
it will, at its sole expense, (i) immediately deliver or cause to be delivered
to the Custodian, in due form for transfer, all securities, chattel paper,
instruments and documents, if any, at any time representing all or any of the
Collateral, including the Receivable File pursuant to Section 5.4, and (ii)
execute and deliver, or cause to be executed and delivered to the Custodian in
due form for filing or recording (and pay the cost of filing or recording the
same in all public offices reasonably deemed necessary or advisable by such
Borrower or CSFB), such assignments, security agreements, mortgages, consents,
waivers, financing statements, and other documents, and do such other acts and
things, all as may from time to time be reasonably necessary or desirable to
establish and maintain to the satisfaction of CSFB a valid first priority
perfected Lien on and security interest in all of the Collateral now or
hereafter existing or acquired to secure payment and performance of the
Obligations.
SECTION 5.4. Delivery of Receivable Files. Prior to the delivery of a
Borrowing Request and each Advance, the applicable Borrower shall transfer and
deliver to the Custodian at the Custodian's Office the Receivable File for each
Receivable listed on the applicable Schedule of Receivables, to be held by the
Custodian as the bailee of and on behalf of CSFB. As of the making of each
Advance, all blanks on any form shall have been properly filled in and each form
shall have otherwise been correctly prepared. Notwithstanding the above, the
originals of the complete Receivable File for each Receivable shall be in the
possession of the Custodian. Each Servicer shall hold all other documents with
respect to the Receivables as custodian for CSFB in accordance with Section
12.14.
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SECTION 5.5. Hypothecation or Pledge of Collateral. Nothing in this
Agreement shall preclude CSFB from transferring, pledging, repledging,
hypothecating, or rehypothecating any of the Collateral, but no such transaction
shall relieve CSFB of its obligations to the applicable Borrower under this
Agreement or the Custody Agreement with respect to the Collateral or impair the
Borrower's right to obtain the Collateral as provided herein.
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ARTICLE VI
ACCOUNTS; COLLECTIONS
SECTION 6.1. Establishment of Lock-Boxes and Settlement Accounts.
(a) Lock-Boxes. (i) AutoInfo Finance of Virginia, Inc.
has established a Lock-Box with Crestar Bank, Norfolk, Virginia, as a
Lock-Box Bank.
(ii) Car Loan Co., Inc. has
established a Lock-Box with Crestar Bank, Norfolk, Virginia, as a
Lock-Box Bank.
(b) Settlement Accounts. Each Borrower shall establish with
the Custodian in accordance with the terms of the Custody Agreement a
separate Settlement Account for the benefit of CSFB, which each such
Settlement Account shall be an Eligible Account.
SECTION 6.2. Collections. Each Servicer shall make diligent and
reasonable efforts to collect all payments called for under the terms of the
Receivables as and when the same shall become due and payable consistent with
the terms of such Receivables and this Agreement and in accordance with the
Accepted Servicing Standards. On each Business Day, pursuant to and in
accordance with the applicable Lock-Box Agreement, the applicable Lock-Box Bank
shall transfer any payments from Obligors and other payments in respect of the
Collateral received in such Lock-Box to the applicable Settlement Account. In
addition, each Servicer and each Borrower shall remit directly into the
applicable Settlement Account all payments by or on behalf of the Obligors
received by such Servicer or such Borrower, as applicable, with respect to the
Receivables and other Collateral, and all Liquidation Proceeds and other
recoveries as soon as practicable after receipt thereof (but in any event no
later than one (1) Business Day following receipt thereof.) Each Servicer shall
cause all collections on the Receivables financed with the proceeds of Advances
to be identified to the Receivables to which such collections respectively
relate, and posted in the records of such Servicer accordingly, as soon as
practicable but not later than the second (2nd) Business Day following receipt
thereof by such Servicer.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties as to each Borrower. To
induce CSFB to enter into this Agreement and to make Advances hereunder, each
Borrower hereby makes and shall be deemed to have made the following
representations and warranties to CSFB as to such Borrower as of the execution
and delivery of this Agreement, as of each day during the term of this Agreement
and as of the making of each Advance to such Borrower, which representations and
warranties shall survive the making of each such Advance and shall continue
until this Agreement is terminated.
(a) Due Organization; Qualification; Power and Authority.
Each Borrower (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of the jurisdiction
of its incorporation, (ii) is duly qualified to do business as a
foreign corporation and in good standing under the laws of each
jurisdiction where the character of its property, the nature of its
business or the performance of its obligations make such qualification
necessary, and (iii) has all corporate powers and authorizations and
all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted and for purposes of
the transactions contemplated by this Agreement and the other Related
Agreements.
(b) Due Authorization. The execution, delivery and
performance of each of the Related Agreements by each Borrower are
within its corporate powers and have been duly authorized by all
necessary corporate action and do not require any additional approvals
or consents or other action by or any notice to or filing with any
Person.
(c) Noncontravention. None of the execution and delivery of
the Related Agreements by each Borrower, the consummation of the
transactions contemplated thereby or the satisfaction of the terms and
conditions of the Related Agreements (i) contravenes, conflicts with,
or results in any breach or violation of any provision of the articles
or certificate of incorporation or by-laws of such Borrower or any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination, or award currently in effect having applicability to
such Borrower, or any of its properties, including regulations issued
by an administrative agency or other governmental authority having
supervisory powers over such Borrower, (ii) constitutes a default by
such Borrower under or a breach of any provision of any loan or credit
agreement, mortgage, indenture or other agreement or instrument to
which such Borrower or any of its Affiliates is a party or by which it
or any of its properties is or may be bound or affected, or (iii)
results in or requires the creation of any lien upon or in respect of
any of the assets of such Borrower or any of its Affiliates except as
otherwise expressly contemplated by this Agreement or any other
Related Agreement.
(d) Valid and Binding Obligations. Each of the Related
Agreements to which each Borrower is a party when executed and
delivered by such Borrower will constitute
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the legal, valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforceability of creditors' rights generally, and general
equitable principles.
(e) Legal Proceedings. There is no action, suit, proceeding
or investigation pending or, to the knowledge of each Borrower,
threatened, before any court, regulatory body, administrative agency,
or other governmental instrumentality having jurisdiction over such
Borrower or its properties that, if adversely determined would
materially and adversely affect the financial condition, operations or
business prospects of such Borrower or any of its Affiliates or would
adversely affect any Receivable.
(f) No Consents. Except as set forth in Schedule 7.1(f), no
consent, license, approval or authorization from, or registration,
filing or declaration with, any regulatory body, administrative
agency, or other governmental instrumentality, nor any consent,
approval, waiver or notification of any creditor, lessor or other
nongovernmental person, is required in connection with the execution,
delivery and performance by each Borrower of this Agreement or of any
other Related Agreement.
(g) Accuracy of Information. There is no fact known to each
Borrower which has a reasonable likelihood of causing a material
adverse effect with respect to such Borrower and its financial
condition or of causing an adverse effect with respect to the
Receivables. None of the documents or information prepared by or on
behalf of each Borrower and provided by such Borrower to CSFB relating
to such Borrower or its financial condition (A) contain any statement
of material fact with respect to such Borrower or its financial
condition that was untrue or misleading in any respect when made or
(B) omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. Since the
furnishing of such documents or information, there has been no change,
nor any development or event involving a prospective change known to
each Borrower, that would render any such documents or information
untrue or misleading in any material respect.
(h) Employee Benefit Plans. During the twelve consecutive
month period prior to (x) the date of this Agreement and (y) the
applicable Advance Date, (i) no steps have been taken by the Pension
Benefit Guaranty Corporation, each Borrower or to the knowledge of
such Borrower, by any Person, to terminate any Pension Plan (other
than a Pension Plan with no unfunded benefit liabilities on a
termination basis); and (ii) no contribution failure has occurred with
respect to any Pension Plan maintained by each Borrower sufficient to
give rise to a lien under Section 302(f)(1) of ERISA in connection
with such Pension Plan; and (iii) no condition exists or event or
transaction has occurred with respect to any Plan which could
reasonably be expected to result in the incurrence by each Borrower of
liabilities, fines or penalties in an amount that is reasonably likely
to have a materially adverse effect on the ability of such Borrower to
perform its obligations under this Agreement or the Promissory Note,
or the other Related Agreements.
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(i) Financial Statements. The Financial Statements of each
Borrower, copies of which have been furnished to CSFB, (i) present
fairly the financial condition and results of operations of each of
the Borrowers as of the dates and for the periods indicated and (ii)
have been prepared in accordance with generally accepted accounting
principles consistently applied, except as noted therein (subject as
to interim statements to normal year-end adjustments). Since the date
of the most recent Financial Statements, there has been no material
adverse change in such financial condition or results of operations.
Except as disclosed in the Financial Statements or otherwise disclosed
to CSFB in writing, neither of the Borrowers is subject to any
contingent liabilities or commitments that, individually or in the
aggregate, if made absolute would have a material adverse effect in
respect of such Borrower and its business or operations.
(j) Use of Proceeds. The proceeds of the Advances will be
used by each Borrower solely to purchase Eligible Receivables from
Dealers.
(k) Ownership of Borrower. Except as set forth on Schedule
7.1(k), each Borrower has no subsidiaries and owns no capital stock
of, or other interest in, any other Person. Each Borrower is a
wholly-owned subsidiary of AutoInfo, Inc.
(l) Business Locations: Trade Names. Schedule 7.1(l) lists
(i) where each Borrower maintains its chief executive office,
principal place of business, and the location of its consolidated
business and financial records, and (ii) each Borrower's legal name
and each name under or by which each Borrower conducts its business.
(m) Taxes. Each Borrower has filed all tax returns which
have been required to be filed by it, and has paid or provided
adequate reserves for the payment of all taxes, including, without
limitation, all payroll taxes and federal and state withholding taxes,
and all assessments payable by it that have become due, other than
those that are not yet delinquent or that are being contested in good
faith by appropriate proceedings and with respect to which adequate
reserves have been established, and are being maintained, in
accordance with generally accepted accounting principles.
(n) Solvency; Fraudulent Conveyance. Each Borrower is
solvent and will not be rendered insolvent by the transfer, assignment
and pledge of the Receivables hereunder and pursuant hereto, and,
after giving effect to any such transfer, assignment or pledge, each
Borrower will not be left with an unreasonably small amount of capital
with which to engage in its business. Each Borrower does not intend to
incur, or does not believe that it has incurred, debts beyond its
ability to pay such debts as they mature. Each Borrower is not
contemplating the commencement of insolvency, bankruptcy, liquidation
or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of
such Borrower or any of its assets.
(o) Investment Company Act. Each Borrower is not registered
or required to be registered under the Investment Company Act of 1940,
as amended, and each Borrower
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is not controlled by an "investment company" registered or required to
be registered under the Investment Company Act.
(p) Compliance With Law, Etc. No practice, procedure or
policy employed or proposed to be employed by each Borrower in the
conduct of its business violates any law, regulation, judgment,
agreement, order or decree applicable to it which, if enforced, would
result in a material adverse effect upon such Borrower.
(q) Independent Entity. Each Borrower is a separate and
independent corporate entity from the custodian named in the Custody
Agreement; each Borrower does not own a controlling interest in such
custodian either directly or through Affiliates; and no director or
officer of such Borrower is also a director or officer of such
custodian.
SECTION 7.2. Representations and Warranties Regarding the Receivables.
To induce CSFB to enter into this Agreement and to make Advances hereunder and
thereunder, each Borrower hereby makes and shall be deemed to have made the
following representations and warranties to CSFB with respect to each Receivable
transferred, assigned and pledged by it as of each Advance Date and as of each
date thereafter, which representations and warranties shall survive the making
of each Advance and the transfer, assignment and pledge of such Receivable and
shall continue until this Agreement is terminated:
(a) Characteristics of Receivables. Each Receivable (1) has
been originated in the United States of America by a Dealer for the
retail sale of a Financed Vehicle in accordance with the applicable
Credit Policy in the ordinary course of the Dealer's business, and
such Dealer had all necessary licenses and permits to originate
Receivables in the state where the Dealer is located; (2) is evidenced
by a retail installment sales agreement or contract which has been
fully and properly executed by the parties thereto and has been
purchased or otherwise originated by the Dealer in connection with the
sale of Financed Vehicles by such Dealer, without any fraud or
misrepresentation on the part of the Dealer or on the part of the
Obligor; (3) has created a valid, perfected, subsisting, and
enforceable first priority security interest in favor of the Dealer
with respect to such Receivable in the Financed Vehicle, which
security interest has been validly assigned by the Dealer to the
applicable Borrower, which in turn has validly assigned such security
interest to CSFB as security for the Obligations; (4) contains
customary and enforceable provisions such that the rights and remedies
of the holder or assignee thereof shall be adequate for realization
against the Collateral or the benefits of the security; (5) is a fully
amortizing Receivable which provides for level monthly payments that
fully amortize the Amount Financed over the original term (except for
the first or the last payment, which may be different from the level
payment) and yields interest at the Annual Percentage Rate; (6) is
denominated and payable only in U.S. Dollars in the United States of
America; (7) provides for, in the event that such Receivable is
prepaid by the Obligor, a prepayment that fully pays the Principal
Balance and to the extent permitted by applicable law, includes a full
month's interest, in the month of prepayment, at the Annual Percentage
Rate; (8) has a remaining maturity, as of the Advance Date, of at
least twelve (12) months but not more than sixty (60) months;
provided, however, that with respect to the initial Advance to each
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Borrower hereunder, such Receivable may have a remaining maturity of
less than twelve (12) months; (9) has an original maturity of at least
twelve (12) months but not more than sixty (60) months; (10) has an
unpaid Principal Balance, as of the Advance Date, of at least $3,500
and not more than $25,000; provided, however, that with respect to the
initial Advance to each Borrower hereunder, such Receivable may have
an unpaid Principal Balance that is less than $3,500 as of the initial
Advance Date; (11) bears interest at a fixed rate and has an Annual
Percentage Rate of at least 10.50%; and (12) is not more than
fifty-nine (59) days past due as of the Advance Date.
(b) Other Characteristics of Receivables. With respect to
each Receivable (1) no funds have been advanced by each Borrower, each
Servicer, any Dealer, or anyone acting on behalf of any of them in
order to cause such Receivable to qualify under clause (12) of Section
7.2(a) above; (2) the Amount Financed did not exceed 125% of the sum
of (x) the retail value indicated for the related Financed Vehicle in
the National Automobile Dealers Association's Guide on Retail and
Wholesale Values and (y) taxes and such costs, fees and other amounts
associated with titling and licensing of such Financed Vehicle and
warranties and customary insurance policies purchased by the related
Obligor; and (3) the Advance Rate Percentage was equal to or greater
than 80% and equal to or less than 95%.
(c) Schedule of Receivables. The information with respect to
the Receivables set forth in the applicable Schedule of Receivables,
including the Receivable Information List, is true and correct in all
respects as of the close of business on the applicable Advance Date
and each such Receivable is an Eligible Receivable.
(d) Compliance with Law. Each Receivable, the sale of the
Financed Vehicle and, to the extent sold by the Dealer or any
Affiliate thereof, the sale of any physical damage, credit life and
credit accident and health insurance and any extended service
contracts at the time each of the above was originated or made
complied with and each of the above currently complies with all
requirements of applicable Federal, State, and local laws, and
regulations thereunder including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, State
adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code, and other consumer credit laws and equal credit
opportunity and disclosure laws and no party to the contract
evidencing such Receivable is in violation of any such law, rule or
regulation in any respect if such violation would impair the
collectibility of such Receivable.
(e) No Government Obligor. No Receivable is due from the
United States of America or any State or from any agency, department,
subdivision or instrumentality of the United States of America or any
State.
(f) Good Title; Valid Transfer; Absence of Liens; Security
Interest. No Receivable has been sold, transferred, assigned or
pledged by the applicable Borrower to
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any Person other than CSFB. Immediately prior to the transfer,
assignment and pledge of such Receivable to CSFB pursuant hereto, such
Borrower was the owner of, and had good, indefeasible and marketable
title to such Receivable free and clear of any security interest,
lien, charge, pledge, preference, equity or encumbrance of any kind,
including, but not limited to, tax liens, mechanic's liens and any
liens that attach by operation of law, and restrictions on
transferability, and had full right, corporate power and lawful
authority to assign, transfer and pledge such Receivable. This
Agreement constitutes a valid pledge and grant of security interest in
the Receivable to CSFB enforceable against creditors of and purchasers
of either Borrower and CSFB shall have a valid and perfected first
priority security interest in such Receivable free and clear of any
security interest, lien charge, pledge, preference, equity or
encumbrance of any kind, including, but not limited to, tax liens,
mechanic's liens and any liens that attach by operation of law, and
restrictions on transferability. No Dealer has a participation in, or
other right to receive, proceeds of such Receivable. Neither Borrower
has taken any action to convey any right to any Person that would
result in such Person having a right to payments due or received under
the related Insurance Policies or the related Dealer Agreements or
Dealer Assignments or to payments due under such Receivables or
otherwise to impair the rights of CSFB in any Receivable or the
proceeds thereof.
(g) Perfection of Liens and Security Interest. Upon the
making of each Advance, the lien and security interest in favor of
CSFB with respect to the Receivable will be perfected by the filing of
financing statements on Form UCC-1 in each jurisdiction where such
recording or filing is necessary for the perfection thereof, the
delivery of the Receivable File for such Receivable to the Custodian
and the establishment of the applicable Settlement Account and the
applicable Lock-Box in accordance with the provisions of this
Agreement and the Related Agreements and no other filings in any
jurisdiction or any other actions (except as expressly provided
herein) are necessary to perfect CSFB's lien on and security interest
in the Collateral as against any third party or parties. All filings
(including, without limitation, UCC filings), and all other actions of
any Person, necessary in any jurisdiction to perfect CSFB's first
priority security interest in the Receivable have been filed in the
appropriate filing office(s).
(h) Security Interest in Financed Vehicle. Immediately prior
to the transfer, assignment and pledge thereof under this Agreement,
(i) each Receivable was secured by a valid, binding and enforceable
first priority perfected security interest in the Financed Vehicle in
favor of the applicable Borrower as secured party, or (ii) application
has been duly made with the appropriate governmental authority for a
valid, binding and enforceable first priority perfected security
interest in the Financed Vehicle in favor of such Borrower. The
certificate of title for each Financed Vehicle shows, or if a new or
replacement certificate of title is being applied for with respect to
such Financed Vehicle the certificate of title will be received by the
applicable Borrower within 120 days after the related Advance Date and
will show the applicable Borrower named as the original secured party
under each Receivable and, accordingly, such Borrower will be the
holder of a first priority security interest in such Financed Vehicle;
provided, however, that with respect to Receivables of AutoInfo
Finance that are subject to Advances to AutoInfo Finance
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within 90 days after the date of this Agreement and for which no
certificate of title, guaranty of title or application for title is
delivered prior to the related Advance Date, the certificate of title
will be received by such Borrower prior to the earlier of (x) 90 days
after such Advance Date and (y) 180 days after the date of origination
of the related Receivable. With respect to each Receivable (other than
Receivables of AutoInfo Finance referred to in the proviso in the
immediately preceding sentence) for which the certificate of title has
not yet been returned from the registrar of titles, the applicable
Borrower has received written evidence from the related Dealer that
such certificate of title showing such Borrower as first lienholder
has been applied for. If the Receivable was originated in a state in
which a filing or recording is required of the secured party to
perfect a security interest in motor vehicles, such filings or
recordings have been duly made to show the applicable Borrower named
as the original secured party under the related Receivable. Such
security interest in the Financed Vehicle has been validly assigned by
the Dealer to the applicable Borrower pursuant to the related Dealer
Agreement and by such Borrower to CSFB pursuant to this Agreement.
Immediately after the transfer, assignment and pledge
thereof to CSFB, there shall exist under each Receivable a valid,
subsisting and enforceable first priority perfected security interest
in the Financed Vehicle securing such Receivable and at such time as
enforcement of such security interest is sought there shall exist a
valid, subsisting and enforceable first priority perfected security
interest in such Financed Vehicle in favor of CSFB (other than, as to
the priority of such security interest, any statutory lien arising by
operation of law after such transfer, assignment and pledge thereof,
which is prior to such interest).
(i) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released
from the lien granted by the related Receivable in whole or in part.
(j) No Waiver. No provision of a Receivable has been
amended, waived, altered or modified in any respect since its
origination, except by instruments or documents identified in the
Receivable File held by the Custodian. No Receivable has been modified
as a result of application of the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
(k) No Defenses. No right of rescission, setoff,
counterclaim or defense exists or has been asserted or threatened with
respect to any Receivable. The operation of the terms of any
Receivable or the exercise of any right thereunder will not render
such Receivable unenforceable in whole or in part or subject to any
such right of rescission, setoff, counterclaim, or defense.
(l) No Liens. There are no Liens or claims existing or which
have been filed for taxes, work, labor, storage or materials relating
to or affecting a Financed Vehicle that are or may be prior to, or
equal or coordinate with, the lien of the related Receivable or the
security interest in the Financed Vehicle granted by any Receivable.
There is not, with
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respect to any Receivable, any lien against the related Financed
Vehicle for delinquent taxes.
(m) No Default. Except for payment delinquencies continuing
for a period of not more than fifty-nine (59) days, (x) no default,
breach, violation or event permitting acceleration under the terms of
any Receivable has occurred and (y) no condition exists or event has
occurred and is continuing that with notice, the lapse of time or both
would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable has arisen, and there
has been no waiver of any of the foregoing.
(n) Insurance; Other. The related Financed Vehicle is
covered by a comprehensive and collision insurance policy in an amount
at least equal to the lesser of (a) its insurable value as determined
by the insurer (less any deductible) or (b) the principal amount due
from the Obligor under the related Receivable. Each Obligor has
obtained insurance covering the Financed Vehicle as of the Advance
Date insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage and each Receivable requires the
Obligor to maintain such insurance naming the applicable Borrower and
its successors and assigns as a loss payee, and each Receivable
permits the holder thereof to obtain physical loss and damage
insurance at the expense of the Obligor if the Obligor fails to do so.
Each Receivable that finances the cost of premiums for credit life and
credit accident and health insurance is covered by an insurance policy
or certificate of insurance naming the applicable Borrower and its
successors and assigns as the credit beneficiary under each such
insurance policy and certificate of insurance. As to each Receivable
that finances the cost of an extended service contract, the respective
Financed Vehicle which secures the Receivable is covered by an
extended service contract.
