Exhibit 10.2.2
SALE AND SERVICING AGREEMENT
between
COMPASS AUTO RECEIVABLES TRUST 1998-A,
as Issuer
ASSET BACKED SECURITIES CORPORATION,
as Company
COMPASS BANK,
an Alabama state banking corporation,
as Servicer
and
THE CHASE MANHATTAN BANK,
as Indenture Trustee
Dated as of June 30, 1998
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I. DEFINITIONS........................................................1
SECTION 1.1. Definitions......................................................1
SECTION 1.2. Other Interpretive Provisions....................................1
ARTICLE II. CONVEYANCE OF RECEIVABLES.........................................2
SECTION 2.1. Conveyance of Receivables........................................2
SECTION 2.2. True Sales.......................................................3
ARTICLE III. THE RECEIVABLES..................................................3
SECTION 3.1. Representations and Warranties as to Each Receivable.............3
SECTION 3.2. Repurchase upon Breach...........................................4
SECTION 3.3. Custodian of Receivable Files....................................4
ARTICLE IV. ADMINISTRATION AND SERVICING OF RECEIVABLES.......................8
SECTION 4.1. Duties of Servicer...............................................8
SECTION 4.2. Collection of Receivable Payments................................9
SECTION 4.3. Realization upon Receivables....................................10
SECTION 4.4. Physical Damage Insurance.......................................10
SECTION 4.5. Maintenance of Security Interests in Financed Vehicles..........11
SECTION 4.6. Covenants of Servicer...........................................12
SECTION 4.7. Purchase by Servicer upon Breach................................12
SECTION 4.8. Servicing Fee...................................................13
SECTION 4.9. Servicer's Report...............................................13
SECTION 4.10. Annual Statement as to Compliance; Notice of Default...........13
SECTION 4.11. Annual Independent Certified Public Accountants' Report........14
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables..................................................14
SECTION 4.13. Reports to the Commission......................................15
SECTION 4.14. Reports to the Rating Agencies.................................15
SECTION 4.15. Servicer Expenses..............................................15
ARTICLE V. DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO
CERTIFICATEHOLDERS AND NOTEHOLDERS................................15
SECTION 5.1. Establishment of Trust Accounts.................................15
SECTION 5.2. Collections.....................................................18
SECTION 5.3. Additional Deposits.............................................18
SECTION 5.4. Distributions...................................................18
SECTION 5.5. Statements to Certificateholders and Noteholders................20
SECTION 5.6. Net Deposits....................................................22
SECTION 5.7. Reserve Account.................................................22
i
ARTICLE VI. COMPANY..........................................................25
SECTION 6.1. Representations of Company......................................25
SECTION 6.2. Continued Existence.............................................27
SECTION 6.3. Liability of Company; Indemnities...............................27
SECTION 6.4. Merger or Consolidation of, or Assumption of the Obligations
of, Company...................................................28
SECTION 6.5. Limitation on Liability of Company and Others...................28
SECTION 6.6. Company May Own Certificates or Notes...........................28
ARTICLE VII. SERVICER........................................................29
SECTION 7.1. Representations of Servicer.....................................29
SECTION 7.2. Indemnities of Servicer.........................................30
SECTION 7.3. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer..................................................32
SECTION 7.4. Limitation on Liability of Servicer and Others..................32
SECTION 7.5. Compass Bank Not To Resign as Servicer..........................33
SECTION 7.6. Existence.......................................................33
SECTION 7.7. Servicer May Own Notes or Certificates..........................33
ARTICLE VIII. SERVICER TERMINATION EVENTS....................................34
SECTION 8.1. Servicer Termination Event......................................34
SECTION 8.2. Appointment of Successor........................................35
SECTION 8.3. Payment of Servicing Fee........................................36
SECTION 8.4. Notification to Noteholders and Certificateholders..............37
SECTION 8.5. Waiver of Past Defaults.........................................37
ARTICLE IX. TERMINATION......................................................37
SECTION 9.1. Optional Purchase of All Receivables; Termination Notice........37
ARTICLE X. MISCELLANEOUS PROVISIONS..........................................38
SECTION 10.1. Amendment......................................................38
SECTION 10.2. Protection of Title to Trust Property..........................39
SECTION 10.3. Notices........................................................41
SECTION 10.4. Assignment.....................................................41
SECTION 10.5. Limitations on Rights of Others................................41
SECTION 10.6. Severability...................................................41
SECTION 10.7. Separate Counterparts..........................................42
SECTION 10.8. Headings.......................................................42
SECTION 10.9. Governing Law..................................................42
SECTION 10.10. Assignment to Indenture Trustee...............................42
SECTION 10.11. Nonpetition Covenant..........................................42
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee.....................................................43
SECTION 10.13. Further Assurances............................................43
ii
SECTION 10.14. No Waiver; Cumulative Remedies................................43
SCHEDULES
Schedule A -- Schedule of Receivables
Schedule B -- Location of Receivables Files
EXHIBITS
Exhibit A -- Form of Servicer's Report and Monthly Noteholder and
Certificateholder Statement
APPENDIX
Appendix X -- Definitions
iii
SALE AND SERVICING AGREEMENT, dated as of June 30, 1998 (this
"Agreement"), between COMPASS AUTO RECEIVABLES TRUST 1998-A, an Alabama
business trust ("Issuer"), ASSET BACKED SECURITIES CORPORATION, a Delaware
corporation ("Company"), COMPASS BANK, an Alabama state banking
corporation, (in its capacity as servicer, "Servicer"), and THE CHASE
MANHATTAN BANK, a New York banking corporation (in its capacity as
indenture trustee, "Indenture Trustee").
WHEREAS, Issuer desires to purchase from Company a portfolio of
receivables arising in connection with Motor Vehicle Contracts purchased by
Compass Auto and sold to Company under the Purchase Agreements;
WHEREAS, Company is willing to sell such receivables to Issuer and
assign its rights (but none of its obligations) under the Second Tier
Receivables Purchase Agreement to Issuer; and
WHEREAS, Servicer is willing to service such receivables.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS.