(o) Lawful Assignment. No Receivable has been originated in,
or is subject to the laws of, any jurisdiction under which the sale,
transfer, and assignment of such Receivable under this Agreement shall
be unlawful, void, or voidable. Neither Borrower has entered into any
agreement with any account debtor that prohibits, restricts or
conditions the assignment of any portion of the Receivable.
(p) Receivable File; One Original. The applicable Borrower
has delivered to the Custodian at the location listed in Schedule
7.2(p) a complete original Receivable File with respect to each
Receivable pursuant to the terms of the Custody Agreement, and such
Custodian is in possession thereof. There is only one manually
executed original of each Receivable. Each document in the Receivable
File which is required to be signed by the Obligor has been signed by
the Obligor in the appropriate spaces. All applicable blanks on any
form have been properly filled in and each form has otherwise been
correctly prepared.
(q) Chattel Paper. Each Receivable constitutes "chattel
paper" under the UCC.
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(r) Valid and Binding Obligation of Obligor. Each Receivable
represents the genuine, legal, valid and binding obligation of the
Obligor thereunder and is enforceable by the holder or assignee
thereof in accordance with its terms, except only as such enforcement
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally, and all parties to such
Receivable had full legal capacity to execute and deliver such
Receivable and all other documents related thereto and to grant the
security interest purported to be granted thereby.
(s) Characteristics of Obligors. No Obligor on any
Receivable is currently the subject of a bankruptcy proceeding. Each
Obligor under a Receivable is a resident of the United States of
America and is not an Affiliate of any of the parties hereto.
(t) Past Due. No Receivable is sixty (60) or more days past
due at the Advance Date.
(u) Origination of Receivables. Each Obligor under a
Receivable has been approved by the applicable Borrower based on the
applicable Credit Policy; each Receivable satisfies all applicable
requirements of the applicable Credit Policy; and each Receivable was
underwritten in accordance with the applicable Credit Policy.
(v) Casualty. No Financed Vehicle has suffered a Casualty.
(w) Accuracy of Computer File. Each Computer File made
available by each Borrower to CSFB and the Custodian from time to time
is complete and accurate as of the Advance Date and includes a
description of the same Receivables that are described in the Schedule
of Receivables.
(x) Receivable Not Assumable. No Receivable is assumable by
another Person in a manner which would release the Obligor thereof
from such Obligor's obligations to the originator or applicable
Borrower with respect to such Receivable.
(y) No Adverse Selection Procedures. No selection procedures
adverse to CSFB have been utilized in selecting the Receivable from
those receivables owned by each Borrower eligible for transfer, pledge
and assignment to CSFB pursuant to this Agreement.
(z) No Repossession. No Financed Vehicle with respect to any
Receivable has been repossessed or put out for repossession.
(aa) Marking Record. As of the Advance Date, the applicable
Borrower has caused the portions of the electronic ledger relating to
the Receivable to be clearly and unambiguously marked to show that
such Receivable has been transferred, assigned and pledged to CSFB.
SECTION 7.3. Vendor's Single Interest Policy. As of the date hereof,
neither Borrower has in place or obtained vendor's single interest policy
covering each Receivable and naming
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CSFB as the loss payee. CSFB shall, at any time hereafter (but in no event
earlier than six (6) months from the date of this Agreement), have the right to
require any of the Borrowers to obtain and maintain such vendor's single
interest policy with respect to any additional Receivables that are subject to
this Agreement thereafter, but not including the Receivables that had been
subject to this Agreement prior thereto.
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ARTICLE VIII
AFFIRMATIVE COVENANTS
Until the Commitment Termination Date, and thereafter until the
Promissory Note and all other Obligations are paid in full, each Borrower and
each Servicer (as applicable) agrees that, unless at any time CSFB shall
otherwise expressly consent in writing, it will perform and comply with each of
the following covenants.
SECTION 8.1. Corporate Existence; Foreign Qualification. Each Borrower
and each Servicer shall do and cause to be done at all times all things
necessary to (a) maintain and preserve its corporate existence, rights,
franchises and privileges, (b) be duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction where the nature of its
business makes such qualification necessary and the failure to so qualify is
reasonably likely to have an adverse effect on its performance of its respective
obligations, or enforcement of its rights, under this Agreement or any Related
Agreement and (c) perform and comply with each of its obligations under this
Agreement and any other Related Agreements and to comply with all requirements
of law, rule or regulation binding upon or applicable to it or thereto, or that
are required in connection with its performance under this Agreement and any
other Related Agreements, except to the extent that the failure to comply
therewith is not reasonably likely to, in the aggregate, have an adverse effect
on its performance of its respective obligations, or enforcement of its rights,
under this Agreement or any Related Agreement. Each Borrower and each Servicer
shall each maintain all licenses, permits, charters and registrations which are
material to the performance by each Borrower or each Servicer, as the case may
be, of its respective obligations, or enforcement of its rights, under this
Agreement and each other Related Agreement to which each Borrower or each
Servicer, as the case may be, is a party or by which it is bound.
SECTION 8.2. Books, Records and Inspections. Each Borrower shall: (a)
maintain complete and accurate books and records with respect to the Collateral;
(b) at any time and from time to time during regular business hours, upon at
least two (2) Business Days prior notice from CSFB, permit CSFB or such other
person who may be designated from time to time by CSFB or its agents or
representatives to examine and make copies of such books, records and documents
in the possession or under the control of such Borrower relating to the
Collateral as CSFB or such person may reasonably request; and (c) permit or such
other person to visit the office and properties of such Borrower for the purpose
of examining such materials, and to discuss matters relating to the Collateral
or such Borrower's performance under this Agreement with such Borrower's
independent public accountants or with any of the officers or employees of such
Borrower having knowledge of such matters.
SECTION 8.3. Accounting Methods; Financial Records. Each Borrower
shall maintain a system of accounting established and administered in accordance
with generally accepted accounting principles, keep adequate records and books
of account in which complete entries will be made in accordance with such
accounting principles and reflecting all transactions required to be reflected
by such accounting principles and keep accurate and complete records of its
properties and assets.
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SECTION 8.4. Reporting Requirements. (a) The Borrowers shall furnish,
or cause to be furnished to CSFB:
(i) Annual Financial Statements. As soon as available, and
in any event within ninety (90) days after the close of each fiscal
year of each of the Borrowers, the consolidated audited balance sheets
of AutoInfo, Inc. and its consolidated subsidiaries as of the end of
such fiscal year and the audited statements of income, changes in
shareholders' equity and cash flows of AutoInfo, Inc. and its
consolidated subsidiaries for such fiscal year, all in reasonable
detail and stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared
in accordance with generally accepted accounting principles,
consistently applied, and accompanied by the certificate of the
Borrowers' and AutoInfo's independent accountants (who shall be, in
each case, a nationally recognized firm or otherwise acceptable to
CSFB) and by the certificate specified in Section 8.4(b) hereof.
(ii) Quarterly Financial Statements. As soon as available,
and in any event within forty-five (45) days after the close of each
of the first three quarters of each fiscal year of each of the
Borrowers, the unaudited balance sheets of each of the Borrowers and
of AutoInfo, Inc. and its consolidated subsidiaries as of the end of
such quarter and the unaudited statements of income, changes in
shareholders' equity and cash flows of each of the Borrowers and of
AutoInfo, Inc. and its consolidated subsidiaries for the portion of
the fiscal year then ended, all in reasonable detail and, stating in
comparative form the respective figures for the corresponding date and
period in the preceding fiscal year, prepared in accordance with
generally accepted accounting principles, consistently applied
(subject to normal year-end adjustments).
(iii) Monthly Financial Statements. As soon as available,
and in any event within thirty (30) days after the last day of each
calendar month, the unaudited balance sheets of each of the Borrowers
and of AutoInfo, Inc. and its consolidated subsidiaries as of the end
of such calendar month and the unaudited statements of income and
changes in equity of each of the Borrowers and of AutoInfo, Inc. and
its consolidated subsidiaries for the portion of the fiscal year then
ended, all in reasonable detail and prepared in accordance with
generally accepted accounting principles, consistently applied
(subject to normal year-end adjustments.)
(iv) Accountants' Reports. Copies of any reports submitted
to each Borrower or AutoInfo, Inc. by its independent accountants in
connection with any examination of the financial statements of such
Borrower or AutoInfo, Inc., promptly upon receipt thereof.
(v) Other Information. Promptly upon receipt thereof, copies
of all reports, statements, certifications, schedules, or other
similar items delivered to or by each Borrower or AutoInfo, Inc.
pursuant to the terms of the Related Agreements and,
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promptly upon request, such other information or data as CSFB may
reasonably request.
(vi) Filings. Promptly after the filing or sending thereof,
copies of all proxy statements, financial statements, Form 10-K, Form
10-Q or other reports, filings and registration statements (but not
including ordinary course communications to partners, shareholders or
members) which the Borrowers or AutoInfo, Inc. files, or delivers to,
its stockholders, the Securities and Exchange Commission, or any other
federal, state or foreign government agency, authority or body which
supervises the issuance of securities by the Borrowers or AutoInfo,
Inc. or any national securities exchange.
(vii) Annual Budgets; Business Plans. Such annual budgets,
monthly and annual comparisons of conformity of operations with annual
budgets, three-year projections of financial and operations results,
strategic business plans and other internal reports prepared by or
received by the chief financial officer or chief executive officer of
each Borrower as CSFB may reasonably request.
(viii) Receivable Performance Data. Monthly reports in form
and scope satisfactory to CSFB, setting forth data regarding the
performance of the Receivables, including, without limitation,
information with respect to delinquencies, repossessions, charge-offs,
Obligor bankruptcies, extensions and modifications and such other
information as CSFB may reasonably request.
(ix) Monthly Servicing Diskettes. A computer tape and a
diskette (or any other electronic transmission acceptable to CSFB) in
a format acceptable to CSFB containing such information with respect
to the Receivables and the servicing of the Receivables as CSFB may
reasonably request.
(x) Delivery of Credit Policy. A new copy of each Credit
Policy at the end of each calendar quarter ending March 31, June 30,
September 30 and December 31.
(b) Compliance Certificate. Each Borrower shall deliver to CSFB
concurrently with the delivery of the financial statements required pursuant to
Sections 8.4(a)(i), (ii) and (iii) a certificate signed by the chief financial
officer of such Borrower stating that:
(i) a review of such Borrower's performance under the
Related Agreements during such period has been made under such
officer's supervision;
(ii) no Event of Default has occurred, and if a Default or a
Potential Event of Default has occurred, specifying the nature thereof
and stating in reasonable detail the steps, if any, being taken by
such Borrower, to cure such Default or Potential Event of Default or
to otherwise comply with the terms of the agreement to which such
Default or Potential Event of Default relates; and
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(iii) the attached financial reports submitted in accordance
with Section 8.4(a)(i) or (ii) or (iii) hereof, as applicable, present
fairly the financial condition and results of operations of such
Borrower and AutoInfo, Inc. and its consolidated subsidiaries as of
the dates and for the periods indicated, in accordance with generally
accepted accounting principles consistently applied (subject as to
interim statements to normal year-end adjustments).
(c) Events of Default. Promptly after becoming aware of the
occurrence of (A) any Servicer Default, Event of Default or Potential
Event of Default or (B) any other event, circumstance or condition
that has resulted, or is reasonably likely to result, in a material
adverse effect upon any Borrower, such Borrower shall deliver written
notice thereof to CSFB describing such event and the action that such
Borrower proposes to take with respect thereto.
(d) Litigation. Promptly after becoming aware of any claim,
litigation, arbitration, governmental or judicial investigation or
proceeding or inquiry that is pending or threatened (A) against any
Borrower or any Servicer which is reasonably likely to have an adverse
effect on the ability of such Borrower or such Servicer to perform its
respective obligations pursuant to this Agreement or any Related
Agreement, (B) against any Borrower or any Servicer pertaining to the
applicable Receivables, (C) with respect to a material portion of the
Receivables or (D) in which a request has been made for certification
as a class action (or equivalent relief) that would involve a material
portion of the Receivables, such Borrower or such Servicer, as
applicable, shall deliver written notice thereof to CSFB.
(e) ERISA. Promptly after becoming aware of (i) the
termination of any Pension Plan, (ii) the failure to make a
contribution to any Pension Plan maintained by a Borrower or a
Servicer sufficient to give rise to a lien under Section 302(f)(1) of
ERISA, or (iii) the existence or occurrence of a condition, event or
transaction with respect to any Plan which could reasonably be
expected to result in the incurrence by such Borrower or such
Servicer, of liabilities, fines or penalties in an amount that is
reasonably likely to have an adverse effect on the ability of such
Borrower or such Servicer to perform its respective obligations
pursuant to this Agreement or any Related Agreement, such Borrower or
such Servicer, as applicable, shall deliver written notice thereof to
CSFB.
(f) Change in Location. Each Borrower and each Servicer
shall promptly inform CSFB in writing of any change in the location of
such Borrower's or such Servicer's principal office or any change in
the location of such Borrower's or such Servicer's books and records.
(g) Other. Each Borrower and each Servicer shall promptly
provide such other information, documents, or reports respecting the
Collateral or the condition, financial or otherwise, or operations of
such Borrower as CSFB may from time to time reasonably request in
order to protect the interests of CSFB under or as contemplated by
this Agreement or any Related Agreement.
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SECTION 8.5. Taxes and Obligations. Each Borrower shall pay when due
all taxes, assessments and other material (determined on a consolidated basis)
liabilities (including titling fees and registration fees payable with respect
to any Receivables) except as contested in good faith and by appropriate
proceedings with respect to which adequate reserves have been established, and
are being maintained, in accordance with generally accepted accounting
principles if and so long as forfeiture of any part of the Collateral will not
result from the failure to pay any such taxes, assessments or other material
liabilities during the period of any such contest.
SECTION 8.6. Business. Each Borrower shall engage only in the business
of (i) purchasing Receivables from a Dealer, (ii) financing such purchases,
(iii) selling such Receivables in connection with securitization or other
dispositions, or (iv) otherwise dealing with Receivables and engaging in related
activities.
SECTION 8.7. Payments on Receivables. Each Borrower and each Servicer
shall direct each Obligor to make all payments under the related Receivable
financed with Advances directly to the applicable Lock-Box. All payments from
Obligors under the Receivables which are received directly by a Borrower or a
Servicer shall be deposited directly into the applicable Settlement Account as
soon as practicable after receipt thereof (but in any event no later than one
(1) Business Day following receipt thereof). In addition, each Borrower and each
Servicer shall cause all other payments with respect to the Collateral to be
made directly to the applicable Settlement Account. Any such payments with
respect to such Collateral (other than payments received from Obligors) received
directly by a Borrower or a Servicer shall be deposited into the applicable
Settlement Account as soon as practicable after receipt thereof (but in any
event no later than one (1) Business Day following receipt thereof).
SECTION 8.8. Notation of Lien. Concurrently with each purchase of a
Receivable with the proceeds of any Advance, each of the applicable Borrower and
the applicable Servicer shall indicate on its computer records the security
interest therein granted to CSFB pursuant to this Agreement.
SECTION 8.9. Further Assurances. Each Borrower and each Servicer shall
file all necessary financing statements, assignments or other instruments, and
any amendments or continuation statements relating thereto, necessary to be kept
and filed in such manner and in such places as may be required by law to
preserve and protect fully the lien on and first-priority perfected security
interest in, and all rights of CSFB with respect to the Receivables under this
Agreement. In addition, each Borrower and each Servicer shall, upon the request
of CSFB from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within thirty (30) days of such request,
such amendments hereto and such further instruments and take such further action
as may be reasonably necessary to effectuate the intention, performance and
provisions of the Related Agreements or to protect the interest of CSFB in the
Receivables, free and clear of all liens and restrictions on transferability
except the lien in favor of CSFB and the restrictions on transferability imposed
by this Agreement.
SECTION 8.10 Minimum Net Worth. The Borrowers, on a consolidated basis
with AutoInfo, Inc., shall maintain at all times on and after December 31, 1996
a minimum Net Worth
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of not less than $10,000,000. The "Net Worth" of AutoInfo, Inc. and its
consolidated subsidiaries, including the Borrowers, as of any date of
determination shall be equal to the sum of (i) the par value of its capital
stock and (ii) additional paid-in capital plus retained earnings (or minus
accumulated deficit) of AutoInfo, Inc. on a consolidated basis, each item to be
determined in accordance with generally accepted accounting principles, less (x)
amounts attributable to stock that may be redeemed at the option of the holder
and with respect to which such holder has elected to have such stock redeemed
and (y) intangible assets.
SECTION 8.11 Limitations on Debt. The ratio of the total Debt of
AutoInfo, Inc. and its consolidated subsidiaries, including the Borrowers, to
the Net Worth of AutoInfo, Inc. and its consolidated subsidiaries, including the
Borrowers, shall not be more than 6 to 1. "Debt" shall mean any indebtedness
(other than Subordinated Debt), contingent or otherwise, in respect of borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of AutoInfo, Inc. or such consolidated subsidiaries or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
letters of credit or representing the balance deferred and unpaid of the
purchase price of any property (except any such balance that constitutes a trade
payable and an accrued liability arising in the ordinary course of business that
is not overdue by more than ninety (90) days or that is being contested in good
faith), if and to the extent any of the foregoing indebtedness would appear as a
liability upon a consolidated balance sheet of AutoInfo, Inc. prepared in
accordance with generally accepted accounting principles, and shall also
include, to the extent not otherwise included, indebtedness secured by a lien or
mortgage to which the property or assets owned or held by AutoInfo, Inc. or such
consolidated subsidiaries is subject (whether or not the obligations secured
thereby shall have been assumed), guarantees of items that would be included
within this definition (without regard to whether such items would appear upon
such balance sheet), and obligations in respect of interest rate swap
obligations. The amount of Debt of AutoInfo, Inc. and its consolidated
subsidiaries, including the Borrowers, at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability of any such contingent obligations at such date. "Net Worth"
shall have the meaning assigned thereto in Section 8.10 above; provided,
however, that for the purposes of this Section 8.11, Subordinated Debt shall be
added thereto. "Subordinated Debt" means all indebtedness of each Borrower which
shall, by its terms or in a manner reasonably satisfactory to CSFB, be
subordinated in right of payment to the Obligations.
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ARTICLE IX
NEGATIVE COVENANTS
Until the Commitment Termination Date and thereafter until the
Promissory Note and all other Obligations are paid in full each Borrower and
each Servicer, as applicable, agrees that, unless at any time CSFB shall
otherwise expressly consent in writing, it will comply with the following
covenants.
SECTION 9.1. Liens. Neither Borrower shall, except as otherwise
provided in the Related Agreements, sell, assign (by operation of law or
otherwise) or otherwise dispose of any Receivable or create or permit to exist
any Lien with respect to any Collateral now or hereafter existing or acquired.
SECTION 9.2. Impairment of Rights. Neither any Servicer nor any
Borrower shall take any action, or fail to take any action, if such action or
failure to take action may (i) interfere with the enforcement of any rights
under the Related Agreements that affect the rights, benefits or obligations of
CSFB, (ii) result in an adverse effect in respect of the Receivables or (iii)
impair the ability of such Servicer or such Borrower to perform its obligations
under the Related Agreements, including any consolidation, merger with any
Person or any transfer of all or any material amount of such Servicer's or such
Borrower's assets to any other Person if such consolidation, merger or transfer
would impair the net worth of such Servicer or such Borrower or any successor
Person obligated, after such event, to perform such Servicer's or such
Borrower's obligations under the Related Agreements.
SECTION 9.3. Waiver, Amendments, Etc. Neither each Servicer nor each
Borrower shall waive, modify or amend, or consent to any waiver, modification or
amendment of, any of the provisions of any of the Related Agreements or, if such
waiver, modification or amendment would adversely affect CSFB, such Borrower's
or such Servicer's respective articles of incorporation, certificate of
incorporation or bylaws, unless CSFB shall have consented thereto in writing.
SECTION 9.4. No Mergers. (a) Neither Borrower shall consolidate with
or merge into any Person or transfer all or substantially all of its assets to
any Person or liquidate or dissolve; and (b) neither Servicer shall consolidate
with or merge into any Person or transfer all or substantially all of its assets
to any Person or liquidate or dissolve other than in accordance with Section
11.3 of this Agreement; provided, however, that either Borrower may merge or
consolidate with or into (x) any of its Affiliates or (y) any other Person so
long as (i) neither the validity nor enforceability of this Agreement or the
Related Agreements shall be adversely affected thereby, (ii) the surviving
entity (if other than such Borrower) shall assume in writing or by operation of
law the due and punctual performance of all terms and conditions of the Related
Agreements to which such Borrower is a party and all liabilities and obligations
of such Borrower thereunder, and (iii) the net worth of the surviving entity
immediately after such merger or consolidation is not less than the net worth of
the applicable Borrower immediately prior thereto; provided, further, that CSFB
has consented to such merger or consolidation prior thereto.
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SECTION 9.5. Insolvency. Neither any Servicer nor any Borrower shall
commence any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to the bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, corporation or other relief
with respect to it or (B) seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
assets, or make a general assignment for the benefit of its creditors. Neither
any Servicer nor any Borrower shall take any action in furtherance of, or
indicating the consent to, approval of, or acquiescence in any of the acts set
forth above. Neither Borrower shall admit in writing its inability to pay its
debts.
SECTION 9.6. Extension or Amendment of Receivables. Except as
otherwise permitted hereunder, neither Borrower shall extend, amend or otherwise
modify the terms of any Receivable, except for not more than one extension of
the due date for any Scheduled Payment on such Receivable for a period of not
more than one month during any twelve (12) month period; provided, however, in
no event shall the aggregate of all extensions with respect to a Receivable
(including extensions granted prior to the applicable Advance Date) exceed three
(3) months.
SECTION 9.7. Change in Business, Credit Policy or Servicing Policies.
Neither Borrower shall make any change in the character of its business if such
change would be reasonably likely to have a material adverse effect on such
Borrower. Neither Borrower shall make any change to its respective Credit Policy
without obtaining the prior written consent of CSFB. Neither Servicer shall make
any change to its respective Servicing Policies without the prior written
consent of CSFB.