SECTION 1.1. Definitions. Capitalized terms are used in this
Agreement as defined in Appendix X to this Agreement.
SECTION 1.2. Other Interpretive Provisions. For purposes of this
Agreement, unless the context otherwise requires: (a) accounting terms not
otherwise defined in this Agreement, and accounting terms partly defined in
this Agreement to the extent not defined, shall have the respective
meanings given to them under generally accepted accounting principles; (b)
terms defined in Article 9 of the UCC as in effect in the relevant
jurisdiction and not otherwise defined in this Agreement are used as
defined in that Article; (c) the words "hereof," "herein" and "hereunder"
and words of similar import refer to this Agreement as a whole and not to
any particular provision of this Agreement; (d) references to any Article,
Section, Schedule, Appendix or Exhibit are references to Articles,
Sections, Schedules, Appendices and Exhibits in or to this Agreement and
references to any paragraph, subsection, clause or other subdivision within
any Section or definition refer to such paragraph, subsection, clause or
other subdivision of such Section or definition; (e) the term "including"
means "including without limitation"; (f) except as otherwise expressly
provided herein, references to any law or regulation refer to that law or
regulation as amended from time to time and include any successor law or
regulation; (g) references to any Person include that Person's successors
and assigns;
and (h) headings are for purposes of reference only and shall not otherwise
affect the meaning or interpretation of any provision hereof.
ARTICLE II. CONVEYANCE OF RECEIVABLES.
SECTION 2.1. Conveyance of Receivables. In consideration of Issuer's
payment of $377,837,916.25 and the issuance of $22,080,879 principal amount
of Certificates at the direction of Compass Auto, which direction Company
hereby acknowledges and agrees to, Company does hereby sell, transfer,
assign, set over and otherwise convey to Issuer, without recourse, subject
to the obligations herein (collectively, the "Trust Property") all of
Company's right, title and interest in and to:
(a) the Receivables, and (i) all monies received thereon and allocable
to principal on and after the Cutoff Date and (ii) all monies received
thereon and allocable to interest on and after the July 1, 1998;
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Receivables and, to the extent permitted by law,
any accessions thereto;
(c) any proceeds with respect to the Receivables from claims on any
Insurance Policies covering Financed Vehicles or the Obligors;
(d) any recourse against Dealers with respect to the Receivables under
the Dealer Agreements;
(e) all funds on deposit from time to time in the Certificate
Distribution Account and the Trust Accounts, and in all investments and
proceeds thereof (but excluding all investment income thereon);
(f) the Second Tier Purchase Agreement, including the right of Company
to cause Compass Auto to repurchase Receivables thereunder, and the First
Tier Receivables Purchase Agreement, including the right of Compass Auto to
cause a Seller to repurchase Receivables thereunder; and
(g) any and all proceeds of the foregoing.
The sale, transfer, assignment, setting over and conveyance made
hereunder shall not constitute and is not intended to result in an
assumption by Issuer of any obligation of either Seller to the Obligors,
the Dealers or any other Person in connection with the Receivables and the
other assets and properties conveyed hereunder or any agreement, document
or instrument related thereto.
2
SECTION 2.2. True Sales. (a) Each of Company and Issuer intend the
transfer of the Trust Property to constitute true sales by Company to
Issuer providing Issuer with the full benefits of ownership thereof, and
neither party hereto intends the transactions contemplated hereunder to be,
or for any purpose to be characterized as, a loan from Issuer to Company.
(b) If (but only to the extent) that the transfer of the Trust
Property hereunder is characterized by a court or other Governmental
Authority as a loan rather than a sale, Company shall be deemed hereunder
to have granted to Issuer a security interest in all of Company's right,
title and interest in and to the Trust Property . Such security interest
shall secure all of Company's obligations (monetary or otherwise) under
this Agreement and the other Basic Documents to which it is a party,
whether now or hereafter existing or arising, due or to become due, direct
or indirect, absolute or contingent. Issuer shall have, with respect to
the property described in this Section 2.2, and in addition to all the
other rights and remedies available to Issuer under this Agreement and
applicable law, all the rights and remedies of a secured party under any
applicable UCC, and this Agreement shall constitute a security agreement
under applicable law.
ARTICLE III. THE RECEIVABLES.
SECTION 3.1. Representations and Warranties as to Each Receivable.
Company hereby makes the following representations and warranties as to
each Receivable conveyed by it to Issuer hereunder on which Issuer shall
rely in acquiring the Receivables. Unless otherwise indicated, such
representations and warranties shall speak as of the Closing Date, but
shall survive the sale, transfer and assignment of the Receivables to
Issuer and the pledge thereof to Indenture Trustee pursuant to the
Indenture.
(a) Lien in Force. Company has not taken any action which would have
the effect of releasing the related Financed Vehicle from the Lien granted
pursuant to the Motor Vehicle Contract in whole or in part.
(b) No Liens. Company has not received notice of any Liens or claims,
including Liens for work, labor, materials or unpaid state or federal
taxes, relating to the Financed Vehicle securing the Receivable, that are
or may be prior to or equal to the Lien granted by the Receivable.
(c) Good Title. It is the intention of Company that the transfer and
assignment herein contemplated constitutes a sale of the Receivables from
Company to Issuer and that the beneficial interest in and title to the
Receivables not be part of Company's estate in the event of the filing of a
bankruptcy petition by or against Company under any bankruptcy law. No
Receivable has been sold, transferred, assigned, or pledged by Company to
any Person other than Issuer. Immediately prior
3
to the transfer and assignment herein contemplated, Company had good and
marketable title to the Receivable free and clear of any Lien and had full
right and power to transfer and assign the Receivable to Issuer and
immediately upon the transfer and assignment of the Receivable to Issuer,
Issuer shall have good and marketable title to the Receivable, free and
clear of any Lien; and Issuer's interest in the Receivable resulting from
the transfer has been perfected under the UCC.