SECTION 9.8. Investments. Neither Borrower shall, except in the
ordinary course of business, (i) make, incur or suffer to exist an investment in
or equity contribution to, any Person; (ii) make any loan or advance to any
Person; or (iii) create any direct or indirect subsidiary or otherwise acquire
direct or indirect ownership of any equity interest in any other Person. This
Section 9.8 shall not limit a Borrower's right to organize, capitalize, make a
loan or an equity contribution to, or otherwise acquire an equity interest in a
special purpose subsidiary in connection with a securitization of any
Receivables.
SECTION 9.9. Negative Pledges. Neither Borrower shall enter into or
assume any agreement (other than this Agreement and the other Related
Agreements) prohibiting the creation or assumption of any Lien upon any
Receivables, whether now owned or hereafter acquired by such Borrower, as
contemplated by the Related Agreements, or otherwise prohibiting or restricting
any transaction contemplated hereby or by the other Related Agreements.
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ARTICLE X
EVENTS OF DEFAULT
SECTION 10.1. Events of Default. Each of the following shall
constitute an Event of Default under this Agreement:
Section 10.1.1 Non-Payment of Advances. Failure of any Borrower to pay
or repay when due principal or interest on any Advance which failure is not
cured on the next Business Day after the occurrence thereof.
Section 10.1.2 Non-Payment of Other Amounts. Failure of any Borrower
and continuance thereof for one (1) Business Day after notice thereof by CSFB to
the applicable Borrower, in the payment when due of any amount payable hereunder
(other than any amount described in Section 10.1.1), including, but not limited
to payments or transfer of cash or Eligible Receivables required pursuant to
Section 4.3 and Section 4.4 and payments pursuant to Section 2.7(a).
Section 10.1.3 Events of Bankruptcy. The occurrence of an Event of
Bankruptcy with respect to any Borrower.
Section 10.1.4 Non-Compliance With Provisions. Failure by any Borrower
to comply with or to perform any provision of this Agreement or any Related
Agreement (which failure does not constitute an Event of Default under any of
the provisions of this Section 10.1) which failure, in the judgment of CSFB,
materially adversely affects the ability of the Borrower to perform under this
Agreement and the Custodial Agreement or the rights of CSFB and which failure
shall not have been cured by the applicable Borrower within thirty (30) days of
the earlier of discovery of such failure by the applicable Borrower or
notification by CSFB to the applicable Borrower of same.
Section 10.1.5 Representations and Warranties.
(a) Any representation or warranty made by any Borrower in this
Agreement or any Related Agreement (other than a representation and warranty
contained in Section 7.2 of this Agreement, except for the representations or
warranty contained in clauses (c), (w), (y) and (aa) of Section 7.2) is
incorrect or untrue in any material respect (to the extent that any such
representation or warranty does not incorporate a materiality limitation in its
terms) when made or repeated or when deemed to have been made or repeated and,
which continues to be incorrect or untrue in any material respect (to the extent
that any such representation or warranty does not incorporate a materiality
limitation in its terms) for a period of thirty (30) days after the earlier of
(i) the date on which written notice thereof shall have been given by CSFB to
the applicable Borrower and (ii) the date on which such Borrower obtains
knowledge thereof;
(b) Any schedule, certificate, financial statement, report, notice, or
other material writing furnished to CSFB by any Borrower, is false or misleading
in any material respect on the date as of which the facts therein set forth are
stated or certified and, which continues to be
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incorrect in any material respect for a period of thirty (30) days after the
earlier of (i) the date on which written notice thereof shall have been given by
CSFB to such Borrower and (ii) the date on which the applicable Borrower obtains
knowledge thereof, and such failure has an adverse effect on the interests of
CSFB;
(c) Any representation or warranty made by the applicable Borrower in
clauses (c), (w), (y) and (aa) of Section 7.2 shall have been incorrect or
untrue when made or repeated or when deemed to have been made or repeated; or
(d) Any representation or warranty made by the applicable Borrower in
Section 7.1 or any representation or warranty made the Guarantor in the Guaranty
Agreement shall have been incorrect or untrue in any material respect (to the
extent that any such representation or warranty does not incorporate a
materially limitation in its terms) when made or repeated or when deemed to have
been made or repeated and which materially and adversely affects the rights of
CSFB or the ability of such Borrower to perform its obligations under this
Agreement or the other Related Agreements, or the ability of the Guarantor to
perform its obligations under the Guaranty Agreement.
Section 10.1.6 Servicer Default. A Servicer Default shall occur and
CSFB gives notice of an Event of Default.
Section 10.1.7 Judgments. One or more final judgments shall be entered
by any court or courts against a Borrower for the payment of money which,
together with any judgment which shall be entered by any court or courts against
the other Borrower for payment of money, exceed $500,000 in the aggregate which
are not fully covered by insurance or by reserves shown on the financial
statements of the applicable Borrower or each of the Borrowers, as the case may
be, which have been delivered to CSFB in accordance herewith; or a warrant of
attachment or execution or similar process shall be issued or levied against
property of a Borrower which, together with all other such property of the
applicable Borrower subject to other such process (and together with any warrant
or execution or similar process which shall be issued or levied against property
of the other Borrower, together with all other property of such other Borrower
subject to other process), exceeds in value $500,000 in the aggregate, and
within thirty (30) days after the entry, issue or levy thereof, such
judgment(s), warrant(s) or process(es) shall not have been paid or discharged or
stayed pending appeal, or if, after the expiration of any such stay(s), such
judgment(s), warrant(s) or process(es) shall not have been paid or discharged.
Section 10.1.8 Litigation. Any litigation (including, without
limitation, derivative actions), arbitration proceedings or governmental
proceedings is pending against any Borrower or any of its Affiliates, which, in
the judgment of CSFB, if adversely determined, would have a material adverse
effect on such Borrower.
Section 10.1.9 Material Adverse Change. In the reasonable judgment of
CSFB, a material adverse change shall have occurred in the business, operations,
properties, prospects or condition (financial or otherwise) of any Borrower or
the Guarantor.
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Section 10.1.10 Notice of Lien. The Internal Revenue Service shall
file notice of a lien pursuant to Section 6323 of the Internal Revenue Code with
regard to any of the assets of any Borrower, or the Pension Benefit Guaranty
Corporation shall file notice of a lien pursuant to Section 4068 of ERISA with
regard to any of the assets of such Borrower, and in either such case such lien
shall secure a liability in excess of $100,000 and shall not have been released
within thirty (30) days.
Section 10.1.11 Defaults on Other Indebtedness. A default shall have
occurred and be continuing under any instrument, contract or agreement
evidencing, securing or providing for the issuance of indebtedness for borrowed
money in excess of $500,000 of, or guaranteed by, any Borrower which default, in
the judgment of CSFB, could materially and adversely affect the financial
condition of the Borrower (which defaults include, but are not limited to, (i)
an Event of Bankruptcy, (ii) failure of the Borrower to make required payments
under such instrument, contract or agreement as they become due or (iii) the
acceleration of the maturity of such indebtedness).
Section 10.1.12 Invalidity of Related Agreements. All or any portion
of any Related Agreement (other than any Dealer Agreement or Dealer Assignment)
shall at any time and for any reason be declared to be null and void, or a
proceeding shall be commenced by any Borrower, or by any governmental authority
having jurisdiction over any Borrower, seeking to establish the invalidity or
unenforceability thereof (exclusive of questions of interpretation of any
provision thereof).
Section 10.1.13 Change of Control. With respect to any Borrower, a
Change of Control shall have occurred.
Section 10.1.14 Commitment. CSFB shall have determined that any
Borrower is or will be unable to meet its commitments under this Agreement or
any other Related Agreements or that the Guarantor is or will be unable to meet
its commitments under the Guaranty Agreement and shall have notified the
applicable Borrower or Guarantor, as applicable, of such determination and such
Borrower or Guarantor, as applicable, shall not have responded with appropriate
information to the contrary to the reasonable satisfaction of CSFB within one
(1) Business Day following the date of such notice.
Section 10.1.15 Effect on Security Interest. There shall exist any
event or occurrence that has an adverse effect on the status, existence,
perfection, priority or enforceability of CSFB's interest in the Collateral or
this Agreement shall for any reason cease to create a valid, first priority
security interest in the Collateral purported to be conveyed thereby.
Section 10.1.16 Failure to Provide Assurance. CSFB shall not have
received (a) written assurances as to the financial well-being of any Borrower
or the Guarantor within one (1) Business Day of a request by CSFB therefor, or
(b) a certificate, substantially in the form set forth in Section 8.4(b), within
ten (10) days following the date the related annual or quarterly or monthly
financial statement is required to be delivered.
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Section 10.1.17 Default on Other Agreements. Any Borrower shall be in
default with respect to any provision under any servicing agreement or
subservicing agreement or any lease to which it is a party, which default, in
the reasonable judgment of CSFB, could reasonably be expected to materially and
adversely affect the financial condition of such Borrower (which defaults
include, but are not limited to, an Event of Bankruptcy of such Borrower or the
failure of such Borrower to make required payments under such lease or agreement
as they become due).
Section 10.1.18 Going Concern. AutoInfo, Inc.'s audited annual
financial statements or the notes thereto or other opinions or conclusions
stated therein shall be qualified or limited by reference to AutoInfo, Inc.'s or
any Borrower's status as a "going concern" or a reference of similar import.
Section 10.1.19 Amendment to Credit Policy. Any Borrower shall have
amended or modified its respective Credit Policy without obtaining the prior
written consent of CSFB.
Section 10.1.20 Amendment to Fee Agreement with Custodian. Any
amendment, modification or change to the letter agreement between the Borrowers
and Custodian relating to the Custodian Fee without the prior written consent of
CSFB.
Section 10.1.21 Failure to Obtain or Maintain Vendor's Single Interest
Policy. Failure of any Borrower to obtain a vendor's single interest policy
within fifteen (15) days of CSFB's request pursuant to Section 7.3 and to
maintain such policy thereafter.
SECTION 10.2. Effect of Event of Default. If any Event of Default
described in Section 10.1.3 shall occur, the obligation of CSFB to make Advances
to any of the Borrowers (if not theretofore terminated) shall immediately
terminate and the Promissory Note and all other Obligations shall automatically
become immediately due and payable. If any Event of Default other than one
described in the immediately preceding sentence shall occur, (i) CSFB may
declare its commitment to make Advances (if not theretofore terminated) to be
terminated, whereupon such commitment shall immediately terminate, and may
declare the Promissory Note and all other Obligations to be due and payable,
whereupon the Promissory Note and all other Obligations shall become immediately
due and payable and (ii) CSFB may terminate all of the rights and servicing
obligations of the Servicers under this Agreement.
SECTION 10.3. Remedies. (a) Upon the occurrence of any Event of
Default, in addition to CSFB's rights and remedies under the Promissory Note,
any Related Agreement or the UCC or any other applicable law, CSFB shall have
any or all of the following rights and remedies, which may be exercised by CSFB:
(i) CSFB may cause the disposition of all or any
portion of the Collateral to be conducted immediately upon
the occurrence of an Event of Default, or upon the
expiration of any period of delay or notice required by law.
Should CSFB decide to conduct more than one such sale or
disposition, CSFB may at its option cause the same to be
conducted simultaneously or successively on the same day or
upon such different days or at such different times and in
such order as CSFB may
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deem to be in the best interests of the holder(s) of
interests in the Promissory Note. Each Borrower waives, to
the fullest extent permitted by law, any prejudice resulting
to it from any such decision.
(ii) CSFB shall have the right to sell the
Collateral in one or more lots, at one or more times, at
such place or places, at public or private sales and with or
without notice of any kind, as CSFB may elect, at such
prices and on such terms, as to cash or credit, as CSFB may
deem proper. However, notwithstanding any provision of this
Agreement to the contrary, not less than five (5) Business
Days notice of all sales of all or any portion of the
Collateral shall be given to the Borrowers. CSFB shall have
the right to become a purchaser at any such sale that is
open to the public and to apply all unpaid Obligations
toward the purchase price of all or any portion of the
Collateral sold to CSFB. If notice is given of a public
sale, it is agreed that notice shall be satisfactorily given
if such notice is published at least once in The Wall Street
Journal not less than five (5) Business Days prior to such
sale. The foregoing notice provisions shall not preclude
CSFB's rights to foreclose upon the Collateral in any other
manner permitted under the Uniform Commercial Code as in
effect in the applicable jurisdiction. However, a sale of
the Collateral in accordance with such notice requirements
shall be deemed a disposal of the Collateral in a
commercially reasonable manner. CSFB shall have the right to
sell the Collateral, or to foreclose, sue upon or otherwise
seek to enforce with respect thereto in its own name or in
the name of applicable Borrower. Subject to the foregoing
provisions of this paragraph, if an Event of Default shall
have occurred and be continuing, CSFB shall have the right
to renew, extend the time of payment of or otherwise modify,
amend, supplement, settle or compromise in any manner any
obligations for the payment of money included in the
Collateral, any security therefor and any other agreements,
instruments, claims or chooses in action of any kind, that
may be included in the Collateral. In view of the nature of
the Collateral, the parties agree (to the extent such an
agreement is permitted by applicable law) that liquidation
of the Collateral does not require a public sale and that
one or more good faith private sales, including such private
sales at which CSFB shall have the right to become a
purchaser, is a commercially reasonable disposition of the
Collateral.
(iii) CSFB may take possession of all or any
portion of the Collateral that is not already in its
possession, and the applicable Borrower agrees to assemble
and make available the Collateral to CSFB at a convenient
location. CSFB may manage and protect the Collateral, do any
acts that it, deems proper to protect the Collateral as
security hereunder, and sue upon any contract or claim
relating to the Collateral and receive any payments due
thereon or any damages thereunder, and apply all sums
received to the payment of the Obligations in accordance
with the same order of priorities as set forth in Section
10.4 hereof. Any such actions of CSFB shall not, absent
written ratification by CSFB, be deemed to impose upon CSFB
any of the Borrowers' obligations under any contracts.
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(iv) CSFB may direct the applicable Servicer to
take such action with respect to the Collateral as CSFB
determines is appropriate.
(b) CSFB shall, without regard to the adequacy of the
security for the Obligations, be entitled to the appointment of a
receiver by any court having jurisdiction, without notice, to take
possession of and protect, collect, manage, liquidate, and sell the
Collateral or any portion thereof, collect the payments due with
respect to the Collateral or any portion thereof, and do anything that
CSFB is authorized hereunder to do. The Borrowers shall pay all costs
and expenses incurred by CSFB in connection with the appointment and
activities of such receiver.
(c) CSFB may enforce its rights and remedies hereunder
without prior judicial process or hearing, and each Borrower and each
Servicer hereby expressly waives, to the extent permitted by law, any
right such Borrower and such Servicer might otherwise have to require
CSFB to enforce its rights by judicial process or hearing. Each
Borrower and each Servicer also waives, to the extent permitted by
law, any defense it might otherwise have to the Obligations arising
from use of nonjudicial process, enforcement and sale of all or any
portion of the Collateral or from any other election of remedies.
Each Borrower and each Servicer recognizes that nonjudicial remedies are
consistent with the usages of the trade, are responsive to commercial necessity,
and are the result of a bargain at arm's length.
(d) Notwithstanding the foregoing, upon the occurrence of any Event of
Default, CSFB shall have the right to exercise any of its rights and/or remedies
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrowers and the Servicers.
SECTION 10.4. Application of Proceeds. The proceeds of any sale or
disposition of each item of the Collateral pursuant to this Article shall be
applied as follows:
(a) First, to the payment of the costs and expenses of such
sale or disposition, or any other enforcement action pursuant hereto,
including reasonable attorney's fees and expenses, (including the
reasonable expenses of internal counsel to CSFB), and all other
expenses incurred in connection therewith, with a reasonable reserve
for any liabilities incurred in connection therewith and full
repayment with interest of all Advances made or incurred in connection
therewith;
(b) Second, to the payment in full, in such order as CSFB
shall determine, of (i) the accrued interest on the Promissory Note
and (ii) the outstanding principal on the Promissory Note; and
(c) Finally, to the payment to the person or persons
entitled thereto, or as a court of competent jurisdiction directs.
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If the proceeds of any such sale are insufficient to cover the costs and
expenses of such sale, as aforesaid, and the payment in full of the Promissory
Note, including without limitation all Advances thereunder, including Accrued
Interest thereon, and all other Obligations, the Borrowers shall remain jointly
and severally liable for any deficiency.
SECTION 10.5. Reimbursement. All reasonable sums expended by CSFB in
connection with the exercise of any right or remedy provided for herein shall be
and remain the joint and several obligation of the Borrowers. At the option of
CSFB, all such sums may be paid from the Collateral, or may be advanced by CSFB,
in which event they shall be deemed to have been advanced to the Borrowers and
shall be reimbursed by the Borrowers to CSFB, with interest at the Late Payment
Rate until reimbursement is made. During the continuance of an Event of Default,
each Borrower waives, and shall not have, any right to restrict or control the
expenditures by CSFB from any cash which constitutes Collateral.
Each Borrower agrees to pay, with interest at the Late Payment Rate,
the reasonable out-of-pocket expenses and reasonable attorneys' fees incurred by
CSFB in connection with the administration and enforcement of the Related
Agreements, including the taking of any action, including legal action, or in
connection with any refinancing or restructuring.
SECTION 10.6 Power of Attorney. (a) Each Borrower hereby irrevocably
constitutes, designates and appoints CSFB and any employee, agent and officer
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority following an Event of
Default in the place and stead of such Borrower and in the name of such Borrower
or in its own name, from time to time in CSFB's discretion, for the purpose of
carrying out the terms of this Agreement and any other Related Agreements and,
without limiting the generality of the foregoing, such Borrower hereby gives
CSFB the power and right, on behalf of such Borrower, without notice to or
assent by such Borrower to do the following: (i) at such time or times hereafter
as CSFB or its employees, officers or agents, in its sole discretion, may
determine, in CSFB's or Borrower's name, to endorse such Borrower's name on any
Receivable, checks, notes, drafts, instruments, documents or any other payment
relating to the Collateral which come into the possession of CSFB or come under
CSFB's control; (ii) to the extent permitted by law, to sign such Borrower's
name on any document (including, without limitation, financing statements and
continuations thereof and assignments) necessary or desirable for the purpose of
maintaining or achieving the perfection of CSFB's security interest in the
Collateral and such Borrower's interest in the Financed Vehicle and other
collateral granted by the Obligor to such Borrower; (iii) to file any claim or
take any other action or proceeding in any court of law or equity for the
purpose of collecting any and all of the Collateral and Obligations due under
this Agreement and any other Related Agreements; (iv) to remove from any
premises where they may be located any and all documents, instruments, files and
records relating to the Collateral; (v) to take or bring, in CSFB's name or in
the name of such Borrower, all steps, actions, suits or proceedings deemed by
CSFB necessary or desirable to effect collection of or to realize upon the
Collateral; and (vi) following an Event of Default or Potential Event of
Default, to direct the Servicers to make all payments of the Collateral to CSFB.
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(b) Each Borrower hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof in the absence of gross
negligence or willful misconduct. This power of attorney is a power coupled with
an interest, shall be irrevocable and shall terminate only upon payment in full
of the Promissory Note and all other Obligations and termination of this
Agreement. The powers conferred on CSFB hereunder are solely to protect CSFB's
interests in the Collateral and shall not impose any duty upon it to exercise
any such powers. CSFB shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers, and neither it nor any of
its officers, directors, employees or agents shall be responsible to any
Borrower for any action taken or omitted to be taken in good faith or in
reliance on the advice of counsel except for its own gross negligence or wilful
misconduct.
SECTION 10.7 Right of Set-off. In addition to its rights under this
Agreement, CSFB shall have the right to proceed against any assets of any
Borrower which may be in the possession of CSFB, including the right to
liquidate such assets and to set-off the proceeds against monies owed by the
Borrowers to CSFB pursuant to this Agreement. CSFB may set-off cash, the
proceeds of the liquidation of the Receivables, any Collateral or its proceeds,
and all other sums or obligations owed by CSFB to any Borrower against all of
the Borrowers' obligations to CSFB, whether under this Agreement, any Related
Agreement, or under any other agreement between the parties, or otherwise,
whether or not such obligations are then due, without prejudice to CSFB's right
to recover any deficiency. Any cash proceeds, or property in excess of any
amounts due, or which CSFB reasonably believes may become due, to it from the
Borrowers shall be returned to the applicable Borrower after satisfaction of all
obligations of the Borrowers to CSFB.
SECTION 10.8 Rights and Remedies Cumulative. The enumeration of the
rights and remedies of CSFB set forth in this Agreement is not intended to be
exhaustive and the exercise by CSFB of any right or remedy shall not preclude
the exercise of any other rights or remedies, all of which shall be cumulative,
and shall be in addition to any other right or remedy given hereunder or under
any other Related Agreements, as applicable, or that may now or hereafter exist
in law or in equity or by suit or otherwise.
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ARTICLE XI
SERVICER
SECTION 11.1. Representations and Warranties of each Servicer. To
induce CSFB to enter into this Agreement and to make Advances hereunder, each
Servicer makes the following representations and warranties to CSFB as of the
execution and delivery of this Agreement and as of the making of each Advance
(which representations and warranties shall survive the making of each Advance
and shall continue until the termination of this Agreement):
(a) Organization and Good Standing. Each Servicer has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of the jurisdiction of its
incorporation, with power and authority to own its properties and to
conduct its business as such properties shall be currently owned and
such business is presently conducted, has all licenses necessary to
carry on its business as presently conducted, and had at all relevant
times, and shall have, power, authority and legal right to service the
Receivables.
(b) Due Qualification. Each Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business
(including the servicing of the Receivables as required by this
Agreement) shall require such qualification, except where the failure
to qualify will not have a material adverse effect on the business or
properties of such Servicer.
(c) Power and Authority. Each Servicer has the requisite
corporate power and authority to execute and deliver this Agreement
and to carry out its terms; and the execution, delivery, and
performance of this Agreement and the other Related Agreements to
which it is a party has been duly and validly authorized by such
Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of each Servicer enforceable in
accordance with its terms except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforceability of creditors' rights generally, and
general equitable principles.
(e) No Violation. The execution, delivery and performance by
each Servicer of this Agreement and the consummation of the
transactions contemplated hereby and the fulfillment of the terms
hereof do not conflict with, result in any breach of any of the terms
and provisions of, nor constitute (with or without notice or lapse of
time) a default under, the articles of organization, regulations,
articles of incorporation or by-laws of such Servicer, or any
indenture, agreement, mortgage, deed of trust, or other instrument to
which such Servicer is a party or by which it is bound or any of its
properties are subject; nor result in the creation or imposition of
any Lien upon any of its properties pursuant to
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the terms of any indenture, agreement, mortgage, deed of trust, or
other instrument (other than this Agreement); nor violate any law,
order, rule, or regulation applicable to such Servicer of any court or
of any Federal or State regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over such
Servicer or its properties.