(d) No Assignment. As of the Closing Date, Company shall not have
taken any action to convey any right to any Person that would result in
such Person having a right to payments received under the Insurance
Policies or Dealer Agreements, or payments due under the Receivable, that
is senior to, or equal with, that of Issuer.
SECTION 3.2. Repurchase upon Breach. Company, Servicer, Indenture
Trustee or Owner Trustee, as the case may be, shall inform the other
parties to this Agreement promptly, in writing, upon the discovery (or,
with respect to the Indenture Trustee or Owner Trustee, upon actual
knowledge of a Responsible Officer) of any breach or failure to be true of
the representations or warranties made by Compass Auto pursuant to Section
3.3 of the Second Tier Receivables Purchase Agreement; or a Seller pursuant
to Section 3.3 of the First Tier Receivables Purchase Agreement; provided
that the failure to give such notice shall not affect any obligation of
Compass Auto or either Seller, under the applicable Purchase Agreement.
SECTION 3.3. Custodian of Receivable Files. (a) Custody. To assure
uniform quality in servicing the Receivables and to reduce administrative
costs, Issuer, upon the execution and delivery of this Agreement, revocably
appoints Custodian, as agent, and Custodian accepts such appointment, to
act as agent on behalf of Issuer to maintain custody of the following
documents or instruments, which are hereby constructively delivered to
Issuer with respect to each Receivable (collectively, a "Receivable File"):
(i) fully executed original of the Receivable;
(ii) any documents customarily delivered to or held by
Sellers or Servicer evidencing the existence of any Physical Damage
Insurance Policies;
(iii) the original credit application, fully executed by the
Obligor;
(iv) the original certificate of title or application
therefor, or such other documents as the applicable Seller, as
appropriate, keeps on file, in accordance with its customary
procedures, evidencing the security interest of such Seller in the
Financed Vehicle; and
4
(v) any and all other documents or electronic records that
Company, either Seller or Servicer, as the case may be, keeps on file,
in accordance with its customary procedures, relating to the
Receivable, any Insurance Policies, the Obligor or the Financed
Vehicle.
(b) Safekeeping. Servicer, in its capacity as Custodian, shall hold
the Receivable Files as agent on behalf of Issuer and maintain such
accurate and complete accounts, records and computer systems pertaining to
each Receivable as shall enable Servicer and Issuer to comply with the
terms and provisions of this Agreement applicable to them. In performing
its duties as Custodian hereunder, Custodian shall act with reasonable
care, exercising the degree of skill, attention and care that Custodian
exercises with respect to receivable files relating to other similar motor
vehicle contracts owned and/or serviced by Custodian and that is consistent
with industry standards. In accordance with its customary practice with
respect to its retail installment sale contracts, Custodian shall conduct,
or cause to be conducted, periodic audits of the Receivable Files held by
it under this Agreement, and of the related accounts, records, and computer
systems, and shall maintain the Receivable Files in such a manner as shall
enable Indenture Trustee and Owner Trustee to verify, if either of them so
elects, the accuracy of the record keeping of Custodian. Custodian shall
promptly report in writing to Indenture Trustee and Owner Trustee any
failure on its part to hold the Receivable Files and maintain its accounts,
records and computer systems as herein provided, and promptly take
appropriate action to remedy any such failure. Custodian hereby
acknowledges receipt of the Receivable File for each Receivable listed on
the Schedule of Receivables. Nothing herein shall be deemed to require
Issuer, Owner Trustee or Indenture Trustee to verify the accuracy of the
record keeping of the Custodian.
(c) Maintenance of and Access to Records. Custodian shall maintain
each Receivable File at the location specified in Schedule B to this
Agreement, or at such other office of Custodian within the United States
(or, in the case of any successor Custodian, within the State in which its
principal place of business is located) as shall be specified to Issuer and
Indenture Trustee by 30 days' prior written notice. At the reasonable
direction of the Owner Trustee or Indenture Trustee, Custodian shall make
available to Owner Trustee, Indenture Trustee and their respective agents
(or, when requested in writing by Owner Trustee or Indenture Trustee, their
respective attorneys or auditors) the Receivable Files and the related
accounts, records and computer systems maintained by Custodian at such
times during the normal business hours of Custodian for purposes of
inspecting, auditing or making copies of abstracts of the same.
(d) Release of Documents. Upon written instructions from Indenture
Trustee (or, if no Notes are then Outstanding, Owner Trustee), Custodian
shall release any document in the Receivable Files to Indenture Trustee or
Owner Trustee or its respective agent or designee, as the case may be, at
such place or places as
5
Indenture Trustee or Owner Trustee may designate, as soon thereafter as is
practicable. Any document so released shall be handled by Indenture Trustee
or Owner Trustee with due care and returned to Custodian for safekeeping as
soon as Indenture Trustee or Owner Trustee or its respective agent or
designee, as the case may be, shall have no further need therefor.
(e) Title to Receivables. Custodian agrees that, in respect of any
Receivable File held by Custodian hereunder, Custodian shall not at any
time have or in any way attempt to assert any interest in such Receivable
File or the related Receivable, other than solely for the purpose of
collecting or enforcing the Receivable for the benefit of Issuer and that
the entire equitable interest in such Receivable and the related Receivable
File shall at all times be vested in Issuer.
(f) Instructions; Authority to Act. Custodian shall be deemed to have
received proper instructions with respect to the Receivable Files upon its
receipt of written instructions signed by a Responsible Officer of
Indenture Trustee or Owner Trustee, as applicable. A certified copy of
excerpts of certain resolutions of the Board of Directors of Indenture
Trustee or Owner Trustee, as applicable, shall constitute conclusive
evidence of the authority of any such Responsible Officer to act and shall
be considered in full force and effect until receipt by Custodian of
written notice to the contrary given by Indenture Trustee or Owner Trustee,
as applicable.