(f) No Proceedings. Neither Servicer is a party to, bound by
or in breach or violation of any indenture or other agreement or
instrument, or subject to or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it, which materially and
adversely affects, or may in the future materially and adversely
affect, the ability of such Servicer to perform its obligations under
this Agreement or the interest of CSFB;
(g) No Litigation. There is no action, suit, proceeding or
investigation pending or, to the knowledge of each Servicer threatened
against such Servicer, before any court, regulatory body,
administrative agency or other tribunal or governmental
instrumentality having jurisdiction over such Servicer (A) asserting
the invalidity of the Related Agreements to which it is a party, (B)
seeking to prevent the consummation of any of the transactions
contemplated by the Related Agreements to which it is a party, (C)
seeking any determination or ruling that might adversely affect the
ability of such Servicer to perform its obligations under, or the
validity or enforceability of, the Related Agreements to which it is a
party, or (D) that could have an adverse effect on the Receivables.
(h) Approvals. Except as set forth in Schedule 11.1(h),
neither Servicer is required to obtain the consent of any other party
or obtain the consent, license, approval or authorization of, or make
any filing, registration or declaration with, any person, corporation
or other organization, or of any court or any governmental agency,
authority or bureau in connection with the execution, delivery and
performance, validity or enforceability of each of the Related
Agreements and the making of the applicable Advance.
(i) The principal place of business and chief executive
office of each Servicer is located at:
(a) For AutoInfo Finance of Virginia, Inc.:
863 Glenrock Road
Norfolk, Virginia 23502
(b) For Car Loan Co., Inc.:
444 Westport Avenue
Norwalk, Connecticut 06851
SECTION 11.2. Indemnities of Servicer. (a) Each Servicer shall
indemnify, defend, and hold harmless CSFB from and against any and all
reasonable costs, reasonable expenses, losses, claims, damages, and liabilities
to the extent that such cost, reasonable expense, reasonable loss,
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claim, damage, or liability was the result of the negligence, misfeasance or bad
faith of such Servicer in the performance of its duties under this Agreement or
any other Related Agreement or by reason of such Servicer's breach of its
obligations and duties under this Agreement or any other Related Agreement.
Indemnification under this Section 11.2 shall survive the termination of this
Agreement and shall include reasonable fees and expenses of counsel and expenses
of litigation. If any Servicer shall have made any indemnity payments pursuant
to this Section 11.2 and the recipient thereafter collects any of such amounts
from others, the recipient shall promptly repay such amounts to such Servicer,
without interest.
(b) For purposes of this Section, in the event of the
termination of the rights and obligations of a Servicer (or any
successor thereto pursuant to Section 11.3) as Servicer pursuant to
Section 13.2, or a resignation by such Servicer pursuant to this
Agreement, such Servicer shall be deemed to be the Servicer pending
appointment of a successor Servicer pursuant to Section 13.2. The
provisions of this Section 11.2(b) shall in no way affect the survival
of the indemnification by the applicable Servicer provided by Section
11.2(a).
SECTION 11.3. Merger or Consolidation of or Assumption of the
Obligations of a Servicer. Any Person (i) into which a Servicer may be merged or
consolidated, (ii) which may result from any merger or consolidation to which
such Servicer shall be a party, or (iii) which may succeed to the properties and
assets of such Servicer substantially as a whole, shall execute an agreement of
assumption to perform every obligation of such Servicer hereunder, and whether
or not such assumption agreement is executed, shall be the successor to such
Servicer under this Agreement without further act on the part of any of the
parties to this Agreement; provided, however, that (w) immediately after giving
effect to such transaction, no Event of Default or Potential Event of Default
shall have occurred and be continuing, (x) such Servicer shall have delivered to
CSFB and Custodian forty-five (45) days prior written notice of any such merger
or consolidation and shall have delivered to CSFB an Officer's Certificate and
an Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 11.3 and that all
conditions precedent provided for in this Agreement relating to such transaction
have been complied with, (y) such Servicer shall have delivered to CSFB an
Opinion of Counsel either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of CSFB in the Receivables and other Collateral and reciting the
details of such filings, or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest and (z)
nothing herein shall be deemed to release such Servicer from any obligation.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement or assumption and compliance with clause (w), (x) or (y) above shall
be conditions to the consummation of the transactions referred to in clause (i),
(ii) or (iii) above.
SECTION 11.4. Servicer Not to Resign. Subject to the provisions of
Section 11.3, neither Servicer shall resign from its respective obligations and
duties hereby imposed on it as servicer of the applicable Receivables under this
Agreement except upon determination that by reason of a change in legal
requirements the performance of its duties under this Agreement would cause
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it to be in violation of such legal requirements in a manner which would result
in a material adverse effect on such Servicer, and CSFB does not elect to waive
the obligations of such Servicer to perform the duties which render it legally
unable to act or does not elect to delegate those duties to another Person.
Notice of any such determination permitting the resignation of any Servicer
shall be communicated to CSFB and the Custodian at the earliest practicable time
(and, if such communication is not in writing, shall be confirmed in writing at
the earliest practicable time) and any such determination shall be evidenced by
an Opinion of Counsel to such effect delivered to and satisfactory to CSFB
concurrently with or promptly after such notice. No such resignation of any
Servicer shall become effective until a successor servicer acceptable to CSFB
shall have assumed the responsibilities and obligations of such Servicer in
accordance with Section 13.2.
SECTION 11.5. Fidelity Bond, Errors and Omissions Insurance or Crime
Coverage Insurance. Each Servicer shall maintain, at its own expense, either of
the following types of insurance:
(i) A blanket fidelity bond and an errors and omissions insurance
policy, with broad coverage with responsible companies that would meet
applicable requirements on all officers, employees or other persons acting 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 be in appropriate form in respect to the Receivable
and shall protect and insure the applicable Servicer against losses, including
forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of
such persons. No provision of this Section 11.5(i) requiring such fidelity bond
and errors and omissions insurance shall diminish or relieve such Servicer from
its duties and obligations as set forth in this Agreement or any other Related
Agreement to which it is a party. The minimum coverage under any such bond and
insurance policy shall be in an amount which is customary and standard in the
industry for servicers that service a similar portfolio of receivables and that
are in accordance with the Accepted Servicing Standards. Upon request of the
CSFB, the applicable Servicer shall cause to be delivered to CSFB a certified
true copy of the fidelity bond and errors and omissions insurance policy and a
statement from the surety and the insurer that such fidelity bond and errors and
omissions insurance policy shall in no event be terminated or materially
modified without thirty (30) days' prior written notice; or
(ii) Crime coverage insurance which covers, among other things,
employee dishonesty, money and securities, money order and counterfeit paper,
depositor's forgery and computer fraud and which shall, in each case, be in an
amount acceptable to CSFB and shall have a maximum deductible in the amount of
$2,500.
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ARTICLE XII
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 12.1. Duties of Servicer; Standard of Care.
(a) Each Servicer shall for the benefit of CSFB (to the extent
provided herein) have full power and authority to manage, service, administer
and make collections on the Receivables with reasonable care, using that degree
of skill and attention that such Servicer exercises with respect to all
comparable automobile receivables that it services for itself or others.
(b) Each Servicer's duties shall include collection and posting of all
payments, responding to inquiries of Obligors on such Receivables, investigating
delinquencies, sending payment statements to Obligors, accounting for
collections, furnishing daily statements (if so requested) and monthly and
annual statements to CSFB with respect to distributions. In performing its
duties and obligations hereunder as servicer of the applicable Receivables, such
Servicer shall comply with all applicable state and federal laws, shall follow
its currently employed standards, policies and procedures, or such other
standards, policies and procedures as such Servicer employs consistent with
prudent and customary standards in the industry with respect to servicing
similar receivables (the "Accepted Servicing Standards"), and shall exercise
that degree of skill and care consistent with the highest degree of skill and
care that such Servicer exercises with respect to similar receivables serviced
by such Servicer for its own account or others. Without limiting the generality
of the foregoing, and subject to the servicing standards set forth in this
Agreement, each Servicer is authorized and empowered by the Borrowers and CSFB
to execute and deliver, on behalf of itself, the Borrowers and CSFB or any of
them, any and all instruments of satisfaction or cancellation, or partial or
full release or discharge, and all other comparable instruments, with respect to
such Receivables or to the Financed Vehicles securing such Receivables and/or
the certificates of title with respect to such Financed Vehicles.
(c) If any Servicer shall commence a legal proceeding to enforce a
Receivable, the applicable Borrower shall thereupon be deemed to have
automatically assigned, solely for the purpose of collection, such Receivable to
such Servicer. If in any enforcement suit or legal proceeding it shall be held
that any Servicer may not enforce a Receivable on the ground that it shall not
be a real party in interest or a holder entitled to enforce such Receivable, the
applicable Borrower shall, at such Servicer's expense and direction, take steps
to enforce such Receivable, including bringing suit in its name or the name of
such Borrower. The applicable Servicer shall prepare and furnish and the
applicable Borrower shall execute, any powers of attorney and other documents
reasonably necessary or appropriate from time to time to enable such Servicer to
carry out its servicing and administrative duties hereunder.
(d) Each Servicer shall conduct quarterly and annual performance
reviews of the Dealers and provide to CSFB the information with respect to such
Dealers specified upon CSFB's request based on such reviews, including, without
limitation, the Amount Financed of Receivables originated by each Dealer. In
addition, each Servicer shall perform all administrative responsibilities
relating to Dealers in respect of the Receivables.
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SECTION 12.2. Collection and Allocation of Receivable Payments. Each
Servicer shall make all reasonable and diligent efforts to collect all payments
called for under the terms and provisions of the Receivables as and when the
same shall become due and shall follow such collection procedures as it follows
with respect to all comparable automobile receivables that it services for
itself or others and the Accepted Servicing Standards. Each Servicer shall
direct the applicable Obligors to make payments directly to the applicable
Lock-Box. Each Servicer shall be responsible for identifying any payments it or
any Borrower receives from the Obligors and transferring these payments to the
applicable Settlement Account in accordance with Section 6.2. Each Servicer
shall allocate collections between principal and interest in accordance with
applicable law and the customary servicing procedures it follows with respect to
all comparable automobile receivables that it services for itself or others and
the Accepted Servicing Standards. Each Servicer shall also allocate collections
between Receivables and other Collateral securing the Advances. Each Servicer
shall not agree to any alteration of the interest rate on any Receivable or of
the amount of any Scheduled Payment on a Receivable and may not make any
extension on a Receivable without the prior written consent of CSFB, except as
required by law or order of a court, or permitted by this Agreement or the
Related Agreements. Each Servicer may in its discretion waive any late payment
charge or any other fees that may be collected in the ordinary course of
servicing a Receivable.
SECTION 12.3. Realization Upon Receivables. Each Servicer shall, on
behalf of the Borrowers and CSFB, use all reasonable efforts, consistent with
the Accepted Servicing Standards, to repossess or otherwise convert the
ownership of the Financed Vehicle securing any Receivable as to which such
Servicer shall have determined that payments thereunder are not likely to be
resumed, as soon as is practicable after default on such Receivable. The
Servicer shall use reasonable efforts consistent with its customary servicing
procedures to liquidate such Financed Vehicle. Each Servicer shall follow such
customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of automobile receivables, which may include
reasonable efforts to realize upon any recourse to Dealers and selling the
Financed Vehicle at public or private sale. The foregoing shall be subject to
the provision that, in any case in which the Financed Vehicle shall have
suffered damage, each Servicer shall not expend funds in connection with the
repair or the repossession of such Financed Vehicle unless it shall determine in
its discretion that such repair and/or repossession will increase the proceeds
ultimately recoverable with respect to such Receivable by an amount greater than
the amount of such expenses.
SECTION 12.4. Physical Damage Insurance; Other Insurance. (a) Each
Servicer, in accordance with the Accepted Servicing Standards, shall verify (i)
that each Obligor shall have obtained insurance covering the Financed Vehicle,
as of the date of the execution of the Receivable, insuring against loss and
damage due to fire, theft, collision and other risks generally covered by
comprehensive and collision coverage and that each Receivable requires the
Obligor to maintain such physical loss and damage insurance naming the
applicable Borrower and its successors and assigns as a loss payee, (ii) that
each Receivable that finances the cost of premiums for vendor's single interest
insurance, credit life and credit accident and health insurance is covered by an
insurance policy or certificate naming the applicable Borrower as policyholder
(creditor), and (iii) as to each Receivable that finances the cost of an
extended service contract,
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the respective Financed Vehicle which secures the Receivable is covered by an
extended service contract.
(b) To the extent applicable, each Servicer shall not take any action
which would result in noncoverage under any of the insurance policies referred
to in Section 12.4(a) which, but for the actions of such Servicer, would have
been covered thereunder. Each Servicer, on behalf of CSFB, shall take such
reasonable action as shall be necessary to permit recovery under any of the
foregoing insurance policies. Any amounts collected by each Servicer under any
of the foregoing insurance policies shall be deposited into the applicable
Settlement Account pursuant to Section 6.2. Each Servicer shall use reasonable
efforts to cause each Obligor to maintain on the related Financed Vehicle
insurance coverage referred to in Section 12.4(a)(i) in an amount specified in
Section 7.2(n). The parties hereto acknowledge that the Servicers shall not be
required to force place any insurance coverage referred to in Section 12.4(a)(i)
above, or any other insurance coverage.
SECTION 12.5. Maintenance of Security Interests in Financed Vehicles.
(a) Each Servicer shall take such steps as are required by applicable law to
maintain perfection of (i) the security interest created by each Receivable in
the related Financed Vehicle and (ii) the security interest of CSFB in the
Collateral created by this Agreement, including, but not limited to, (to the
extent necessary under applicable law) obtaining the execution by the Obligors
and the recording, registering, filing, re-recording, re-registering and
refiling of all security agreements, financing statements and continuation
statements or instruments as are necessary to maintain the security interest
granted by Obligors under the respective Receivables. The Borrowers and CSFB
hereby authorize each Servicer to take such steps as are necessary to re-perfect
or continue the perfection of such security interest on behalf of CSFB in the
event of the relocation of a Financed Vehicle or for any other reason.
SECTION 12.6. Additional Covenants of Servicer. Neither Servicer shall
release the Financed Vehicle securing each Receivable from the security interest
granted by such Receivable in whole or in part except in the event of payment in
full by the Obligor thereunder or repossession and resale, neither Servicer
shall impair the rights of CSFB in such Receivables, and neither Servicer shall
amend a Receivable, except that extensions may be granted in accordance with
Section 12.2.
SECTION 12.7. Monthly Servicing Fee. The Monthly Servicing Fee with
respect to each Servicer for each Distribution Date shall be an amount equal to
the sum of (a) the product of (i) one-twelfth of the Servicing Rate and (ii) the
average aggregate Principal Balance of the respective Receivables during the
Related Collection Period plus (b) all late fees, prepayment charges and other
administrative fees or similar charges allowed by applicable law with respect to
such Receivables, collected (from whatever source) on such Receivables during
the Related Collection Period.
SECTION 12.8. Monthly Servicing Report. Not later than 12:00 p.m., New
York City time on each Determination Date, each Servicer shall deliver to CSFB a
Monthly Servicing Report
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containing all the information specified in Exhibit C to this Agreement relating
to their respective Receivables.
SECTION 12.9. Semi-Annual Statement as to Compliance; Notice of
Default. (a) Each Servicer shall deliver to CSFB on or before January 31, 1997,
and June 30, 1997, an Officer's Certificate, stating that a review of such
Servicer's performance under this Agreement has been made under such officer's
supervision and to the best of such officer's knowledge, based on such review,
such Servicer has fulfilled all its obligations under this Agreement in all
respects throughout such period or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof.
(b) Each Servicer shall deliver to CSFB promptly after having obtained
knowledge thereof, but in no event later than five (5) Business Days thereafter,
written notice in any Officer's Certificate of the existence of any Potential
Event of Default.
SECTION 12.10. Independent Certified Public Accountant's Report. Each
Servicer shall cause a firm of independent nationally recognized certified
public accountants, who may also render other services to such Servicer or to
the Borrowers, to deliver to CSFB on or before the last day of the third
calendar month after the end of the fiscal year of such Servicer, a report dated
as of the end of the fiscal year of such Servicer and addressed to the Board of
Directors of such Servicer and to the effect that such firm has examined the
financial statements of such Servicer and issued its report therefor and that
such examination was made in accordance with generally accepted auditing
standards (except as otherwise noted therein), and accordingly included such
tests of the accounting records and such other auditing procedures as such firm
considered necessary in the circumstances.
The reports will also indicate that the firm is independent of the
Servicers within the meaning of Code of Professional Ethics of the American
Institute of Certified Public Accountants.
Notwithstanding the foregoing in this Section 12.10, for so long as
the Borrowers are also Servicers, the delivery of the annual Financial
Statements of AutoInfo, Inc. and its consolidated subsidiaries pursuant to
Section 8.4(a)(i) shall satisfy the requirements of this Section 12.10.
SECTION 12.11. Interim Certified Public Accountant's Reports. Each
Servicer shall cause a firm of independent nationally recognized certified
public accountants, who may render other services to such Servicer or to the
Borrowers, (a) to deliver to CSFB on or before the fourth (4th) Distribution
Date after the initial Advance a report addressed to CSFB and to the effect that
(i) a review in accordance with agreed upon procedures reasonably acceptable to
CSFB was made of the Receivables and the Monthly Servicing Report issued with
respect to each of the first three Distribution Dates after the initial Advance
Date, (ii) except as disclosed in the report, no exceptions or errors in such
Monthly Servicing Report were found, (iii) the collections, balances,
delinquency and loss information relating to the Receivables, as well as the
calculations, contained in such Monthly Servicing Report was found to be
accurate and (b) to deliver to CSFB on or before the seventh and tenth
Distribution Dates after the initial Advance, a report addressed to CSFB to the
effect that (i) a review in accordance with agreed upon procedures reasonably
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acceptable to CSFB was made of the Receivables and the Monthly Servicing Report
issued with respect to one randomly selected Distribution Date during the
preceding 3-month period; (ii) except as disclosed in the report, no exceptions
or errors in such Monthly Servicing Report was found, (iii) the collections,
balances, delinquency and loss information relating to the Receivables contained
in such Monthly Servicing Report, well as the related calculations, were found
to be accurate.
The reports will also indicate that the firm is independent of the
Servicers within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 12.12. Servicer Expenses. Each Servicer shall be required to
pay all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of independent accountants, taxes imposed on
such Servicer, and expenses incurred in connection with distributions and
reports to CSFB and Custodian and fees and expenses of any successor Servicer
and any other subcontractor.
SECTION 12.13. Access to Certain Documentation and Information
Regarding Receivables. Each Servicer shall provide to representatives of CSFB
and Custodian reasonable access to documentation and computer systems and
information regarding the Receivables. In each case, such access shall be
afforded without charge upon at least two (2) Business Days' prior notice and
during normal business hours. Nothing in this Section 12.13 shall derogate from
the obligation of each Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of such
Servicer to provide access as provided in this Section 12.13 as a result of such
obligation shall not constitute a breach of this Section 12.13.
SECTION 12.14. Documents Maintained by Servicer. Except for those
documents in the Receivables File, each Servicer shall retain possession of all
documents and files relating to the Receivables and hold such documents and
files relating to the Receivables as custodian for CSFB.
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ARTICLE XIII
SERVICER DEFAULT
SECTION 13.1. Servicer Default. If any one of the following events
(each, a "Servicer Default") shall occur and be continuing:
(a) Any failure by any Servicer to deposit into the
applicable Settlement Account or other account as required in this
Agreement any proceeds or payment required to be so delivered under
the terms of this Agreement that shall continue unremedied for a
period of one (1) Business Day; or
(b) Any failure by any Servicer to deliver any certificate
or Monthly Servicing Report within one (1) Business Day after the date
such certificate or Report, as the case may be, is required to be
delivered; or
(c) Failure on the part of any Servicer duly to observe or
to perform in any respect any other covenants or agreements of such
Servicer set forth in this Agreement or any Related Agreement, which
failure shall continue unremedied for a period of fifteen (15) days
after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to such Servicer by any
Borrower or Custodian or CSFB; or
(d) A breach of any representation or warranty of any
Servicer hereunder that continues unremedied for a period of one (1)
Business Day after the earlier of the date on which such Servicer
obtains knowledge thereof or on which written notice of such failure
thereof shall have been given to such Servicer;
(e) The occurrence of an Event of Bankruptcy with respect to
any Servicer; or
(f) Any assignment by any Servicer of its duties or rights
hereunder except as specifically permitted hereunder, or any attempt
to make such an assignment;
then, and in each and every case, so long as a Servicer Default shall not have
been remedied, CSFB, in addition to any other remedies it may have, may
terminate all of the rights and obligations of such Servicer as servicer of the
applicable Receivables under this Agreement. Each Servicer shall be entitled to
its pro rata share of its respective Monthly Servicing Fee for the number of
days in the Collection Period prior to the effective date of its termination. On
or after the receipt by a Servicer and the effective date of written notice of
termination from CSFB, all authority and power of such Servicer under this
Agreement, whether with respect to the Receivables or otherwise, shall, without
further action, pass to and be vested in a successor Servicer as may be
appointed under Section 13.2; provided, however, that such successor Servicer
shall have no liability with respect to any obligation which was required to be
performed by the predecessor Servicer prior to the date such successor Servicer
becomes Servicer or any claim of a third party based on any alleged action or
inaction of such predecessor Servicer as Servicer; and,
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without limitation, CSFB is hereby authorized and empowered to execute and
deliver, on behalf of such predecessor Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
applicable Receivables and related documents, or otherwise. The predecessor
Servicer shall cooperate with the successor Servicer and CSFB in effecting the
termination of the responsibilities and rights of such predecessor Servicer as
servicer of the applicable Receivables under this Agreement, including (x) the
transfer to such successor Servicer for administration by it of all funds that
shall at the time be held or should have been held by such predecessor Servicer
for deposit, or shall thereafter be received with respect to the applicable
Receivables and all funds in an account related to such Receivables and the
related documents and statements held by it hereunder and (y) the delivery to
such successor Servicer all files and records concerning and relating to the
applicable Receivables and a computer tape in readable form containing all
information necessary to enable such successor Servicer to service the
applicable Receivables and the related Receivable Files in such predecessor
Servicer's possession. All reasonable costs and expenses (including attorneys'
fees) incurred in connection with transferring the Receivable Files and any
other related documents and instruments to any successor Servicer and amending
this Agreement to reflect such succession as Servicer pursuant to this Section
13.1 shall be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses. In addition, any successor Servicer
shall be entitled to payment from the immediate predecessor Servicer for
reasonable transition expenses incurred in connection with acting as successor
Servicer, and to the extent not so paid, such payment shall be made pursuant to
the Custodial Agreement. The predecessor Servicer shall grant CSFB and the
successor Servicer reasonable access to such predecessor Servicer's premises at
such predecessor Servicer's expense. If requested by CSFB the successor Servicer
shall modify or terminate any arrangements relating to (i) the applicable
Lock-Box with the Lock-Box Bank or (ii) the Lock-Box Agreement, and direct the
applicable Obligors to make all payments under the applicable Receivables
directly to such successor Servicer at the predecessor Servicer's expense (in
which event such successor Servicer shall process such payments directly, or,
through a lock-box with a lock-box bank at the direction of CSFB.)