(g) Custodian's Indemnification. Custodian shall indemnify and hold
harmless Issuer, Owner Trustee and Indenture Trustee, and each of their
respective officers, directors, employees and agents and the Holders from
and against any and all liabilities, obligations, losses, compensatory
damages, payments, costs or expenses of any kind whatsoever that may be
imposed on, incurred or asserted against Issuer, Owner Trustee, Indenture
Trustee or the Holders as the result of any act or omission of Custodian
relating to the maintenance and custody of the Receivable Files; provided
that Custodian shall not be liable hereunder to the Owner Trustee or
Indenture Trustee to the extent that such liabilities, obligations, losses,
compensatory damages, payments, costs or expenses result from the willful
misfeasance, bad faith or gross negligence of Owner Trustee or Indenture
Trustee, as the case may be. Indemnification under this subsection (g)
shall include reasonable fees and expenses of counsel and expenses of
litigation and shall survive termination of this Agreement and the
resignation or removal of Owner Trustee or Indenture Trustee, as the case
may be. If Custodian shall have made any indemnity payments to Owner
Trustee or Indenture Trustee pursuant to this Section and Owner Trustee or
Indenture Trustee thereafter shall collect any of such amounts from Persons
other than Custodian, Owner Trustee or Indenture Trustee, as the case may
be, shall, as soon as practicable following such receipt thereof, repay
such amounts to Custodian, without interest.
6
(h) Effective Period and Termination. Servicer's appointment as
Custodian shall become effective as of the Cutoff Date and shall continue
in full force and effect until terminated pursuant to this subsection (h).
If Servicer shall resign as Servicer in accordance with Section 7.5 or if
all of the rights and obligations of Servicer shall have been terminated
under Section 8.1, the appointment of Servicer as Custodian hereunder shall
be terminated by Owner Trustee or Indenture Trustee or by the Holders of
Notes evidencing more than 50% of the aggregate Outstanding Amount of the
Notes (or, if no Notes are then Outstanding, the Holders of Certificates
representing more than 50% of the Adjusted Certificate Balance), in each
case in the same manner as Owner Trustee or Indenture Trustee or such
Holders may terminate the rights and obligations of Servicer under Section
8.1. The Indenture Trustee, at the direction of Holders of Notes evidencing
more than 50% of the aggregate Outstanding Amount of the Notes, or, if no
Notes are then Outstanding, the Owner Trustee at the direction of Holders
of Certificates evidencing more than 50% of the Adjusted Certificate
Balance, shall terminate Servicer's appointment as Custodian hereunder at
any time with cause, or with 30 days' prior written notice without cause.
As soon as practicable after any termination of such appointment Servicer
shall deliver, or cause to be delivered, the Receivable Files to Indenture
Trustee or Owner Trustee, as applicable, or its respective agent or
designee at such place or places as Indenture Trustee or Owner Trustee, as
applicable, may reasonably designate. Notwithstanding any termination of
Servicer as Custodian hereunder (other than in connection with a
termination resulting from the termination of Servicer, as such, pursuant
to Section 8.1), from and after the date of such termination, and for so
long as Servicer is acting as such pursuant to this Agreement, Indenture
Trustee (or Owner Trustee, if no Notes are outstanding) shall provide, or
cause the successor Custodian to provide, access to the Receivable Files to
Servicer, at such times as Servicer shall reasonably request, for the
purpose of carrying out its duties and responsibilities with respect to the
servicing of the Receivables hereunder.
(i) Delegation. Custodian may, at any time without notice or consent,
delegate any or all of its duties under the Basic Documents to any
Affiliate of Servicer; provided that no such delegation shall relieve
Custodian of its responsibility with respect to such duties and Custodian
shall remain obligated and liable to Issuer, Indenture Trustee and the
Holders for its duties hereunder as if Custodian alone were performing such
duties.
7
ARTICLE IV. ADMINISTRATION AND SERVICING OF RECEIVABLES.
SECTION 4.1. Duties of Servicer. (a) Servicer is hereby authorized
to act as agent for Issuer and in such capacity shall manage, service,
administer, make collections on the Receivables (other than Purchased
Receivables), perform all duties of Issuer (including Issuer's duty to pay
certain expenses incurred under the Indenture but excluding Issuer's
obligation to make payments of principal and interest on the Notes) other
than those specifically assigned to Owner Trustee under the Trust Agreement
and perform the other actions required by Servicer under this Agreement,
with reasonable care. Without limiting the standard set forth in the
preceding sentence, Servicer shall use a degree of skill, attention and
care that is not less than Servicer exercises with respect to comparable
motor vehicle contracts that it services for itself or others and that is
consistent with prudent industry standards. Servicer's duties shall include
the collection and posting of all payments, responding to inquiries by
Obligors on the Receivables, or by federal, state or local governmental
authorities, investigating delinquencies, sending payment coupons or
monthly invoices to Obligors, reporting required tax information to
Obligors, accounting for Collections, furnishing monthly and annual
statements to Owner Trustee and Indenture Trustee with respect to
distributions, providing collection and repossession services in the event
of Obligor default and performing the other duties specified herein.
In accordance with its customary servicing procedures, Servicer shall
also administer and enforce all rights and responsibilities of the holder
of the Receivables provided for in the Physical Damage Insurance Policies
as provided in Section 4.4 and the Dealer Agreements. Without limiting the
generality of the foregoing, Servicer is hereby authorized and empowered by
Issuer to execute and deliver, on behalf of itself, Indenture Trustee,
Issuer, Owner Trustee and the Holders, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge,
and all other comparable instruments, with respect to the Receivables or to
the Financed Vehicles, all in accordance with this Agreement; provided that
notwithstanding the foregoing, Servicer shall not, except pursuant to an
order from a court of competent jurisdiction, release an Obligor from
payment of any unpaid amount under any Receivable or waive the right to
collect the unpaid balance of any Receivable from the Obligor, except in
connection with a de minimis deficiency that Servicer would not attempt to
collect in accordance with its customary procedures. If Servicer shall
commence a legal proceeding to enforce a Receivable, Issuer shall thereupon
be deemed to have automatically assigned such Receivable to Servicer, which
assignment shall be solely for purposes of collection. If, however, in any
enforcement suit or legal proceeding, it is held that Servicer may not
enforce a Receivable on the grounds that it is not a real party in interest
or a Person entitled to enforce such Receivable, Owner Trustee, on behalf
of Issuer, at Servicer's expense, or either Seller, Compass Auto or
Company, at Servicer's expense, shall take such steps as Servicer deems
necessary to enforce the Receivable, including bringing suit
8
in Issuer's name or the name of Owner Trustee or Indenture Trustee.
Servicer shall provide Indenture Trustee with written notice of any waiver
of any unpaid balance under any Receivable (other than in connection with
de minimus deficiencies) which waiver shall only be effected if permitted
pursuant to this Section 4.1(a), and the commencement of any legal
proceeding to enforce a Receivable.
(b) Servicer may, at any time without notice (except that Servicer
shall give written notice to each Rating Agency and Indenture Trustee of
any delegation outside the ordinary course of business of the substantial
portion of its servicing business) or consent, delegate (i) any or all
duties under this Agreement to any Person more than 50% of the voting
securities of which are owned, directly or indirectly, by Compass
Bancshares, Inc., a Delaware corporation, so long as Compass Bank or its
successor or assigns acts as Servicer, or (ii) specific duties to sub-
contractors who are in the business of performing such duties; provided
that no such delegation shall relieve Servicer of its responsibility with
respect to such duties and Servicer shall remain obligated and liable to
Issuer, the Holders and Indenture Trustee for servicing and administering
the Receivables in accordance with this Agreement as if Servicer alone were
performing such duties.
SECTION 4.2. Collection of Receivable Payments. (a) Servicer shall
make reasonable efforts to collect all payments called for under the terms
and provisions of the Receivables as and when the same shall become due,
and otherwise act with respect to the Receivables, the Physical Damage
Insurance Policies, the Dealer Agreements and related property in such a
manner as shall, in the reasonable judgment of Servicer, maximize the
amount to be received by Issuer with respect thereto, in accordance with
the standard of care required by Section 4.1. Servicer shall be entitled to
amend or modify any Receivable in accordance with its customary procedures
if Servicer believes in good faith that such amendment or modification is
in Issuer's best interests; provided that Servicer may not, (i) extend a
Receivable beyond April 30, 2004, (ii) reduce the amount of the scheduled
payments under a Receivable, or (iii) reduce the Principal Balance or
Contract Rate of any Receivable. If Servicer fails to comply with the
provisions of the preceding sentence, Servicer shall be required to
purchase the Receivable or Receivables affected thereby, for the Purchase
Amount, in the manner specified in Section 4.7 as of the last day of the
Collection Period in which such failure occurs. Servicer may, in its
discretion (in accordance with its customary standards, policies and
procedures), waive any prepayment charge, late payment charge, extension
fee or any other fee that may be collected in the ordinary course of
servicing a Receivable.
(b) If, in the course of collecting payments under the Receivables,
Servicer determines to set off any obligation of Servicer to an Obligor
against an amount payable by the Obligor with respect to such Receivable,
Servicer shall deposit the amount so set off in the Collection Account, no
later than the close of business on the Deposit Date for the Collection
Period in which the set-off occurs.
9
All references herein to payments or Liquidation Proceeds collected by
Servicer shall include amounts set-off by Servicer.
SECTION 4.3. Realization upon Receivables. On behalf of Issuer,
Servicer shall charge off a Receivable as a Defaulted Receivable in
accordance with its customary standards but in no event later than 120 days
after such Receivable shall have become delinquent (other than with respect
to Receivables that became Defaulted Receivables as a result of the related
Financed Vehicle being repossessed) and shall use reasonable efforts to
repossess and liquidate the Financed Vehicle securing any Defaulted
Receivable as soon as feasible after such Receivable becomes a Defaulted
Receivable, in accordance with the standard of care required by Section
4.1. In taking such action, Servicer shall follow such customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of Motor Vehicle Contracts, and as are otherwise consistent with
the standard of care required under Section 4.1, which shall include
exercising any rights under the Dealer Agreements and selling the Financed
Vehicle at public or private sale. Servicer shall be entitled to recover
all reasonable expenses incurred by it in the course of repossessing and
liquidating a Financed Vehicle into cash proceeds or pursuing any
deficiency claim against the related Obligor, but only out of the cash
proceeds of such Financed Vehicle or any deficiency obtained from the
Obligor. The foregoing shall be subject to the provision that, in any case
in which a Financed Vehicle shall have suffered damage, Servicer 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 Liquidation Proceeds of the
related Receivable by an amount equal to or greater than the amount of such
expenses.
If Servicer elects to commence a legal proceeding to enforce a Dealer
Agreement, the act of commencement shall be deemed to be an automatic
assignment from Issuer to Servicer of the rights under such Dealer
Agreement. If, however, in any enforcement suit or legal proceeding, it is
held that Servicer may not enforce a Dealer Agreement on the grounds that
it is not a real party in interest or a Person entitled to enforce the
Dealer Agreement, Owner Trustee, on behalf of Issuer, at Servicer's
expense, or either Seller, Compass Auto or Company, at Servicer's expense,
shall take such steps as Servicer deems necessary to enforce the Dealer
Agreement, including bringing suit in Issuer's name or the name of Owner
Trustee or Indenture Trustee.
SECTION 4.4. Physical Damage Insurance. (a) The Receivables require
that each Financed Vehicle be insured under a Physical Damage Insurance
Policy. It is understood that Servicer will not "force-place" any Physical
Damage Insurance Policy on any Financed Vehicle. To the extent applicable,
Servicer shall not take any action which would result in noncoverage under
any of the insurance policies referred to in this Section 4.4(a) which, but
for the actions of Servicer, would have
10
been covered thereunder. Servicer, on behalf of the Indenture Trustee shall
take such reasonable action as shall be necessary to permit recovery under
any of the foregoing insurance policies. Any amounts collected by Servicer
under any of the foregoing insurance policies, shall be deposited in the
Collection Account pursuant to Section 5.2.