SECTION 13.2. Appointment of Successor Servicer.
(a) Upon any Servicer's receipt of notice of termination
pursuant to Section 13.1 or, if such Servicer resigns, in accordance
with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as servicer of the applicable
Receivables under this Agreement only until the date specified in such
termination notice or, if no such date is specified in a notice of
termination, until receipt of such notice and, in the case of
resignation, until the later of (x) the date ninety (90) days from the
delivery to CSFB and the Custodian of written notice of such
resignation (or written confirmation of such notice) in accordance
with the terms of this Agreement and (y) the date upon which such
predecessor Servicer shall become legally unable to act as Servicer,
as specified in the notice of resignation and accompanying Opinion of
Counsel.
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(b) On and after the date any Servicer receives a notice of
termination pursuant to Section 13.1 and Section 13.3, CSFB shall (i)
succeed to and assume all of such Servicer's responsibilities, rights,
duties and obligations under this Agreement with respect to servicing
of the applicable Receivables, unless CSFB is prohibited by law from
so acting, or (ii) appoint as successor Servicer any established
financial institution having a net worth of not less than $20,000,000
and whose regular business shall include the servicing of receivables
similar to the Receivables subject to this Agreement and such
successor Servicer shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of such Servicer under this
Agreement with respect to servicing of the applicable Receivables
prior to the termination of such Servicer's responsibilities, duties,
liabilities and obligations with respect to servicing of the
applicable Receivables under this Agreement in accordance with the
terms of this Agreement. In the event that a successor Servicer has
not been appointed at the time when the predecessor Servicer has
ceased to act as Servicer in accordance with this Section 13.2, then
CSFB shall appoint itself as successor Servicer, or petition a court
of competent jurisdiction to appoint a successor to such Servicer
under this Agreement.
(c) Upon such appointment, the successor Servicer shall be
the successor Servicer in all respects to the predecessor Servicer and
shall be subject to all the responsibilities, duties, and liabilities
arising thereafter relating thereto placed on the predecessor Servicer
as servicer of the applicable Receivables, and shall be entitled to
the respective Monthly Servicing Fee and all of the rights granted to
the predecessor Servicer, by the terms and provisions of this
Agreement.
SECTION 13.3. Action Upon Certain Failures of the Servicer. In the
event that CSFB shall have knowledge of any Servicer Default or event which,
with notice or lapse of time or both, would unless cured or waived, become a
Servicer Default, CSFB shall give notice thereof to the Borrowers, the Servicers
and the Custodian. For all purposes of this Agreement, in the absence of actual
knowledge by CSFB, CSFB shall not be deemed to have knowledge of any failure of
any Servicer as specified in Section 13.1 unless notified thereof in writing by
such Servicer. CSFB shall be under no duty or obligation to investigate or
inquire as to any potential failure of any Servicer specified in Section 13.1.
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ARTICLE XIV
THE LENDER
SECTION 14.1. CSFB's Authority. Each Borrower hereby irrevocably
appoints CSFB, and any successor or assigns to CSFB, its true and lawful
attorney, with full power of substitution, in the name of such Borrower, at the
expense of such Borrower, to the extent permitted by law to exercise, at any
time and from time to time, any or all of the following powers with respect to
all or any of the Collateral: (i) to demand, sue for, collect, receive and give
acquittance for any and all monies due or to become due upon or by virtue
thereof, (ii) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto, (iii) to sell, transfer, assign or otherwise
deal with the same or the proceeds thereof as fully and effectively as if CSFB
were the absolute owner thereof, and (iv) to extend the time of payment of any
or all thereof and to make any allowance or other adjustments with respect
thereto.
SECTION 14.2. Degree of Care. Notwithstanding any term or provision of
this Agreement, CSFB shall incur no liability to the Borrowers except for a
material breach of the terms of this Agreement or for gross negligence, bad
faith or willful misconduct in carrying out its duties, if any, to the
Borrowers. CSFB shall be protected and shall incur no liability to any such
party in relying upon the accuracy, acting in reliance upon the contents and
assuming the genuineness of any notice, demand, certificate, signature,
instrument or other document believed by CSFB to be genuine and to have been
duly executed by the appropriate signatory, and (absent manifest error or actual
knowledge to the contrary) CSFB shall not be required to make any independent
investigation with respect thereto. CSFB shall, at all times, be free
independently to establish to its reasonable satisfaction the existence or
nonexistence, as the case may be, of any fact the existence or nonexistence of
which shall be a condition to the exercise or enforcement of any right or remedy
under this Agreement or any of the Related Agreements.
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ARTICLE XV
GENERAL
SECTION 15.1. Survival. Except as otherwise expressly provided herein,
all covenants, agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement, the Promissory Note and
the Custody Agreement, the making of each Advance hereunder, and the termination
of this Agreement.
SECTION 15.2. Waiver; Amendments. No delay or failure to take any
action on the part of CSFB or the holder of the Promissory Note or other
Obligations in the exercise of any right, power, privilege or remedy shall
operate as a waiver thereof and hereof, nor shall any single or partial exercise
by any of them of any such right, power, privilege or remedy preclude other or
further exercise thereof or the exercise of any other right, power, privilege or
remedy shall be construed to be a waiver of any Event of Default or Potential
Event of Default. No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or the Promissory Note or any
Related Agreement shall in any event be effective unless the same shall be in
writing and signed and delivered by CSFB and the Borrower.
SECTION 15.3. Confirmations. Each of the Borrowers and CSFB (or the
holder of the Promissory Note) agrees from time to time, upon written request
received by it from the other, to confirm to the other in writing the aggregate
unpaid principal amount of the Advances then outstanding under the Promissory
Note.
SECTION 15.4. Notices. All notices, amendments, waivers, consents and
other communications provided to any party hereto under this Agreement shall be
in writing and addressed, delivered or transmitted to such party at its address
or facsimile number set forth in Schedule II at such other address or facsimile
number as may be designated by such party in a notice to the other parties. Any
notice, if mailed and properly addressed with postage prepaid or if properly
addressed and sent by pre-paid courier service, shall be deemed given when
received; any notice, if transmitted by facsimile, shall be deemed given when
transmitted upon receipt of electronic confirmation of transmission.
SECTION 15.5. Costs, Expenses and Taxes. The Borrowers further agree
to pay all out-of-pocket costs and expenses (including reasonable attorneys'
fees and legal expenses and reasonable accountant fees and expenses) incurred by
CSFB in connection with entering into this Agreement and the administration,
enforcement, waiver or amendment of this Agreement, and any other Related
Agreement. In addition, the Borrowers agree to pay, and to save CSFB harmless
from all liability for, any document, stamp, filing, recording, or other taxes
(other than net income taxes of CSFB) which may be payable in connection with
the borrowings hereunder or the execution, delivery, recording or filing of this
Agreement or of any other instruments or documents provided for herein or
delivered or to be delivered hereunder or in connection herewith. All
obligations provided for in this Section 15.5 shall be the joint and several
obligations of the Borrowers and shall survive any termination of this
Agreement. In the event that either party commences a lawsuit or proceeding
against the other in connection with this Agreement or
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any other Related Agreement, any and all reasonable attorneys' fees and costs
incurred by CSFB in connection with such lawsuit or proceeding shall be paid by
the Borrowers. All amounts payable by the Borrowers under this Section 15.5 and
Section 15.6 and under the other provisions of this Agreement and any other
Related Agreement shall, except as otherwise expressly provided, be immediately
due upon request for the payment thereof.
SECTION 15.6. Indemnification. In consideration of CSFB's execution
and delivery of this Agreement and CSFB's extension of its commitment pursuant
to this Agreement, each Borrower hereby agrees to indemnify, defend, exonerate
and hold CSFB and its officers, directors, stockholders and employees (herein
collectively called "Lender Parties" and individually called a "Lender Party")
free and harmless from and against any and all claims, demands, actions, causes
of action, suits, losses, costs (including, without limitation, all documentary,
recording, filing, or other stamp taxes or duties), charges, liabilities,
damages, and expenses in connection therewith (irrespective of whether such
Lender Party is a party to the action for which indemnification hereunder is
sought), and including, without limitation, reasonable attorneys' fees and
disbursements (called in this paragraph the "Indemnified Obligations"), incurred
by Lender Parties or any of them as a result of, or arising out of, or relating
to (i) any transaction financed or to be financed in whole or in part, directly
or indirectly, with the proceeds of any Advance or involving any Advance, or
(ii) the execution, delivery, performance or enforcement of this Agreement, the
other Related Agreements and any instrument, document or agreement executed
pursuant hereto or thereto by any of the Lender Parties, or (iii) the ownership,
operation, maintenance, leasing, or titling of the Receivables, except in each
case for any such Indemnified Obligations arising on account of the relevant
Lender Party's gross negligence or willful misconduct, and each Borrower agrees
to the payment and satisfaction of each of the Indemnified Obligations which is
permissible under applicable law; provided that the Indemnified Obligations
shall not include recourse for Defaulted Receivables or losses suffered by
stockholders as a result of a decline in the value of their investment in CSFB.
SECTION 15.7. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT, ANY RELATED AGREEMENT OR THE PROMISSORY NOTE, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
CSFB, ANY SERVICER OR ANY BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY
IN THE COURTS OF THE STATE OF NEW YORK OR IN UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
- -------- ------- ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT CSFB'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE BORROWERS AND EACH OF THE
SERVICERS HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ALL FEDERAL AND STATE COURTS OF THE STATE OF NEW YORK FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. EACH
OF THE BORROWERS AND EACH OF THE SERVICERS FURTHER
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IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH OF
THE BORROWERS AND EACH OF THE SERVICERS HEREBY EXPRESSLY AND IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT A BORROWER OR A SERVICER
HAVE OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF
FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR
ITS PROPERTY, EACH HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT, ANY RELATED AGREEMENT AND THE PROMISSORY NOTE.
SECTION 15.8. Governing Law; Severability. THIS AGREEMENT AND THE
PROMISSORY NOTE SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or unenforceable
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition, unenforceability or invalidity, without invalidating
the remainder of such provision or the remaining provisions of this Agreement.
All obligations of the Borrowers and rights of CSFB and the holder of the
Promissory Note or other Obligations shall be in addition to and not in
limitation of those provided by applicable law or in any other written
instrument or agreement relating to any of the Obligations.
SECTION 15.9. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS AGREEMENT, THE PROMISSORY NOTE OR ANY OTHER RELATED
AGREEMENT TO WHICH IT IS A PARTY, OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT
OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT OR ANY RELATED AGREEMENT OR ANY RELATED TRANSACTION, AND AGREES THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
SECTION 15.10. Successors and Assigns. This Agreement shall be binding
upon the Borrowers, the Servicers and CSFB and their respective successors and
assigns, and shall inure to the benefit of the Borrowers, the Servicers and CSFB
and their respective successors and assigns; provided, however, that the
Borrowers and the Servicers shall not have the right to assign their respective
rights, obligations or delegate their respective duties under this Agreement or
any
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other Related Agreement without CSFB's prior written consent. CSFB may from time
to time, without the consent of the Borrowers and the Servicers, assign all or a
portion of its rights under the Related Agreements, including rights to receive
payments of principal and interest in respect of all or a portion of the
Advances, and such assignee shall be entitled to all rights in respect of such
assigned interest which are provided to CSFB under the Related Agreements. This
Agreement and the other Related Agreements contain the entire agreement of the
parties hereto with respect to the matters covered hereby.
SECTION 15.11. Headings. Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Borrowers and CSFB have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
AUTOINFO FINANCE OF VIRGINIA, INC.,
as Borrower and Servicer
By:____________________________________________
Name: Scott J. Zecher
Title: Chief Executive Officer
CAR LOAN CO., INC., as Borrower and Servicer
By:____________________________________________
Name: Scott J. Zecher
Title: Chief Executive Officer
CS FIRST BOSTON MORTGAGE CAPITAL
CORP., as Lender
By:___________________________________________
Name:
Title:
================================================================================
CUSTODY AGREEMENT
by and among
CS FIRST BOSTON MORTGAGE CAPITAL CORP.,
Lender
and
AUTOINFO FINANCE OF VIRGINIA, INC.,
Borrower and Servicer
and
CAR LOAN CO., INC.,
Borrower and Servicer
and
CRESTAR BANK,
Custodian
Dated as of December 9, 1996
================================================================================
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TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS; APPOINTMENT........................ 1
Section 1.1. General................................................. 1
Section 1.2. Certain Defined Terms................................... 1
Section 1.3. Incorporation of Certain Definitions.................... 3
Section 1.4. Reference to Time....................................... 3
Section 1.5. Appointment of the Custodian............................ 3
ARTICLE II
RECEIVABLE INFORMATION LIST...................... 4
Section 2.1. Receivable Information List; Computer File.............. 4
Section 2.2. Documents Maintained by Servicer........................ 4
ARTICLE III
CUSTODIAL ARRANGEMENT.......................... 5
Section 3.1. Deposit of Collateral................................... 5
Section 3.2. Transfer of Receivables; Delivery of Documents.......... 5
Section 3.3. Borrowing Request and Review of Receivable Files........ 6
Section 3.4. Trust Receipt and Certification......................... 7
Section 3.5. Release of Receivable Files............................. 8
Section 3.6. Return.................................................. 9
Section 3.7. Custodial Register...................................... 9
Section 3.8. Power of Attorney....................................... 9
Section 3.9. No Service Charge for Sale or Transfer of Receivables... 9
Section 3.10. The Lender May Reject Receivables....................... 9
Section 3.11. Affidavit of Lost Receivable File....................... 10
ARTICLE IV
DISTRIBUTION DATE PAYMENTS; SETTLEMENT ACCOUNTS...... 11
Section 4.1. Distribution Date Payments.............................. 11
Section 4.2. Settlement Account...................................... 11
Section 4.3. Distributions........................................... 11
Section 4.4. Payments of Shortfalls.................................. 12
Section 4.5. Investments............................................. 12
Section 4.6. Simultaneous Transfers.................................. 12
Section 4.7. Transfer of Receivables ................................ 12
ARTICLE V
CUSTODIAN................................ 14
Section 5.1 Representations, Warranties and Covenants of Custodian.. 14
Section 5.2 Custodian of Documents.................................. 15
Section 5.3 Charges and Expenses.................................... 15
Section 5.4 No Adverse Interests.................................... 16
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Section 5.5 Inspections............................................. 16
Section 5.6 Insurance............................................... 16
Section 5.7 Limitation of Liability................................. 16
Section 5.8 Indemnification......................................... 16
Section 5.9 Removal of Custodian.................................... 17
Section 5.10 Termination of Custodian................................ 17
Section 5.11 Reliance of Custodian................................... 17
Section 5.12 Transmission of Receivable Files........................ 17
Section 5.13 Authorized Representatives.............................. 18
Section 5.14 Merger or Consolidation of or Assumption of the
Obligations of the Custodian........................ 18
ARTICLE VI
MISCELLANEOUS PROVISIONS...................... 19
Section 6.1 Amendment............................................... 19
Section 6.2 Governing Law and Jurisdiction; Waiver of Jury Trial.... 19
Section 6.3 Notices................................................. 19
Section 6.4 Severability of Provisions.............................. 20
Section 6.5 No Partnership.......................................... 20
Section 6.6 Counterparts............................................ 20
Section 6.7 Assignment.............................................. 20
Section 6.8 Headings................................................ 20
EXHIBIT A Form of Trust Receipt and Certification................... A-1
EXHIBIT B Request for Release of Documents.......................... B-1
EXHIBIT C Authorized Officers of the Lender......................... C-1
EXHIBIT D Authorized Officers of AutoInfo Finance of Virginia, Inc.. D-1
EXHIBIT E Authorized Officers of Car Loan Co., Inc.................. E-1
EXHIBIT F Authorized Officers of Custodian.......................... G-1
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CUSTODY AGREEMENT
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This Custody Agreement ("Agreement"), dated as of December 9, 1996, is
by and among AutoInfo Finance of Virginia, Inc., a Virginia corporation
("AutoInfo Finance"), Car Loan Co., Inc., a Connecticut corporation ("Car Loan
Co.") (AutoInfo Finance and Car Loan Co. are referred to herein collectively as
the "Borrowers" and each a "Borrower"), CS First Boston Mortgage Capital Corp.,
a New York corporation ("Lender"), and Crestar Bank, a Virginia banking
corporation ("Custodian").
PRELIMINARY STATEMENT
---------------------
A. Pursuant to the Loan, Security and Servicing Agreement dated as of
December 9, 1996 (the "Loan Agreement") among the Lender and the Borrowers, the
Lender may from time to time make Advances to the Borrowers.
B. In order to secure repayment of the Advances, each Borrower has
transferred, assigned, pledged and granted, and will from time to time transfer,
assign, pledge and grant, to the Lender and its successors and assigns a
security interest in and lien on all of such Borrower's right, title and
interest in and to the Collateral.
C. The Lender and the Borrowers desire to provide for the custody and
management of the Receivable Files relating to the Receivables.
D. The Lender and the Borrowers have requested that the Custodian act
as custodian to hold all Receivable Files relating to the Receivables and the
proceeds thereof as bailee of, and agent for the benefit of the Lender.
The Custodian is willing and able to perform the duties and
obligations of a custodian and bailee as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Lender, the
Borrowers and the Custodian agree as follows:
ARTICLE I
DEFINITIONS; APPOINTMENT
Section 1.1. General. For the purpose of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this Article include the plural as well as the singular, the words
"herein", "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision, and Section references refer to Sections of this Agreement.
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Section 1.2. Certain Defined Terms. Whenever used in this Agreement,
unless the context otherwise requires, the following words shall have the
meanings set forth below:
"Agreement": This Custody Agreement, including all exhibits hereto,
and all amendments hereof and supplements hereto.
"Assignment": With respect to a Receivable, collectively the original
instrument of assignment of such Receivable and all other documents securing
such Receivable made by the Person originating such Receivable to the applicable
Borrower, which is in a form sufficient under the laws of the jurisdiction in
which the related Financed Vehicle is located to permit the assignee to exercise
all rights granted by the Obligor under such Receivable and such other documents
and all rights available under applicable law to the obligee under such
Receivable and which, in each case, may, to the extent permitted by the laws of
the state in which the related financed vehicle is located, be a blanket
instrument of assignment covering other Receivables as well.
"Authorized Representative": As defined in Section 5.13 hereof.
"Available Funds": With respect to any Distribution Date, all
collections and other amounts received in respect of the Receivables and
deposited to the Settlement Accounts during the related Collection Period.
"Borrowing Request": As defined in the Loan Agreement and in the form
attached thereto.
"Collateral Value Deficiency Notice": As defined in the Loan
Agreement.
"Collection Period": As defined in the Loan Agreement.
"Confirmation": As defined in the Loan Agreement.
"Delivery Date": The date on which the Receivables and related
Receivable Files are delivered to the Custodian by the applicable Borrower.
"Lender's Account": The account designated in writing by the Lender to
Custodian, as Lender may so designate from time to time.
"Monthly Servicing Fee": As defined in the Loan Agreement.
"Receivable": As defined in the Loan Agreement.
"Receivable Files": As defined in Section 3.2 hereof.
"Receivable Information List": As defined in the Loan Agreement.
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"Servicer": AutoInfo Finance of Virginia, Inc. or Car Loan Co., Inc.,
as applicable, or any successor thereto.
"Settlement Account": An account established pursuant to Section 4.2
hereof and the Loan Agreement.
Section 1.3. Incorporation of Certain Definitions. All capitalized
terms used herein and not otherwise defined shall have the meanings assigned in
the Loan Agreement, unless the context clearly indicates otherwise.
Section 1.4. Reference to Time. All references to time herein shall be
deemed to refer to New York City time unless otherwise provided.
Section 1.5. Appointment of the Custodian. The Lender and the
Borrowers hereby appoint the Custodian, and the Custodian hereby accepts its
appointment, to act as the bailee of and agent for the Lender and its successors
and assigns for the purpose of taking custody of the documents contained in the
Receivable Files and the proceeds thereof and to act on behalf of the Lender
under this Agreement and, in the absence of other written instructions from the
Lender, to exercise such powers hereunder as are specifically delegated to or
required of the Custodian by the terms hereof. With respect to each Receivable,
the Custodian's appointment as the bailee and agent shall terminate upon such
time as such Receivable is not subject of the Loan Agreement or upon notice from
the Lender.
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ARTICLE II
RECEIVABLE INFORMATION LIST
Section 2.1. Receivable Information List; Computer File.
(a) Custodian shall maintain, as an attachment to its executed copy of
this Agreement or otherwise in its records or possession, the most recent
version of the Receivable Information List, as such list may be amended from
time to time. Custodian shall receive a printed copy of the amended Receivable
Information List with each revised copy of the Computer File. If a Computer File
received by Custodian is not accompanied by such amended Receivable Information
List, Custodian shall immediately produce such a printed list from the related
Computer File. The Receivable Information List in the custody of Custodian shall
be the definitive Receivable Information List for all purposes under this
Agreement.
(b) On or before (i) each Delivery Date and (ii) each Distribution
Date the applicable Borrower shall provide to the Custodian and to the Lender a
Computer File for each Receivable, as of a date not earlier than the Business
Day prior to such Delivery Date or Distribution Date. With respect to any
Collateral Value Deficiency Notice, the applicable Borrower shall, along with
the delivery of any additional Receivables as required pursuant to the terms of
the Loan Agreement, provide to the Custodian and the Lender a Computer File for
such Receivables. Each Computer File shall clearly indicate Defaulted
Receivables in a manner acceptable to the Custodian and the Lender and, when
delivered, shall be accompanied by a printed copy of the amended Receivable
Information List.
Section 2.2. Documents Maintained by Servicer. Except as delivered to
the Custodian hereunder, all other documents and files relating to the
Receivables shall be retained and held by the applicable Servicer pursuant to
the terms of the Loan Agreement.
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ARTICLE III
CUSTODIAL ARRANGEMENT
Section 3.1. Deposit of Collateral. Each Borrower shall deposit with
the Custodian, and the Custodian agrees to hold in pledge as bailee of and as
agent for the Lender and its successors and assigns, such Collateral that may be
so deposited hereunder from time to time. The Custodian shall maintain such
Collateral so deposited in separate records and files.
Section 3.2. Transfer of Receivables; Delivery of Documents. A
Borrower shall, prior to the delivery of or with the Borrowing Request relating
to each Advance, deliver, or cause to be delivered, to the Custodian the
following documents:
(i) the Receivable Information List, as amended;
(ii) an executed Assignment, if applicable;
(iii) the original certificate of title or title
guaranty issued by the related Dealer or a copy of
an application for title if no certificate of
title has yet been issued; provided, however,
that, with respect to any Advances to AutoInfo
Finance within 90 days after the date of this
Agreement, such certificate of title, title
guaranty or application for title need not be
delivered to the Custodian prior to or with the
delivery of the Borrowing Request; provided,
further, that for any Receivable subject to such
Advance and for which any such certificate of
title, title guaranty or application for title is
not so delivered prior to or with such Borrowing
Request, AutoInfo Finance shall cause the original
certificate of title to be delivered to the
Custodian prior to the earlier of (x) 90 days
after the applicable Advance Date and (y) 180 days
after the date of origination of the related
Receivable;
(iv) the fully executed original of the Receivable
signed by the applicable Borrower in the following
form: "Assigned to [the Lender or, if requested by
the Lender, in blank], without recourse" together
with all intervening endorsements showing a
complete chain of title from originator to the
Borrower;
(v) a copy of the credit application executed by the
Obligor;
(vi) the originals of any assumption, modification,
written assurance, substitution agreement,
extension or guaranty agreement and any assignment
thereof;
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(vii) the original of any security agreement or
equivalent document executed in connection with
the Receivable and any assignment thereof;
(viii) if any Receivable was originated in a state in
which the filing of a financing statement under
the UCC is required to perfect an interest in
motor vehicles, copies of the filed statements (as
well as a consent to file additional UCC-1s or
UCC-3s as required); provided that the Custodian
has no obligation to determine whether such
financing statements are required to perfect an
interest in motor vehicles;
(ix) such other documents as may be in existence
evidencing the security interest of the Lender in
the Receivable; provided, however, that the
Custodian has no obligation to determine the
existence of or necessity for such other
documents; and
(x) such other documents as the Lender may require
after notice to the Borrowers and the Custodian
which the Custodian has consented to review.
All documents held by Custodian with respect to a Receivable,
including those delivered to the Custodian pursuant to Section 3.2, are referred
to herein as the "Receivable File."
Each Borrower represents and warrants to the Lender and the Custodian
that, with respect to such Borrower's Receivables, (i) each of such documents
which is required to be signed by the Obligor has been signed by the Obligor in
the appropriate spaces; and (ii) all blanks on any form have been properly
filled in and each form has otherwise been correctly prepared.
Each Borrower shall, upon execution of this Agreement, deliver to the
Custodian the following:
With respect to Receivables that are chattel paper, evidence of filing
with the appropriate office in the following jurisdictions of the following
UCC-1 financing statements, each indicating the Receivables as collateral:
(a) UCC-1 financing statement executed by the applicable Borrower as
debtor, naming the Lender as secured party, and filed in the State of
Virginia or the State of Connecticut, as applicable; and (b) such other
filings under the UCC as may be required by the Lender;
Section 3.3. Borrowing Request and Review of Receivable Files.
(a) Upon receipt of a Borrowing Request from a Borrower, the Custodian
shall review the Receivable Files which such Borrower has deposited with the
Custodian in connection with such Borrowing Request to determine whether the
Custodian has received a Receivable File with respect to each Receivable listed
on the Schedule of Receivables attached to such Borrowing
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Request. Custodian shall immediately advise the Lender and such Borrower by
telephone or by facsimile transmission if it determines that such Receivables
and other documents in the related Receivable File are not so deposited.
(b) The Custodian shall review the Receivable Files: (i) with respect
to the Receivables subject to Advances referred to in the first and second
provisos in Section 3.2(iii) hereof and for which no original certificate of
title, title guaranty or copy of an application for title is delivered prior to
or with a Borrowing Request, within 90 days after the applicable Advance Date;
and (ii) with respect to any other Receivables not subject to clause (i) in this
Section 3.3(b), within 120 days after the applicable Advance Date, in each case
to verify that original certificates of title have been delivered to the
Custodian. The Custodian shall immediately notify the applicable Borrower and
the Lender by telephone or facsimile transmission if it determines that any such
original certificate of title has not been delivered to the Custodian.
Section 3.4. Trust Receipt and Certification.
(a)(i) Within two (2) Business Days following receipt of the
Receivable Files, the Computer File and the Borrowing Request, the Custodian
shall, with respect to the Receivables referenced in such Borrowing Request,
execute and deliver to the Lender (with a copy to the related Borrower which
shall be clearly marked as a copy and non-transferable) one or more
certifications (each, a "Trust Receipt and Certification") in the form set forth
in Exhibit A hereto.
(ii) In the event of delivery by the Lender to the Borrowers
and the Custodian of a Collateral Value Deficiency Notice pursuant to the Loan
Agreement the Custodian shall, upon receipt of such Notice and the Receivables
and the related Receivable Files delivered to Custodian by such Borrower(s)
pursuant to such Notice, execute and deliver to the Lender (with a copy to the
applicable Borrower which shall be clearly marked as a copy and
non-transferrable) one or more Trust Receipt(s) and Certification(s) in the form
attached hereto as Exhibit A with respect to such Receivable or Receivables.
(b) The Custodian shall, in each Trust Receipt and Certification,
certify and confirm as to each Receivable listed on the Schedule of Receivables
attached to the Borrowing Request (or in the case of a Collateral Value
Deficiency Notice the Receivables delivered to it) that, except as noted on the
schedule of exception report attached to the related Trust Receipt and
Certification:
(i) all documents required to be delivered to it pursuant to
Section 3.2 hereof are in the Custodian's possession;
(ii) such documents have been reviewed by the Custodian and
appear regular on their face and relate to such applicable Receivables and
neither the Receivables nor the Assignments contains any notations on their face
which appear to evidence any claims, liens, security interests, encumbrances or
other restrictions or transfers;
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(iii) each Receivable bears an original signature or
signatures purporting to be the signature or signatures of the person or persons
named as the maker or Obligor under the Receivable;
(iv) if the Receivable does not name "[the related
Borrower]" as the holder or payee, the Receivable bears the original
endorsements that complete the chain of ownership from the original holder or
payee to "[the related Borrower]";
(v) the original of the Assignment of the Receivable
required under Section 3.2 and any intervening assignment of such Receivable
bear the original signature purporting to be the signature of the named obligee
or beneficiary (and any other necessary party including subsequent assignors)
and that such Assignment and any such intervening assignment complete the chain
of title from the originator to the "[the related Borrower]";
(vi) each Receivable has been endorsed as noted in Section
3.2 hereof; and
(vii) based on its review of the Receivable File with
respect to each such Receivable, the information set forth on the Schedule of
Receivables attached to the Borrowing Request or in the Computer File, as
applicable, accurately reflects the information contained in each Receivable
Files.
(c) If, on each Distribution Date, a Receivable is released from the
lien of the Loan Agreement or is rejected by the Lender, the Lender shall cause
the applicable Trust Receipt and Certification to be delivered via overnight
courier to Custodian for cancellation. In the event that any Receivables covered
by such surrendered Trust Receipt(s) and Certification(s) are still subject of
an Advance and the lien of the Loan Agreement, the Custodian shall issue and
deliver to the Lender via overnight courier a replacement Trust Receipt and
Certification covering such Receivables which are still subject to an Advance
and the lien of the Loan Agreement.
Section 3.5. Release of Receivable Files. From time to time and as
appropriate for the repossession of or foreclosure on the collateral securing
any of the Receivables, pay off, full prepayment and repurchase, or in the event
that the Receivable has been rejected, is a Liquidated Receivable or is a
Defaulted Receivable, Custodian is hereby authorized, upon written request of
the applicable Borrower in the form annexed hereto as Exhibit B, to release to
such Borrower or such Borrower's designee the related Receivable Files or the
documents set forth in such request. All documents so released to such Borrower
or such Borrower's designee shall be held by it in trust for the benefit of the
Lender. Such Borrower shall return or cause to be returned to the Custodian the
Receivable Files, or such other documents which have been released to such
Borrower or such Borrower's designee, when such Borrower's need therefor in
connection with such foreclosure or repossession no longer exits, unless the
Receivable shall be liquidated, in which case, upon receipt of a certification
to this effect from such Borrower to Custodian in the form annexed hereto as
Exhibit B, the related Receivable Files shall be released by Custodian to such
Borrower and the Custodian shall thereupon reflect any such liquidation on the
Receivable Information List.
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The foregoing provision respecting release of the Receivable Files by
Custodian upon request by a Borrower shall be operative only to the extent that
at any time Custodian shall not have released Receivable Files or any part
thereof or documents (including those requested) pertaining to no more than 100
of the total number of Receivables being maintained by Custodian hereunder at
the time of such request. Any additional Receivable Files or documents requested
to be released by a Borrower may be released only upon written authorization of
the Lender. The limitation of this paragraph shall not apply to release of the
Receivable Files to a Borrower under Section 3.6 or Section 3.10 below.
Section 3.6. Return. Upon the return of any Receivable pursuant to
this Agreement, the Loan Agreement or the payment in full of any Receivable,
which shall be evidenced by Custodian's receipt of the applicable Borrower's
request for release in the form annexed hereto as Exhibit B, Custodian shall
promptly release the related Receivable Files to such Borrower or such
Borrower's designee.
Section 3.7. Custodial Register. Custodian shall cause such books and
records at its corporate trust office or other registry maintained with respect
to the Receivables to reflect that such records and books or other registry and
the Receivables which are the subject of such records and books or other
registry are owned by the applicable Borrower and pledged to the Lender.
Section 3.8. Power of Attorney. Each Borrower and the Lender hereby
grant to the Custodian a power of attorney, with full power of substitution, to
take in the name of such Borrower and the Lender all steps which are necessary
or appropriate to endorse, negotiate, deposit or otherwise realize on any
instrument or writing of any kind held or transmitted by such Borrower or the
Lender or transmitted or received by Custodian in connection with any
Receivable. The power of attorney that each Borrower and the Lender have granted
to the Custodian pursuant to this Section 3.8 may be revoked by the Lender at
any time.
Section 3.9. No Service Charge for Sale or Transfer of Receivables. No
service charge shall be made for any sale or transfer of Receivables, but the
Custodian may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any sale or transfer
of Receivables. Notwithstanding the foregoing, the Custodian may charge a
reasonable fee in connection with the release of the Receivable Files or any
document contained therein pursuant to Section 3.5, which fee shall be paid by
the Borrowers.
Section 3.10. The Lender May Reject Receivables.
(a) The Lender may refuse any Receivable offered by a Borrower under
the Loan Agreement or may, by notice to Custodian, require an immediate transfer
of any Receivable back to such Borrower, in each case under the circumstances
provided in the Loan Agreement. The Borrowers shall have no right to object to
such rejection or transfer.
(b) If a Receivable is not accepted by the Lender on an Advance Date
because of a defect in the related Receivable File, or if the Lender gives
written notice to the Custodian
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that it will not be accepting a specific Receivable for any other reason, the
Custodian will return the related Receivable File to the related Borrower (or
such other person as such Borrower shall indicate in writing), at such
Borrower's expense, within two (2) Business Days of such Advance Date unless
otherwise instructed in writing by the Lender or, after such Advance Date, by
such Borrower.
Section 3.11. Affidavit of Lost Receivable File. In the event the
Custodian loses or misplaces any Receivable File or any portion thereof, or if
any instruments, documents, or certificates therein are destroyed, then, in
addition to any other liability the Custodian may have in respect thereof
pursuant to the terms of this Custody Agreement or otherwise, the Custodian
agrees to execute and deliver to the Lender, upon the Lender's written request,
an affidavit stating that such instrument, document, or certificate has been
lost or destroyed, as applicable, and, if necessary, such other affidavits or
certificates as may be reasonably necessary to obtain replacement certificates
of title or other instruments.
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ARTICLE IV
DISTRIBUTION DATE PAYMENTS; SETTLEMENT ACCOUNTS
Section 4.1. Distribution Date Payments. One (1) Business Day prior to
each Distribution Date, the Lender shall inform Custodian via facsimile of the
amounts payable by the Borrowers to Lender on such Distribution Date pursuant to
the Loan Agreement and Custodian shall, on such Distribution Date, transfer such
amounts from the Settlement Accounts to the Lender's Account in accordance with
Section 4.3.
Section 4.2. Settlement Account.
(a) Each Borrower shall establish and maintain a separate Settlement
Account with Crestar Bank, which shall be an Eligible Account; provided,
however, if such account shall cease to be an Eligible Account, then within five
(5) Business Days thereafter, the Custodian, with the consent of the Lender,
shall cause such account to be moved to an institution so that such account
meets the definition of an Eligible Account. One Settlement Account shall be
entitled "Crestar Bank as Custodian for CS First Boston Mortgage Capital Corp.
(regarding AutoInfo Finance of Virginia, Inc.)" and the other Settlement Account
shall be entitled "Crestar Bank, as Custodian for CS First Boston Mortgage
Capital Corp. (regarding Car Loan Co., Inc.)". All amounts paid into each
Settlement Account under this Agreement and pursuant to the Loan Agreement shall
be held in trust for the Lender until payment of any such amounts is authorized
hereunder.
(b) On each Business Day, pursuant to the applicable Lock-Box
Agreement, the applicable Lock-Box Bank shall transfer any payments from
Obligors and other payments in respect of the Collateral received in such
Lock-Box to the applicable Settlement Account. In addition, each Servicer shall,
in accordance with the terms of the Loan Agreement, remit, and shall cause each
Borrower to remit, directly into the applicable Settlement Account all payments
by or on behalf of the Obligors received by such Servicer or such Borrower, as
applicable, with respect to the Receivables and other Collateral, and all
Liquidation Proceeds and other recoveries as soon as practicable after receipt
thereof (but in any event no later than one (1) Business Day following receipt
thereof.)
Section 4.3. Distributions.
(a) On each Distribution Date the Custodian, in accordance with the
written instructions of the Lender delivered to it on or prior to such
Distribution Date, shall make the following payments in the following order from
amounts on deposit in the Settlement Accounts which have been allocated to the
payment thereof:
(i) an amount equal to the Monthly Servicing Fee due on such
Distribution Date plus any unpaid Servicing Fee due on a prior
Distribution Date shall be distributed to the applicable Servicer;
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(ii) the amount specified by the Lender pursuant to Section
4.1 shall be distributed to the Lender's Account;
(iii) if a Borrowing Base Deficiency exists as of the
related Determination Date, an amount equal to such Borrowing Base
Deficiency shall be distributed to the Lender's Account;
(iv) any amount deposited in each Settlement Account that
was not required to be deposited by the applicable Borrower or the
applicable Servicer therein shall be returned to such Borrower; and
(v) all amounts remaining in the Settlement Account after
payments pursuant to clauses (i) through (v) in this Section 4.3 shall
be distributed to the applicable Borrower.
(b) The Custodian shall make all distributions by check or by wire
transfer of immediately available funds, as directed by the party to whom such
distribution is payable.
Section 4.4. Payments of Shortfalls. If the Custodian determines that
the amounts in the Settlement Accounts are insufficient to pay amounts payable
pursuant to Section 4.3, the Custodian shall notify Lender and the Borrowers of
such circumstance by telephone or telecopy, and the Borrowers shall immediately
deposit to such Settlement Accounts in immediately available funds the amount of
such deficiency. If, notwithstanding the application of funds in such Settlement
Accounts, there are still insufficient funds available to make any such payment
or distribution required to be made on such day, then, in addition to any other
rights Lender may have, interest shall, to the extent permitted by law, accrue
on the portion of such due and unpaid amount owing to Lender, commencing on the
due date until paid in full, at the Late Payment Rate.
Section 4.5. Investments. The Custodian shall, in the name of
Custodian, as custodian, upon written direction from the applicable Borrower,
invest the amounts in the applicable Settlement Account in Eligible Investments.
Such investment shall mature not later than one (1) Business Day prior to the
next succeeding Distribution Date. No investment may be sold prior to its
maturity, unless otherwise instructed by the applicable Borrower. All net income
and gain from such investments shall be deposited in the related Settlement
Account and any losses on reinvestment of funds shall be reimbursed by the
related Borrower and deposited into such Settlement Account.
Section 4.6. Simultaneous Transfers. The Advances to a Borrower and
the transfer of the related Receivables pursuant to any provision of this
Agreement and the Loan Agreement shall be deemed to occur simultaneously.
Section 4.7. Transfer of Receivables .
(a) Upon Custodian receiving written certification from the Lender of
a Potential Event of Default, Custodian shall (x) follow the instructions of the
Lender including
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instructions regarding the release of the related Receivables from this
Agreement and the transfer of such Receivables and shall do such other acts and
execute such other documents as may be deemed reasonably necessary by such
non-defaulting party to comply with such instructions and (y) follow the
instructions of such nondefaulting party with respect to payment of related
amounts from the Settlement Accounts.
(b) Upon (i) receipt by Custodian of a written certification of the
Lender of a breach of a representation or warranty by Custodian, or the failure
of Custodian to perform a covenant, under this Agreement, and any applicable
cure period has elapsed, or (ii) the termination of the Custodian pursuant to
Section 5.9 hereof, Custodian shall (x) follow the instructions of the Lender
regarding the release from this Agreement and the transfer of such Receivables
and shall do such other acts and execute such other documents as may be deemed
reasonably necessary to comply with such instructions and (y) follow the
instructions of the Lender with respect to payment of related amounts from the
Settlement Accounts.
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ARTICLE V
CUSTODIAN
Section 5.1 Representations, Warranties and Covenants of Custodian.
With respect to each Trust Receipt and Certification, Custodian hereby
represents and warrants to, and covenants with the Lender that as of the date
such Trust Receipt and Certification is provided, which representations and
warranties shall survive delivery of such Trust Receipt and Certification:
(a) Custodian is duly organized, validly existing and in good standing
under the laws of the United States;
(b) Custodian has the full power and authority to hold each Receivable
(whether acting alone or through an agent) and to execute, deliver and perform,
and to enter into and consummate all transactions contemplated by this
Agreement, has duly authorized the execution, delivery and performance of this
Agreement, has duly executed and delivered this Agreement and this Agreement
constitutes a legal, valid and binding obligation of Custodian, enforceable
against it in accordance with its terms, except as enforcement of such terms may
be limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and by the availability of equitable remedies;
(c) Neither the execution and delivery of this Agreement, the filing
of a financing statement indicating that the Lender is the secured party with
respect to certain Receivables, the delivery of Receivables, the issuance of the
Trust Receipt and Certification, the consummation of the transactions
contemplated hereby or thereby, nor the fulfillment of or compliance with the
terms and conditions of this Agreement will conflict with or result in a breach
of any of the terms, conditions or provisions of Custodian's charter or by-laws
or any legal restriction or any agreement or instrument to which Custodian is
now a party or by which it is bound, or constitute a default or result in an
acceleration under any of the foregoing, or result in the violation of any law,
rule, regulation, order, judgment or decree to which Custodian or its property
is subject;
(d) Custodian does not believe, nor does it have any reason or cause
to believe, that it cannot perform each and every covenant contained in this
Agreement;
(e) There is no litigation pending or threatened, which if determined
adversely to Custodian, would adversely affect the execution, delivery or
enforceability of this Agreement, or any of the duties or obligations of
Custodian thereunder, or which would have an adverse effect on the financial
condition of Custodian;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by Custodian of or compliance by Custodian with this Agreement or
the consummation of the transactions contemplated hereby;
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(g) Custodian is a separate and independent entity from any of the
Borrowers, Custodian does not own a controlling interest in any of the Borrowers
either directly or through affiliates, and no director or officer of the
Custodian is also a director or officer of any of the Borrowers;
(h) Upon written request of the Lender, Custodian shall take such
steps as requested by the Lender to protect or maintain any interest in the
Financed Vehicle or other collateral securing the Receivable owned by the Lender
and any insurance applicable thereto.
(i) Custodian is not a party to, bound by or in breach or violation of
any indenture or other agreement or instrument, or subject to or in violation of
any statute, order or regulation of any court, regulatory body, administrative
agency or governmental body having jurisdiction over it, which adversely
affects, or may in the future adversely affect, the ability of the Custodian to
perform its obligations under this Agreement or the interest of the Lender in
any respect;
(j) There are no actions, suits, proceedings or investigations pending
or threatened against the Custodian, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality (A)
asserting the invalidity of this Agreement, (B) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement, and (C)
seeking any determination or ruling that might adversely affect the performance
by the Custodian of its obligations under, or the validity or enforceability of,
this Agreement; and
(k) Custodian shall monitor the financing statements filed with
respect to the Receivables naming the Lender as the secured party and shall
cause each Borrower to file or, if a Borrower shall fail to file in a timely
manner, shall itself file such amendments and continuation statements with
respect thereto necessary in order to maintain the perfected security interest
of the Lender in the Receivables.
Section 5.2 Custodian of Documents. Custodian, either directly or by
acting through an agent, shall hold all documents relating to any Receivable
that comes into its possession for the exclusive use and benefit of the Lender
on and after the related Advance Date and shall make disposition thereof only in
accordance with the instructions furnished to it by the Lender. Custodian shall
segregate and maintain continuous custody of all such documents received by it
in secure facilities in accordance with customary standards for such custody and
shall not release such documents or transfer such documents to any other party,
including any subcustodian, without the express written consent of the Lender,
except as provided in Section 3.5 hereof.