(b) Servicer may ▇▇▇ to enforce or collect upon the Physical Damage
Insurance Policies, in its own name, if possible, or as agent for Issuer.
If Servicer elects to commence a legal proceeding to enforce a Physical
Damage Insurance Policy, the act of commencement shall be deemed to be an
automatic assignment of the rights of Issuer under such Physical Damage
Insurance Policy to Servicer for purposes of collection only. If, however,
in any enforcement suit or legal proceeding it is held that Servicer may
not enforce a Physical Damage Insurance Policy on the grounds that it is
not a real party in interest or a holder entitled to enforce the Physical
Damage Insurance Policy, Owner Trustee, on behalf of Issuer, at Servicer's
expense, or either Seller, Compass Auto or Company, at Servicer's expense,
shall take such steps as Servicer deems necessary to enforce such Physical
Damage Insurance Policy, including bringing suit in Issuer's name or the
name of Owner Trustee or Indenture Trustee. Servicer shall make all claims
and enforce its rights under any lender's single interest insurance policy
(to the extent such claims or rights relate to Receivables) for the benefit
of the Issuer and shall treat as Collections all related proceeds of such
policies.
SECTION 4.5. Maintenance of Security Interests in Financed Vehicles.
Servicer, in accordance with the standard of care required under Section
4.1, shall take such reasonable steps as are necessary to maintain
perfection of the security interest created by each Receivable in the
related Financed Vehicle for the benefit of Issuer and the Indenture
Trustee. Issuer hereby authorizes Servicer, and Servicer hereby agrees, to
take such reasonable steps as are necessary to re-perfect such security
interest on behalf of Issuer if Servicer receives notice of the relocation
of a Financed Vehicle. If there has been a Servicer Termination Event,
Sellers and Servicer, at Servicer's expense, shall promptly and duly
execute and deliver such documents and instruments, and take such other
reasonable actions as may be necessary, as evidenced by an Opinion of
Counsel delivered to Issuer, Owner Trustee and Indenture Trustee to perfect
Issuer's and Indenture Trustee's interest in the Trust Property against all
other Persons, including the delivery of the Receivables and the Receivable
Files to Indenture Trustee (or Owner Trustee if no Notes are then
Outstanding) or its agent or designee, the endorsement and delivery of the
Physical Damage Insurance Policies or the notification of the insurers
thereunder, the execution of transfer instruments, and the endorsement to
Indenture Trustee (or Owner Trustee if no Notes are then Outstanding) and
the delivery of the certificates of title to the Financed Vehicles to the
appropriate department or departments of motor vehicles (or other
appropriate governmental agency).
11
SECTION 4.6. Covenants of Servicer. Servicer makes the following
covenants on which Issuer relies in acquiring the Receivables:
(a) Security Interest to Remain in Force. Servicer shall not release
any Financed Vehicle from the security interest granted by the related
Receivable in whole or in part, except upon payment in full of the
Receivable or as otherwise contemplated herein.
(b) No Impairment. Servicer shall not impair in any material respect
the rights of the Issuer or the Holders in the Receivables, the Dealer
Agreements or the Physical Damage Insurance Policies or, subject to clause
(c), otherwise amend or alter the terms thereof if, as a result of such
amendment or alteration, the interests of Issuer and the Holders hereunder
would be materially and adversely affected.
(c) Amendments. Servicer shall not amend or otherwise modify any
Receivable (including the grant of any extension thereunder), except in
accordance with Section 4.2.
SECTION 4.7. Purchase by Servicer upon Breach. Company, Servicer,
Indenture Trustee or Owner Trustee, as the case may be, shall inform the
other parties promptly, in writing, upon the discovery (or, in the case of
the Indenture Trustee or Owner Trustee, upon actual knowledge of a
Responsible Officer) of any breach by Servicer of its covenants under
Section 4.5 or 4.6; provided that the failure to give such notice shall not
affect any obligation of Servicer. Unless the breach shall have been cured
by the last day of the Collection Period which includes the 60th day (or
the 30th day, if Servicer so elects) after the date on which Servicer
becomes aware of, or receives written notice of, such breach, and such
breach materially and adversely affects the interests of Issuer and the
Holders in any Receivable, Servicer shall purchase such Receivable from
Issuer as of the last day of the Collection Period at a purchase price
equal to the Purchase Amount for such Receivable as of the last day of such
Collection Period; provided that in the case of a breach of the covenant
contained in Section 4.6(c), Servicer shall be obligated to purchase the
affected Receivable or Receivables on the Deposit Date immediately
succeeding the Collection Period during which Servicer becomes aware of, or
receives written notice of, such breach. In consideration of the purchase
of a Receivable hereunder, Servicer shall remit the Purchase Amount of such
Receivable in the manner specified in Section 5.3. The sole remedy of
Issuer, Owner Trustee, Indenture Trustee or the Holders against Servicer
with respect to a breach pursuant to Section 4.5 or 4.6 shall be to require
Servicer to repurchase Receivables pursuant to this Section.
SECTION 4.8. Servicing Fee. The servicing fee for each Distribution
Date shall equal the product of (i) one-twelfth, (ii) the Servicing Fee
Rate and (iii) the Pool Balance as of the opening of business on the first
day of the related Collection Period (the "Servicing Fee"). Servicer shall
also be entitled to retain any late fees,
12
extension fees, prepayment charges, non-sufficient funds charges and other
administrative fees or similar charges allowed by applicable law with
respect to Receivables collected (from whatever source) on the Receivables
and, if Servicer is not Compass Bank, shall be paid any interest earned on
deposits in the Trust Accounts and the Certificate Distribution Account
(the "Supplemental Servicing Fee"). It is understood and agreed that the
Total Distribution Amount shall not include any amounts retained by
Servicer which constitute Supplemental Servicing Fees. The Servicing Fee in
respect of a Collection Period (together with any portion of the Servicing
Fee that remains unpaid from prior Distribution Dates), if the Rating
Agency Condition is satisfied, may be paid at the beginning of the
Collection Period in which such Distribution Date occurs out of Collections
for the related Collection Period.