Section 5.3 Charges and Expenses. The Borrowers shall pay all fees and
reasonable expenses of Custodian in connection with the performance of its
duties hereunder in accordance with written agreements entered into from time to
time between Custodian and the Borrowers, including reasonable fees and expenses
of counsel incurred by Custodian in the performance of its duties hereunder;
provided, however, that (i) Custodian shall in no event acquire and hereby
agrees not to assert (x) any lien upon any Receivable deposited under this
Agreement or (y) any claim against the Lender, by reason of the failure of the
Borrowers to pay
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any of such fees, charges or expenses, and (ii) in the event the Borrowers fail
to pay the fees and expenses of Custodian as set forth in such written
agreements, Custodian shall have no obligation to take actions or incur costs in
connection with this Agreement unless the Lender, the Borrowers or another
Person has made adequate provision for payment of Custodian's fees and expenses.
Section 5.4 No Adverse Interests. Custodian covenants and warrants to
the Lender and the Borrowers that: (i) as of the related date on which Custodian
receives evidence of the perfection of the Lender's interest in the related
Receivables, it holds no adverse interest, by way of security or otherwise, in
any Receivable; and (ii) the execution of this Agreement and the creation of the
custodial relationship hereunder does not create any interest, by way of
security or otherwise of Custodian in or to any Receivable, other than
Custodian's rights as custodian hereunder.
Section 5.5 Inspections. Upon no less than one (1) Business Day's
prior written notice to Custodian, the Lender and the Lender's agents,
accountants, attorneys and auditors will be permitted during normal business
hours to examine Custodian's documents, records and other papers in possession
of or under the control of Custodian relating to the Receivables.
Section 5.6 Insurance. Custodian shall, at its own expense, maintain
at all times during the existence of this Agreement and keep in full force and
effect, (1) fidelity insurance, (2) theft of documents insurance, (3) forgery
insurance subject to deductibles, all in amounts customary and standard in the
industry and with insurance companies reasonably acceptable to the Lender. A
certificate of the respective insurer as to each such policy or a blanket policy
for such coverage shall be furnished to the Lender, upon request, containing the
insurer's statement or endorsement that such insurance shall not terminate prior
to receipt by such party, by registered mail, of ten (10) days advance notice
thereof.
Section 5.7 Limitation of Liability. Custodian assumes no obligation,
and shall be subject to no liability, under this Agreement to the Lender, except
that Custodian agrees to use its best judgment and good faith in the performance
of such obligations and duties as are specifically set forth herein. Custodian
shall not be liable for any action or non-action by it in reliance on advice of
counsel believed by it in good faith to be competent to give such advice.
Custodian may rely and shall be protected in acting upon any written notice,
order, request, direction or other document believed by it to be genuine and to
have been signed or presented by the proper party or parties.
Section 5.8 Indemnification. The Borrowers agree to indemnify
Custodian against, and to hold it and its employees, officers and directors
harmless from, any liabilities, and any related out-of-pocket expenses, which it
may incur in connection with this Agreement or the Trust Receipt and
Certification, other than any liabilities and expenses arising out of
Custodian's negligence or bad faith or misconduct. Custodian agrees to indemnify
each of the Lender and the Borrowers and their respective employees, officers
and directors against out-of-pocket expenses which either the Lender or the
Borrowers or their respective employees, officers or directors may incur in
connection with this Agreement and any Trust Receipt and Certification and which
is
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caused by Custodian's negligence or bad faith or misconduct. Such
indemnifications shall survive the removal or resignation of the Custodian
hereunder and the termination of this Agreement.
Section 5.9 Removal of Custodian. The Lender, with or without cause,
may upon at least thirty (30) days' notice remove and discharge Custodian from
the performance of its duties under this Agreement by written notice from the
Lender to Custodian, with a copy to the Borrowers. Having given notice of such
removal, the Lender promptly shall appoint a successor custodian to act on
behalf of the Lender and the Borrowers, as their respective rights appear
herein, by written instrument, original counterparts of which instrument shall
be delivered to the Lender and the successor Custodian, with a copy to the
Borrowers. In the event of any such removal, Custodian shall promptly transfer
to the successor Custodian, as directed, and at the expense of the Borrowers,
all Custodian's Receivable Files and all funds in the Settlement Accounts and
any other accounts in connection with this Agreement and all related documents.
In the event of any such removal, the Borrowers shall promptly pay the Custodian
its outstanding fees and expenses incurred in connection with this Agreement. In
the event of any such appointment the Borrowers shall be responsible for the
fees and reasonable expenses of the existing and successor Custodian in
accordance with Section 5.3 hereof.
Section 5.10 Termination of Custodian. Custodian may terminate its
obligations under this Agreement upon at least 120 days' prior notice to the
Borrowers and the Lender. In the event of such termination, the Lender shall
appoint a successor Custodian, subject to approval by the Borrowers. The payment
of such successor Custodian's fees and expenses shall be solely the
responsibility of the Borrowers in accordance with Section 5.3 hereof. Upon such
appointment, Custodian shall promptly transfer to the successor Custodian, as
directed, all Receivable Files and all funds in the Settlement Accounts and any
other accounts in connection with this Agreement and all related documents being
administered under this Agreement. If the endorsements on the Receivables have
been completed in the name of Custodian, Custodian shall execute such
endorsements on the Receivables as the Lender shall request. In the event of any
such appointment the Borrowers shall be responsible for the fees and reasonable
expenses of the existing and successor Custodian in accordance with Section 5.3
hereof.
Section 5.11 Reliance of Custodian. The Custodian may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon any request, instructions, certificate, opinion or other
document furnished to the Custodian, reasonably believed by the Custodian to be
genuine and to have been signed or presented by the proper party or parties and
conforming to the requirements of this Agreement; but in any case of any
document or other request, instruction, document or certificate which by any
provision hereof is specifically required to be furnished to the Custodian, the
Custodian shall be under a duty to examine the same to determine whether or not
it conforms to the requirements of this Agreement.
Section 5.12 Transmission of Receivable Files. Written instructions as
to the method of shipment and shipper(s) which the Custodian is directed to
utilize in connection with transmission of Receivable Files in the performance
of the Custodian's duties hereunder shall be delivered by the Borrowers to the
Custodian prior to any shipment of any Receivable Files hereunder. In the event
the Custodian does not receive written instructions as provided for in the
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preceding sentence, the Custodian is hereby authorized and shall be indemnified
as provided herein to utilize a nationally recognized courier service. The
Borrowers shall arrange for the provision of such services at its sole cost and
expense (or, at the Custodian's option, reimburse the Custodian for all costs
and expenses incurred by the Custodian consistent with such instructions) and
will maintain such insurance against loss or damage to Receivable Files as the
Borrowers deem appropriate. Without limiting the generality of the provisions of
Section 5.8 above, it is expressly agreed that in no event shall the Custodian
have any liability for any losses or damages to any person, including, without
limitation, the Borrower, arising out of actions of the Custodian consistent
with instructions of the Borrower.
Section 5.13 Authorized Representatives. Each individual designated as
an authorized representative of the Lender, each of the Borrowers and the
Custodian, respectively (an "Authorized Representative"), is authorized to give
and receive notices, requests and instructions and to deliver certificates and
documents in connection with this Agreement on behalf of the Lender or a
Borrower or the other Borrower or the Custodian, as the case may be, and the
specimen signature for each such Authorized Representative of the Lender, each
such Authorized Representative of one Borrower, each such Authorized
Representative of the other Borrower, and each such Authorized Representative of
the Custodian, initially authorized hereunder, is set forth on Exhibits C, D, E
and F hereof, respectively. From time to time, the Lender, each Borrower and the
Custodian may, by delivering to each other a revised exhibit, change the
information previously given pursuant to this Section 5.13, but each of the
parties hereto shall be entitled to rely conclusively on the then current
exhibit until receipt of a superseding exhibit.
Section 5.14 Merger or Consolidation of or Assumption of the
Obligations of the Custodian. Any Person (i) into which the Custodian may be
merged or consolidated, (ii) which may result from any merger or consolidation
to which the Custodian shall be a party, or (iii) which may succeed to the
properties and assets of the Custodian substantially as a whole, shall execute
an agreement of assumption to perform every obligation of the Custodian
hereunder, and whether or not such assumption agreement is executed, shall be
the successor to the Custodian under this Custody Agreement without further act
on the part of any of the parties to this Custody Agreement; provided, however,
that nothing herein shall be deemed to release the predecessor Custodian from
any obligation.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Amendment. This Agreement may be amended from time to time
by Custodian, the Lender and the Borrower by written agreement signed by such
parties.
Section 6.2 Governing Law and Jurisdiction; Waiver of Jury Trial. This
Agreement shall be construed in accordance with the laws of the State of New
York governing agreements made and to be performed therein, and the obligations,
rights and remedies of the parties hereunder shall be determined in accordance
with such laws. The parties hereto agree to submit to personal jurisdiction in
the State of New York in any action or proceeding arising out of this Agreement.
The parties hereto each hereby waive the right to trial by jury in any
litigation arising hereunder.
Section 6.3 Notices. All demands, notices and communications
hereunder, except as otherwise provided herein, shall be in writing and shall be
deemed to have been duly given if personally delivered at or mailed by
registered mail, postage prepaid, or sent by facsimile transmission to:
(a) in the case of Custodian:
Crestar Bank
919 E. Main Street, 10th Floor
Richmond, Virginia 23219
Attention: J. Lee Judy
Telephone: 804-782-5170
Telecopy: 804-782-7855
(b) in the case of the Lender:
CS First Boston Mortgage Capital Corp.
11 Madison Avenue, 4th Floor
New York, New York 10055-0186
Attention: Chris LaVallee
Telephone: (212) 325-4910
Telecopy: (212) 325-8040
Any and all legal notices are to be sent to:
CS First Boston Mortgage Capital Corp.
11 Madison Avenue, 7th Floor
New York, New York 10010
Attention: Walter Fekula, Director of Credit
Telephone: (212) 325-3063
Telecopy: (212) 325-8219
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(c) in the case of the Borrowers:
AutoInfo Finance of Virginia, Inc.
863 Glenrock Road
Norfolk, Virginia 23502
Attention: Chief Executive Officer
Telephone: (804) 466-3400
Telecopy: (804) 466-3388
Car Loan Co., Inc.
444 Westport Avenue
Norwalk, Connecticut 06851
Attention: Chief Executive Officer
Telephone: (203) 750-1212
Telecopy: (203) 750-1228
Section 6.4 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 6.5 No Partnership. Nothing herein contained shall be deemed
or construed to create a co-partnership or joint venture between the parties
hereto and the services of Custodian shall be rendered as an independent
contractor and not as agent for the Lender or the Borrowers.
Section 6.6 Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 6.7 Assignment. No party hereto shall sell, pledge, assign or
otherwise transfer this Agreement without the prior written consent of the other
parties hereto.
Section 6.8 Headings. Section headings are for reference purposes only
and shall not be construed as a part of this Agreement.
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IN WITNESS WHEREOF, the Lender, the Borrowers and the Custodian have
caused their names to be signed hereto by their respective authorized officers
as of the day and year first above written.
CS FIRST BOSTON MORTGAGE CAPITAL CORP.,
as Lender
By__________________________________________
Name:
Title:
AUTOINFO FINANCE OF VIRGINIA, INC.,
as Borrower and Servicer
By__________________________________________
Name: Scott J. Zecher
Title: Chief Executive Officer
CAR LOAN CO., INC.,
as Borrower and Servicer
By_________________________________________
Name: Scott J. Zecher
Title: Chief Executive Officer
CRESTAR BANK,
as Custodian
By_________________________________________
Name:
Title:
CONFORMED COPY
COMMON STOCK PURCHASE WARRANT
Warrant No. M - 1
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on November 30, 2001.
WARRANT TO PURCHASE COMMON STOCK OF
AUTOINFO, INC.
FOR VALUE RECEIVED, AUTOINFO, INC., a Delaware corporation, (the
"Company"), hereby certifies that CS First Boston Mortgage Capital Corp., or its
permitted assigns, (the "Holder") is entitled to purchase from the Company, at
any time, or from time to time, commencing on the date hereof, and prior to 5:00
p.m., Eastern Standard Time, on November 30, 2001, a total of 125,000 (subject
to adjustment as provided herein) fully paid and nonassessable shares of the
Common Stock, par value $.01 per share, of the Company for an aggregate purchase
price of $375,000 (based upon $3.00 per share). (Hereinafter, (i) said Common
Stock, together with any other equity securities which may be issued by the
Company with respect thereto or in substitution therefor, is referred to as the
"Common Stock", (ii) the shares of the Common Stock purchasable hereunder are
referred to as the "Warrant Shares", (iii) the aggregate purchase price payable
hereunder for the Warrant Shares is referred to as the "Aggregate Warrant
Price", (iv) the price payable hereunder for each of the Warrant Shares is
referred to as the "Per Share Warrant Price", (v) this Warrant, and all warrants
hereafter issued in exchange or substitution for this Warrant, are referred to
as the "Warrant" and (vi) the holder of this Warrant is referred to as the
"Holder"). The Per Share Warrant Price is subject to adjustment as hereinafter
provided. Except as otherwise provided in Section 3, in the event of any such
adjustment, the number of Warrant Shares shall be adjusted by dividing the
Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.
1. Exercise of Warrant. This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on the date hereof (the
"Commencement Date") and prior to 5:00 p.m., Eastern Standard Time, on November
30, 2001, by the Holder of this Warrant by the surrender of this Warrant (with
the subscription form at the end hereof duly executed) at the address set forth
in Subsection 10 (a) hereof, together with proper payment of the Aggregate
Warrant Price, or the proportionate part thereof if this Warrant is exercised in
part. Payment for Warrant Shares shall be made (i) in cash, by certified or
official bank check or wire transfer payable to the order of the Company,
(ii).by Net-Issue Exercise (as hereinafter
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defined), or (iii) by any combination of (i) or (ii). A "Net-Issue Exercise"
means a "cashless" exercise by a holder by delivery of a subscription form
instructing the Company to retain, in payment of the Aggregate Warrant Price (or
portion thereof), a number of Warrant Shares (the "Payment Shares") equal to the
quotient of the Aggregate Per Share Warrant Price of the Warrant Shares issuable
in respect of Warrants then being exercised by Net-Issue Exercise divided by the
Market Price (as hereinafter defined) of such shares as of the date of exercise,
and to deduct the number of Payment Shares from the Warrant Shares to be
delivered to such holder. If this Warrant is exercised in part, this Warrant
must be exercised for a minimum of 1,000 shares of the Common Stock, and the
Holder is entitled to receive a new Warrant covering the number of Warrant
Shares in respect of which this Warrant has not been exercised and setting forth
the proportionate part of the Aggregate Warrant Price applicable to such
remaining Warrant Shares. Upon such surrender of this Warrant, the Company will
issue a certificate or certificates in the name of the Holder for the largest
number of whole shares of the Common Stock to which the Holder shall be entitled
and, (a) in lieu of any fractional share of the Common Stock to which the Holder
shall be entitled, cash equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), or (b) deliver a new Warrant for the proportionate part
thereof in respect of which this Warrant has not been exercised, if this Warrant
is exercised in part, pursuant to the provisions of this Warrant.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and in
reserve, free from preemptive rights, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the shares of the Common
Stock as from time to time shall be receivable upon the exercise of the Warrant.
The Company covenants and agrees that all shares of Common Stock which are
issuable hereunder will, upon issuance, be duly authorized and issued, fully
paid and non-assessable.
3. Anti-Dilution Provisions.
(a) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, including options
and other securities convertible into, or exchangeable for Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the Per Share Warrant Price in effect
immediately prior to such action shall be adjusted so that if the Holder
surrendered this Warrant for exercise immediately thereafter the Holder would be
entitled to receive the number of shares of Common Stock or other capital stock
of the Company which he would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this subsection (a) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made pursuant to this
subsection (a), the Holder of this Warrant shall become entitled to receive
shares of two or more classes of capital stock or shares of Common Stock and
other capital stock of the Company, the Board of Directors (whose determination
shall be conclusive and shall be described in a written notice to the Holder of
this Warrant promptly after such adjustment) shall in good faith determine the
allocation of the adjusted Per Share Warrant Price between or among shares of
such classes of capital stock or shares of Common Stock and other capital stock;
provided that the effect thereof does not materially adversely affect the value
of this Warrant.
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<PAGE>
(b) In case of any reorganization, consolidation or merger to which the
Company is a party, other than a merger or consolidation in which the Company is
the continuing corporation, or in case of any sale or conveyance to another
entity of the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), the Holder shall have the right thereafter
to convert this Warrant into the kind and amount of securities, cash or other
property which he would have owned or have been entitled to receive immediately
after such reorganization, consolidation, merger, statutory exchange, sale or
conveyance had such Warrant been converted immediately prior to the effective
date of such reorganization, consolidation, merger, statutory exchange, sale or
conveyance and in any such case, if necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Section 3 with
respect to the rights and interests thereafter of the Holder to the end that the
provisions set forth in this Section 3 shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of stock
or other securities or property thereafter deliverable on the conversion of this
Warrant. The above provisions of this subsection (b) shall similarly apply to
successive reorganizations, consolidations, mergers, statutory exchanges, sales
or conveyances. Notice of any such reorganization, consolidation, merger,
statutory exchange, sale or conveyance and of said provisions so proposed to be
made, shall be mailed to the Holder not less than 20 days prior to such event. A
sale of all or substantially all of the assets of the Company for a
consideration consisting primarily of securities shall be deemed a consolidation
or merger for the foregoing purposes.
(c) If the Company shall, at any time after the date hereof issue any
shares of Common Stock, other than Excluded Shares (as defined in subsection (h)
below), for a consideration per share less than the Market Price in effect
immediately prior to such issuance, then (i) the Per Share Warrant Price in
effect immediately prior to each such instance shall forthwith be adjusted to a
price equal to the Per Share Warrant Price then in effect multiplied by the
quotient obtained by dividing (a) an amount equal to the sum of (1) the total
number of shares of Common Stock outstanding immediately prior to such issuance
multiplied by the Market Price in effect immediately prior to such issuance,
plus (2) the consideration received by the Company upon such issuance, by (b)
the total number of shares of Common Stock outstanding immediately after such
issuance multiplied by the Market Price in effect immediately prior to such
issuance, and (ii) the number of shares of Common Stock then issuable upon the
exercise of Warrant shares outstanding immediately prior to each such issuance
shall forthwith be adjusted by adding a number of shares of Common Stock equal
to the product of (a) the number of shares of Common Stock issuable upon the
exercise of Warrant Shares outstanding immediately prior to such issuance, times
(b) the quotient obtained by dividing (1) an amount equal to the Per Share
Warrant Price in effect immediately prior to such issuance less the Per Share
Warrant Price in effect immediately after such issuance, by (2) the Per Share
Warrant Price in effect immediately after such issuance.
(d) For the purpose of any adjustment of the Per Share Warrant Price
and the number of shares of Common Stock issuable upon exercise of the Warrants
pursuant to the clause (c), the following provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash received by the
Company therefor.
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<PAGE>
(ii) In the case of the issuance of Common Stock for a consideration
in whole or in part other than cash, the consideration other than cash
shall be deemed to be the "fair value" of such consideration as determined
in the good faith judgment of the Board of Directors of the Company.
(iii) In the case of the issuance of (x) options to purchase or
rights to subscribe for Common Stock, (y) securities by their terms
convertible into or exchangeable for Common Stock or (z) options to
purchase or rights to subscribe for such convertible or exchangeable
securities:
(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time
such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subdivisions (i) and
(ii) above), if any, received by the Company upon the issuance of such
options or rights plus the minimum purchase price provided in such options
or rights for the Common Stock covered thereby;
(2) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or
rights to subscribe for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights
were issued and for a consideration equal to the consideration received by
the Company for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum amount of additional consideration, if any,
to be received by the Company upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
subdivisions (i) and (ii) above);
(3) on any change in the number of shares or exercise price of
Common Stock deliverable upon exercise of any such options or rights or
conversions of or exchange for such convertible or exchangeable
securities, other than a change resulting from the antidilution provisions
thereof, the Per Share Warrant Price and the number of shares of Common
Stock issuable upon exercise of the Warrants shall forthwith be readjusted
to such Per Share Warrant Price and to such number of shares as would have
obtained had the adjustment made at the time of the issuance of such
options, rights or securities not converted prior to such change been made
upon the basis of such change; and
(4) on the expiration of any such options or rights, the termination of
any such rights to convert or exchange or the expiration of any options or
rights related to such convertible or exchangeable securities, the Per Share
Warrant Price and the number of shares
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of Common Stock issuable upon exercise of the Warrants shall forthwith be
readjusted to such Per Share Warrant Price and to such number of shares as would
have obtained had such options, rights, securities, or options or rights related
to such securities (as have not theretofore been converted, exchanged or
exercised) not been issued.
(e) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of the Holder of this
Warrant in accordance with this Section 3, the Company shall promptly prepare a
certificate of an officer of the Company, setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or modification, a
brief statement of the facts requiring such adjustment or modification and the
manner of computing the same and cause a copy of such certificate to be mailed
to the Holder.
(f) If the Board of Directors of the Company shall declare any dividend
or other distribution in cash or property (including securities other than
Common Stock) with respect to the Common Stock, the Company shall mail notice
thereof to the Holder not less than 15 days prior to the record date fixed for
determining shareholders entitled to participate in such dividend or other
distribution.
(g) the Company will not, by amendment of its Certificate of
Incorporation or by-laws or through any reorganization, transfer of assets,
reclassification, merger, dissolution, issue or sale of securities or otherwise,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by the Company hereunder but will at all times in good
faith assist in the carrying out of all the provisions hereof and in the taking
of all such actions as may be necessary or appropriate in order to protect the
rights of the holders of the Warrants against impairment.
(h) For purposes of this Section 3, "Excluded Shares" shall mean (i)
all shares issued upon (a) exercise or conversion of any other warrants
outstanding on the date hereof, (b) exercise of any options outstanding on the
date hereof, and (c) the issuance of shares of Common Stock or options to
purchase such shares, to officers, employees or directors of the Company and its
subsidiaries pursuant to any bonafide equity incentive plan, or other incentive
arrangement.