SECTION 4.9. Servicer's Report. (a) On each Determination Date,
Servicer shall deliver to Owner Trustee, Indenture Trustee, each Paying
Agent and Company, with a copy to the Rating Agencies, a Servicer's Report
substantially in the form of Exhibit A, containing all information
necessary to make the transfers and distributions pursuant to Sections 5.3,
5.4 and 5.7 for the Collection Period preceding the date of such Servicer's
Report together with all information necessary for the Owner Trustee to
send statements to Certificateholders pursuant to Section 5.5 and Indenture
Trustee to send copies of statements received by the Indenture Trustee to
Noteholders pursuant to the Indenture and Section 5.5 of this Agreement.
Receivables to be purchased by Servicer or to be repurchased by Sellers
shall be identified by Servicer by account number with respect to such
Receivable (as specified in the Schedule of Receivables set forth as
Schedule A).
(b) Servicer shall provide Indenture Trustee with a database file for
the Receivables at or prior to the Closing Date (but with information as of
the close of business on the Cutoff Date).
SECTION 4.10. Annual Statement as to Compliance; Notice of Default.
(a) Servicer shall deliver to Owner Trustee, Indenture Trustee, Company and
each Rating Agency, on or before April 30 of each year, beginning on April
30, 1999, an Officer's Certificate, dated as of the preceding December 31,
stating that (i) a review of the activities of Servicer during the
preceding 12-month period (or, in the case of the first such report, during
the period from the Closing Date to December 31, 1998) and of its
performance under this Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge, based on such
review, Servicer has fulfilled all its obligations in all material respects
under this Agreement throughout such period or, if there exists any uncured
default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof. A copy of
such certificate and the report referred to in Section 4.11 may be obtained
by any Certificateholder by a request in writing to Owner Trustee addressed
to the Corporate Trust Office or by any Noteholder by a request
13
in writing to Indenture Trustee addressed to the Corporate Trust Office.
Upon the written request of Owner Trustee, Indenture Trustee will promptly
furnish Owner Trustee a list of Noteholders as of the date specified by
Owner Trustee.
(b) Servicer shall deliver to Owner Trustee, Indenture Trustee and the
Rating Agencies, promptly after having obtained knowledge thereof, but in
no event later than five Business Days thereafter, written notice in an
Officer's Certificate of any event which constitutes, or with the giving of
notice or lapse of time, or both, would become a Servicer Termination Event
under Section 8.1.
SECTION 4.11. Annual Independent Certified Public Accountants'
Report. Servicer shall cause KPMG Peat Marwick LLP or another firm of
nationally recognized independent certified public accountants (the
"Independent Accountants"), who may also render other services to Servicer,
to deliver to Servicer, on or before April 30 of each year, beginning on
April 30, 1999, with respect to the twelve months ended the immediately
preceding December 31 (or such other period as shall have elapsed from the
Closing Date to the date of such certificate), a statement (the
"Accountants' Report") addressed to Servicer, to the effect that such firm
has audited the books and records of Servicer and issued its report thereon
and that: (1) such audit was made in accordance with generally accepted
auditing standards, and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered
necessary in the circumstances; and (2) the firm is independent of Servicer
within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants. Servicer shall also cause the
Independent Accountants to deliver to Servicer on such dates a letter to
the effect that certain agreed upon procedures were performed relating to
three randomly selected Servicer's Reports, and, except as disclosed in
such report, no errors or exceptions were found in the Servicer's Report(s)
based on the performance of such agreed upon procedures. Servicer shall
deliver a copy of the Accountants' Report and the letter referred to in the
preceding sentence, within 15 days of receipt, to the Company, the Owner
Trustee, the Indenture Trustee and the Rating Agencies.
SECTION 4.12. Access to Certain Documentation and Information
Regarding Receivables. Servicer shall provide to the Certificateholders,
Noteholders, Bank Regulatory Authorities and the supervisory agents and
examiners of Bank Regulatory Authorities access to the Receivable Files in
such cases where the Certificateholders, Noteholders or Bank Regulatory
Authorities shall be required by applicable statutes or regulations to
review such documentation as demonstrated by evidence satisfactory to
Servicer in its reasonable judgment. Access shall be afforded without
charge, but only upon reasonable request and during the normal business
hours at the respective offices of Servicer. Nothing in this Section shall
affect the obligation of Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors and the failure of
Servicer to provide access to
14
information as a result of such obligation shall not constitute a breach of
this Section. Any Holder, by its acceptance of a Certificate or Note, as
applicable, shall be deemed to have agreed to keep any information obtained
by it pursuant to this Section confidential and not to use such information
for any other purpose, except as required by applicable law.
SECTION 4.13. Reports to the Commission. Servicer shall, on behalf
of the Issuer, cause to be filed with the Commission any and all periodic
reports required to be filed under the provisions of the Exchange Act, and
the rules and regulations of the Commission thereunder. Company shall, at
Servicer's expense, cooperate in any reasonable request made by Servicer in
connection with such filings. Servicer shall deliver to Indenture Trustee
and Company copies of all reports filed with the Commission.
SECTION 4.14. Reports to the Rating Agencies. Servicer shall deliver
to each Rating Agency a copy of all reports or notices furnished or
delivered pursuant to this Article and a copy of any amendments,
supplements or modifications to this Agreement and any other information
reasonably requested by such Rating Agency to monitor this transaction.