(i) Definition of Market Price. "Market Price" shall mean either:
(1) if shares of the Common Stock are listed or admitted to trading on
any exchange or quoted through NASDAQ or any similar organization, the
average of the daily closing prices per share of the Common Stock for
the 20 consecutive trading days immediately preceding the date of
public announcement of the event giving rise to adjustment under this
Section 3 or, if no such public announcement is made with respect to
such event, the average of the daily closing prices per share of the
Common Stock for the 20 consecutive trading days immediately preceding
the day as of the which "Market Price" is being determined. The closing
price of each day shall be the last sale price regular way or, in case
no such sale takes place on such day, the average of the closing bid
and asked prices regular way, in either case on the New York Stock
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Exchange, or, if shares of the Common Stock are not listed or admitted
to trading on the New York Stock Exchange, on the principal national
securities exchange or national market on which the shares are listed
or admitted to trading or quoted, or if the shares are not so listed or
admitted to trading or quoted, the average of the highest reported bid
and lowest reported asked prices as furnished by the National
Association of Securities Dealers, Inc. through NASDAQ or through a
similar organization if NASDAQ is no longer reporting such information;
or
(2) if such shares of common Stock are not listed or admitted to
trading on any exchange or quoted through NASDAQ or any similar
organization, such value shall be determined by the Board of Directors
of the Company, in good faith and in the exercise of reasonable
business judgment, without taking into consideration any premium for
share representing control of the Company, any discount for any
minority interest therein or any restrictions on transfer under Federal
and applicable state securities laws or otherwise, which determination
shall be conclusive, and which determination of valuation shall be sent
in writing by the Board of Directors to the registered holders of
Warrants outstanding.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be duly and properly authorized, validly issued and outstanding, fully paid and
non-assessable, and not subject to preemptive rights, and the Company will take
all such actions as may be necessary to assure that the par value or stated
value, if any, per share of the Common Stock is at all times equal to or less
than the then Per Share Warrant Price. The Company further covenants and agrees
that it will pay, when due and payable, any and all Federal and state stamp or
similar taxes that may be payable in respect of the issue of any Warrant Share
or certificate therefor.
5. Transfer.
(a) Securities Laws. Neither this Warrant nor the Warrant Shares
issuable upon the exercise hereof have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), or under any state securities laws,
and unless so registered, may not be transferred, sold, pledged, hypothecated or
otherwise disposed of unless an exemption from such registration is available.
In the event the Holder desires to transfer this Warrant or any of the Warrant
Shares issued, the Holder must give the Company prior written notice of such
proposed transfer including the name and address of the proposed transferee.
Such transfer may be made only (i) upon receipt by the Company of an opinion of
counsel reasonably satisfactory to the Company to the effect that the proposed
transfer will not violate the provisions of the Securities Act, or the rules and
regulations promulgated under either such act; or (ii) if the Warrant or Warrant
Shares to be sold or transferred have been registered under the Securities Act
and there is in effect a current prospectus meeting the requirements of
Subsection 10(a) of the Securities Act, which is being or will be delivered to
the purchaser or transferee at or prior to the time of delivery of the
certificates evidencing the Warrant or Warrant Shares to be sold or transferred.
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(b) Conditions to Transfer. Prior to any such proposed transfer, and
as a condition thereto, if such transfer is not made pursuant to an effective
registration statement under the Securities Act, the Holder will, if requested
by the Company, deliver to the Company (i) an investment covenant signed by the
proposed transferee, (ii) an agreement by such transferee to the impression of
the restrictive investment legend set forth herein on the certificate or
certificates representing the securities acquire by such transferee and (iii) an
agreement by such transferee that the Company may place a "stop transfer order"
with its transfer agent or registrar.
(c) Transfer. Except as restricted hereby, this Warrant and the
Warrant Shares issued may be transferred by the Holder in whole or in part at
any time or from time to time. Upon surrender of this Warrant to the Company or
at the office of its stock transfer agent, if any, with assignment documentation
duly executed and funds sufficient to pay any transfer tax, and upon compliance
with the foregoing provisions, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment, and this Warrant shall promptly be canceled. Any assignment,
transfer, pledge, hypothecation or other disposition of this Warrant attempted
contrary to the provisions of this Warrant, or any levy of execution, attachment
or other process attempted upon the Warrant, shall be null and void and without
effect.
(d) Legend and Stop Transfer Orders. Unless the Warrant Shares have
been registered under the Securities Act, or the Company shall have received an
opinion of counsel satisfactory to the Company to the effect that it is not
required, upon exercise of any part of the Warrant and the issuance of any of
the shares of Warrant Shares, the Company shall instruct its transfer agent to
enter stop transfer orders with respect to such shares, and all certificates
representing Warrant Shares shall bear on the face thereof substantially the
following legend, insofar as is consistent with Delaware law:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE
OPINION OF COUNSEL TO THE HOLDER HEREOF IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO COUNSEL TO THE COMPANY, IS EXEMPT FROM REGISTRATION UNDER
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
6. Listing of Common Stock. The Company covenants and agrees for the
benefit of the Holders and each other holder of any Common Stock issued upon
exercise of the Warrants, that at the time of and in connection with the listing
of Common Stock on any national securities exchange, it will, at its expense,
use its best efforts to cause the shares of Common Stock issuable form time to
time upon exercise of the Warrants to be approved for listing, subject to notice
of issuance, and will provide prompt notice to each such exchange of the
issuance thereof from time to time.
7. Registration Rights. The Holder has been granted certain registration
rights with respect to the Common Stock underlying this Warrant as more fully
described in that certain Registration Rights Agreement of even date herewith
between the Holder and the Company.
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8. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
9. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
10. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by first-class
mail, postage prepaid, addressed to:
(a) the Company at 1600 Route 208, Fair Lawn, New Jersey 07410, Attn.:
President, or such other address as the Company has designated in writing to the
Holder, or
(b) the Holder at 55 East 52nd Street, New York, NY 10055-0186, Attn.:
Emily Youssouf, or such other address as the Holder has designated in writing to
the Company.
11. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
12. Applicable Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
principles of conflicts of law thereof.
13. Gender and Number. As used in this Warrant, the masculine, feminine or
neuter gender and the singular or plural number shall be deemed to include the
others whenever the context so indicates or requires.
IN WITNESS WHEREOF, AUTOINFO, INC., has caused this Warrant to be signed
by its President and its corporate seal to be hereunto affixed and attested by
its Secretary this 10th day of December, 1996.
ATTEST: AUTOINFO, INC.
/s/Kenneth S. Rose /s/Scott Zecher
- ------------------------------- ----------------------------------
Kenneth S. Rose, Scott Zecher,
Assistant Secretary President
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<PAGE>
SUBSCRIPTION
The undersigned, _________________________, pursuant to the provisions of the
foregoing Warrant agrees to subscribe for the purchase of ___________________
shares of the Common Stock of AUTOINFO, INC. covered by said Warrant, and makes
payment therefor in full at the price per share provided by said Warrant.
Dated:___________________ Signature: _________________________
Address: _________________________
_________________________
ASSIGNMENT
FOR VALUE RECEIVED _________________________, hereby sells, assigns and
transfers unto _________________ the foregoing Warrant and all rights evidenced
thereby, and does irrevocably constitute and appoint __________________,
attorney, to transfer said Warrant on the books of AUTOINFO, INC.
Dated:___________________ Signature: _________________________
Address: _________________________
_________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby assigns and transfers
unto _______________ the right to purchase _________ shares of the Common Stock
of AUTOINFO, INC. by the foregoing Warrant, and a proportionate part of said
Warrant and the rights evidenced hereby, and does irrevocably constitute and
appoint _________________, attorney, to transfer that part of said Warrant on
the books of AUTOINFO, INC.
Dated:___________________ Signature: _________________________
Address: _________________________
_________________________
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT ("Agreement") made as of the 10th day of
December, 1996 by and between AutoInfo, Inc., a Delaware corporation (the
"Company") and CS First Boston Mortgage Capital Corp. ("MCC").
WITNESSETH
WHEREAS, MCC owns in the aggregate Warrants to purchase up to 125,000
shares of the Company's Common Stock, $.01 par value per share (the "Warrants"),
pursuant to a Warrant Agreement by and between the Company and MCC dated the
date hereof ( the "Warrant Agreement"); and
WHEREAS, in connection with its issuance of the Warrant, the Company has
agreed to grant to MCC certain registration rights with respect to the shares
issuable upon exercise of the Warrant as set forth in this Registration Rights
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and other valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the "Securities Act" (as defined
herein).
"Common Stock" shall mean the Common Stock, $.01 par value per share, of
the Company, as constituted as of the date of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Majority Holders" shall mean persons holding in the aggregate more than
fifty percent (50%) of the total number of Registrable Shares.
"Registrable Shares" shall mean the shares of Common Stock of the Company
issued upon exercise of the Warrant.
"Registration Expenses" shall mean the expenses so described in Section 4.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 4.
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2. Registration. (a) The Majority Holders may on one occasion make a
written request for a registration under the Securities Act and state securities
laws of all or part of the Registrable Shares (a "Demand Registration"). Such
request will specify the number of Registrable Shares to be sold and will also
specify the intended method of disposition thereof. The Company will use its
best efforts (subject to the provisions of this Agreement) to effect, as soon as
practicable after such request, all such registrations, qualifications and
compliances under the Securities Act and state securities laws (including
without limitation, filings required to effect a registration pursuant to the
Securities Act if available or pursuant to any applicable exemption) of the
Registrable Shares which the Company has been so requested to register by the
Majority Holders. Such request will also specify the number of shares of
Registrable Shares to be registered and the intended method of disposition
thereof. The Company shall not for any reason be obligated to effect more than
one Demand Registration pursuant to this Section 2(a).
The Company shall be entitled to postpone the filing of any registration
statement pursuant to this Section 2(a) otherwise required to be prepared and
filed by it if (i) the Company is engaged in a material acquisition,
reorganization, or divestiture which constitutes material non-public information
with respect to the Company, (ii) the Company is currently engaged in a
self-tender or exchange offer and the filing of a registration statement would
cause a violation of Rule lOb-6 under the Securities Exchange Act of 1934, (iii)
the Company is engaged in an underwritten offering and the managing underwriter
has advised the Company in writing that such a registration statement would have
a material adverse effect on the consummation of such offering, (iv) the Company
is subject to an underwriter's lock-up as a result of an underwritten public
offering and such underwriter has refused in writing, the Company's request to
waive such lock-up, or (v) the Company is prohibited by law from proceeding with
such filing. In the event of such postponement, the Company shall be required to
file the registration statement pursuant to this Section 2(a), within sixty (60)
days of the consummation or termination of the event requiring such
postponement.
If the Majority Holder requesting a Demand Registration so elects, the
offering of the Registrable Shares pursuant to the Demand Registration may be in
the form of an underwritten offering. The Company shall have the right to select
the managing underwriter in connection with such offering; provided, however,
that such managing underwriter and additional investment bankers and managers
must be reasonably satisfactory to the Majority Holder. If the proposed sale by
the Majority Holder is to be effected pursuant to an underwritten public
offering, the right of any holder to registration pursuant to this Section 2(a)
shall be conditioned upon such holder's participation in such underwriting and
the inclusion of such holder's Registrable Shares in the underwriting to the
extent requested, unless otherwise mutually agreed by the Company and the
Majority Holder, to the extent provided herein. The Company and the holders
proposing to distribute their securities through such underwriting shall enter
into an agreement in customary form with the underwriter(s) selected for such
underwriting, and shall execute powers of attorney and custodial agreements in
customary form for selling stockholders.
Notwithstanding the foregoing, the Majority Holder shall not have the
right to make demand for registration of the Registrable Shares, if, in the
reasonable opinion of counsel to the Company, reasonably satisfactory to the
Majority Holder and addressed thereto that all of their Registrable Shares may
be sold at the time of such demand in reliance upon Rule 144 under the
Securities Act of 1933, as amended, or other similar provision during any six
month period. The expense of any such legal opinion shall be borne by the
Company.
(b) If the Company at any time proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other
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security holders or both (except with respect to registration statements on
Forms S-4, S-8 or another form not available for registering the Registrable
Shares for sale to the public), then at each such time it will give written
notice to holders of outstanding Registrable Shares of its intention to do so.
Upon the written request of any such holder, received by the Company within ten
(10) business days after the giving of any such notice by the Company, to
register any of such holder's Registrable Shares, the Company will use its best
efforts to cause the Registrable Shares as to which registration shall have been
so requested to be included in the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent requisite to
permit the sale or other disposition by the holder (in accordance with its
written request) of such Registrable Shares so registered ("Piggy-Back
Registration Rights"). The foregoing provisions notwithstanding, (i) the Company
may withdraw any registration statement referred to in this Section 2(b) without
thereby incurring any liability to the holders of Registrable Shares, and (ii)
the inclusion of shares of Registrable Shares under such Piggy-Back Registration
Rights is subject to the cut back provisions of Section 2(c) below.
(c) If the managing underwriter of an offering described in Section 2(b)
above advises the Company that the size of the offering that the Majority
Holder, the Company and any other persons intend to make, is such that the
success of the offering could be adversely affected by inclusion of all or part
of the Registrable Shares requested to be included, then the amount of
Registrable Shares to be offered shall be reduced to the extent necessary to
reduce the total number of shares of Registrable Shares to be included in such
offering to the amount recommended in good faith by the managing underwriter,
for the accounts of the selling shareholders, provided that any such reductions
shall be made in the following priorities:
First, the number of shares of Common Stock requested to be registered by
the holders requesting Piggy-Back Registration and any holders of Common Stock
whose rights are pari passu with the registration rights of such holders
requesting Piggy-Back Registration shall be reduced as required;
Second, the number of shares of Common Stock to be registered by the
holders of registration rights having priority over the registration rights of
the holders having Piggy-Back Registration shall be reduced as required; and
then
Third, the number of shares of Common Stock requested to be registered for
the account of any person requesting Demand Registration, if any, shall be
reduced as required.
Within the categories set forth above for reductions of the number of
shares of Common Stock to be registered, the reductions shall be pro rata in
relation to the number of shares of Common Stock to be registered, unless other
rights exist among such persons.
(d) The Company will not grant to any person on or after the date hereof,
and prior to the registration of all of the Registrable Securities, a piggy-back
registration right which by its terms is senior in any respect as it relates to
cut-back provisions to the Piggy-Back Registration Rights.
3. Registration Procedures. If and whenever the Company is required by
the provisions of Section 2 above to use its best efforts to effect the
registration of Registrable Shares under the Securities Act, the Company will,
as expeditiously as possible, or in any event no later than ninety (90) days
after the end of the period within which request for registration may be given
to the Company:
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(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby, determined as hereinafter provided;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for the period
specified in subsection (a) above and comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Shares covered
by such registration statement in accordance with the sellers' intended method
of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Registrable Shares, and to each underwriter
such number of copies of the registration statement and the prospectus included
therein, including each preliminary prospectus, as such persons reasonably may
request in order to facilitate the public sale or other disposition of the
Registrable Shares covered by such registration statement;
(d) use its best efforts to register or qualify the Registrable Shares
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Registrable Shares or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request;
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to list the Registrable Shares covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify each seller of Registrable Shares and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing; and
(g) immediately notify each seller of Registrable Shares and each
underwriter under such registration statement, at any time when a stop order is
issued effecting the Registrable Securities.
For purposes of Sections 3(a) and 3(b) above, the period of distribution
of Registrable Shares in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Registrable Shares
in any other registration shall be deemed to extend until the earlier of the
sale of all Registrable Shares covered thereby and 180 days after the effective
date thereof.
In connection with each registration hereunder, the sellers of Registrable
Shares will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as shall be reasonably
necessary in order to assure compliance with federal and applicable state
securities laws.
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In connection with each registration pursuant to Section 2 above covering
an underwritten public offering, the Company and each seller agree to enter into
a written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
4. Expenses. All expenses incurred by the Company in complying with
Section 2 above, including without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company and
independent public accountants for the Company, fees and expenses incurred in
connection with complying with state securities or "blue sky" laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars and costs of insurance are called "Registration
Expenses." All underwriting discounts and selling commissions applicable to the
sale of Registrable Shares and fees and disbursements of counsel to the sellers
of Registrable Shares are called "Selling Expenses."
The Company will pay all Registration Expenses in connection with each
registration statement relating to the Demand Registration and each Piggy-Back
Registration under Section 2 above. All Selling Expenses in connection with each
Demand and Piggy-Back Registration under Section 2 above shall be borne by the
participating sellers in proportion to the number of shares sold by each.
5. Indemnification and Contribution. (a) In the event of a registration of
any of the Registrable Shares under the Securities Act pursuant to Section 2
above, the Company will indemnify and hold harmless each seller of such
Registrable Shares thereunder, each underwriter of such Registrable Shares
thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities, or actions in
respect thereof, arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Shares was registered under the Securities Act
pursuant to Section 3 above, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such seller, each such underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such seller, any such underwriter or any such controlling
person in writing specifically for use in such registration statement or
prospectus.
(b) In the event of a registration of any of the Registrable Shares under
the Securities Act pursuant to Section 2 above, each seller of such Registrable
Shares thereunder, severally and not jointly, will indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the registration
statement, each director of the Company against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities, or actions in respect
thereof, arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact
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contained in the registration statement under which such Registrable Shares was
registered under the Securities Act pursuant to Section 2 above, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and each
such officer, director and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action, provided, however, that such
seller will be liable hereunder in any such case if and only to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
seller, as such, furnished in writing to the Company by such seller specifically
for use in such registration statement or prospectus; and provided further,
however, that the liability of each seller hereunder shall be limited to the
proportion of any such loss, claim, damage, liability or expense which is equal
to the proportion that the public offering price of the shares sold by such
seller under such registration statement bears to the total public offering
price of all securities sold thereunder, but not in any event to exceed the
proceeds received by such seller from the sale of Registrable Shares covered by
such registration statement.
(c) Promptly after receipt by a party indemnified hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 5 and shall only relieve it
from any liability which it may have to such indemnified party under this
Section 5 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 5 for any legal expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified parties shall have the
right to select one separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 5 but it is judicially determined, by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal, that such indemnification may not be
enforced in such case, the fact that this Section 5 provides for indemnification
in such case notwithstanding, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided
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under this Section 5, then and in each such case, the Company and such holder
will contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject, after contribution from others, in such proportion so that
such holder is responsible for the portion represented by the percentage that
the public offering price of its Registrable Shares offered by the registration
statement bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that in any such case, (x) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Registrable Shares offered by it pursuant to such registration statement;
and (y) no person or entity guilty of fraudulent misrepresentation, within the
meaning of Section 11(f) of the Securities Act, will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
6. Changes in Common Stock. If, and as often as, there is any change in
the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization where the Company is the surviving entity, appropriate
adjustment shall be made in the provisions hereof so that the rights and
privileges granted hereby to the holders of Registrable Shares shall continue
with respect to the Common Stock as so changed.
7. Representations and Warranties of the Company. The Company represents
and warrants to each other party to this Agreement as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or by-laws of the Company or any
provision of any indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a breach of or
constitute, with due notice or lapse of time or both, a default under any such
indenture, agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company; and
(b) This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms.
8. Rule 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company will
file the reports required to be filed by it, and in the manner required to be
filed by it, under the Securities Act and the Exchange Act (or, if the Company
is not required to file such reports, will, upon the request of any holder of
Registrable Shares, make publicly available other information) and will take
such further action as any holder of Registrable Shares may reasonably request,
all to the extent required from time to time to enable such holder to sell
Registrable Shares without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time (b) any similar rule or regulation
hereafter adopted by the Commission ("Rule 144"). Upon the reasonable request of
any holder of Registrable Shares, the Company will deliver to such holder
written statement as to whether it has complied with such requirements.
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9. Miscellaneous. (a) All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not; provided, however, that registration rights
conferred herein on the holders of Registrable Shares shall only inure to the
benefit of a transferee of Registrable Shares if such transferee agrees to be
bound by the provisions of the Warrant and this Agreement.
(b) Except as otherwise expressly provided herein, any notice required or
desired to be served, given or delivered hereunder shall be in writing, and
shall be deemed to have been validly served, given or delivered upon the earlier
of (i) personal delivery to the address set forth below, (ii) in the case of
mailed notice, three (3) days after deposit in the United States mails, with
proper postage for certified mail, return receipt requested, prepaid, or (iii)
in the case of notice by Federal Express or other reputable overnight courier
service, one (1) business day after delivery to such courier service, addressed
to the party to be notified as follows:
if to the Company or MCC , at the address of such party set forth in the
Warrant Agreement to which it is a party;
if to any subsequent holder of Registrable Shares, to it at such address
as may have been furnished to the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Registrable Shares) or to
the holders of Registrable Shares (in the case of the Company) in accordance
with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to conflict-of-laws principles
which would require the application of the laws of another jurisdiction.
(d) This Agreement may not be amended or modified, and no provision hereof
may be waived, without the written consent of the Company and the Majority
Holders.
(e) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) The obligations of the Company to register shares of Registrable
Shares under Section 2 above shall terminate on November 30, 2001.
(g) If requested in writing by the underwriters for any underwritten
public offering of securities of the Company, each holder of Registrable Shares
who is a party to this Agreement shall agree not to sell publicly any shares of
Registrable Shares or any other shares of Common Stock (other than shares of
Registrable Shares or other shares of Common Stock being registered in such
offering), without the consent of such underwriters, for a period of not more
than 45 days following the effective date of the registration statement relating
to such offering.
(h) The provisions of Section 3 above to the contrary notwithstanding, the
Company's obligation to file a registration statement, or cause such
registration statement to become and remain effective, shall be suspended (i)
for a period not to exceed 90 days in any 12-month period if there exists at the
time material non-public information relating to the Company which, in the
reasonable opinion of the Company, should not be disclosed; and (ii)
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for such period commencing on the one hundred thirty fifth day fiollowing the
end of the Company's third fiscal quarter and ending on the fifth business day
following the Company's filing of its Annual Report on Form 10-K.
(i) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(j) As used in this Agreement, the masculine, feminine or neutral gender
and the singular or plural number shall be deemed to include the others whenever
the context so indicates or requires.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the date first written above.
AutoInfo, Inc.
By: _____________________________________
Scott Zecher, President
CS First Boston Mortgage Capital Corp.
By: _____________________________________
Emily Youssouf, Authorized Agent