SECTION 4.15. Servicer Expenses. Servicer shall be required to pay
all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of the Owner Trustee, Indenture Trustee,
independent accountants, taxes imposed on Servicer and expenses incurred in
connection with distributions and reports to Certificateholders and
Noteholders.
SECTION 4.16. Indenture Trustee Notification to Company. Indenture
Trustee shall, on April 30, 1999, deliver to Company a list of all filings
made with the Commission and delivered to Indenture Trustee pursuant to
Section 4.13.
ARTICLE V. DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS
TO CERTIFICATEHOLDERS AND NOTEHOLDERS.
SECTION 5.1. Establishment of Trust Accounts. (a) Servicer shall
cause to be established with Indenture Trustee:
(i) For the benefit of the Noteholders and the
Certificateholders, in the name of Indenture Trustee, an Eligible
Deposit Account (the "Collection Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the
benefit of the Noteholders and the Certificateholders; and
(ii) For the benefit of the Noteholders, in the name of
Indenture Trustee, an Eligible Deposit Account (the "Note Distribution
Account"),
15
bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Noteholders.
(b) Funds on deposit in the Collection Account, the Note Distribution
Account and the Reserve Account (collectively the "Trust Accounts") shall
be invested by Indenture Trustee with respect to the Trust Accounts (or any
custodian with respect to funds on deposit in any such account) in Eligible
Investments selected in writing by Servicer (pursuant to standing
instructions or otherwise); provided that it is understood and agreed that
neither Servicer, Indenture Trustee nor Owner Trustee shall be liable for
any loss arising from such investment in Eligible Investments. All such
Eligible Investments shall be held by or on behalf of Indenture Trustee for
the benefit of the Noteholders and the Certificateholders; provided that on
each Distribution Date all interest and other investment income (net of
losses and investment expenses) on funds on deposit in the Trust Accounts
shall be distributed to Compass Auto or, if Compass Bank is not Servicer,
to Servicer in accordance with Section 4.8, and shall not be available to
pay the distributions provided for in Section 5.4 and shall not otherwise
be subject to any claims or rights of Holders. Except as permitted in
writing by the Rating Agencies, funds on deposit in the Trust Accounts
shall be invested in Eligible Investments that will mature so that such
funds will be available at the close of business on the Deposit Date
preceding each Distribution Date. No Eligible Investment shall be sold or
otherwise disposed of prior to its scheduled maturity unless a default
occurs with respect to such Eligible Investment and Servicer directs
Indenture Trustee in writing to dispose of such Eligible Investment. Funds
deposited in a Trust Account on a Deposit Date that precedes a Distribution
Date upon the maturity of any Eligible Investments are not required to be
(but are permitted to be) invested overnight.
(c) Indenture Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Trust Accounts and in all
proceeds thereof (excluding investment income thereon) and all such funds,
investments and proceeds shall be part of the Owner Trust Estate. Except as
otherwise provided herein, the Trust Accounts shall be under the sole
dominion and control of Indenture Trustee for the benefit of the
Noteholders and the Certificateholders, as applicable; provided, that
Indenture Trustee shall not be charged with any obligation for the benefit
of the Certificateholders except as provided by the terms of this
Agreement. If, at any time, any of the Trust Accounts or the Certificate
Distribution Account ceases to be an Eligible Deposit Account, Indenture
Trustee (or Servicer on its behalf) or Owner Trustee, as applicable, shall
within 10 Business Days (or such longer period as to which each Rating
Agency may consent) establish a new Trust Account or Certificate
Distribution Account, as applicable, as an Eligible Deposit Account and
shall transfer any cash and/or any investments to such new Trust Account or
new Certificate Distribution Account, as applicable. In connection with the
foregoing, Servicer agrees that, if any of the Trust Accounts are not
accounts with Indenture
16
Trustee, Servicer shall notify Indenture Trustee in writing promptly upon
any of such Trust Accounts ceasing to be an Eligible Deposit Account.
(d) With respect to the Trust Account Property, Indenture Trustee
agrees, by its acceptance hereof, that:
(i) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Deposit Accounts and,
except as otherwise provided herein, each such Eligible Deposit
Account shall be subject to the exclusive custody and control of
Indenture Trustee with respect to the Trust Accounts, and, except as
otherwise provided in the Basic Documents, Indenture Trustee shall
have sole signature authority with respect thereto;
(ii) any Trust Account Property that constitutes Physical
Property shall be delivered to Indenture Trustee, in accordance with
paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by Indenture Trustee, or a
financial intermediary (as such term is defined in Section 8-313(4) of
the UCC) acting solely for Indenture Trustee;
(iii) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to Federal
book-entry regulations shall be delivered in accordance with paragraph
(b) of the definition of "Delivery" and shall be maintained by
Indenture Trustee pending maturity or disposition, through continued
book-entry registration of such Trust Account Property as described in
such paragraph; and
(iv) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by
clause (iii) above shall be delivered to Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by Indenture Trustee pending maturity or
disposition, through continued registration of Indenture Trustee's (or
its nominee's) ownership of such security.
Effective upon Delivery of any Trust Account Property, Issuer shall be
deemed to have represented that it has purchased such Trust Account
Property for value, in good faith and without notice of any adverse claim
thereto.
SECTION 5.2. Collections. (a) Servicer shall remit within two
Business Days of receipt thereof (or, with respect to principal payments
received up to two Business Days prior to the Closing Date, on the Closing
Date) to the Collection Account all payments by or on behalf of the
Obligors with respect to the Receivables (other than any amounts
constituting Supplemental Servicing Fees) and all Liquidation Proceeds,
both as collected during a Collection Period. Notwithstanding
17
the foregoing, if Compass Bank is the Servicer and (i) shall have the
Required Rating or (ii) Indenture Trustee otherwise shall have received
written notice from each of the Rating Agencies that the then outstanding
rating on the Notes or the Certificates would not be lowered or withdrawn
as a result, Servicer may deposit all amounts referred to above for any
Collection Period into the Collection Account not later than the close of
business on the Deposit Date with respect to such Collection Period;
provided that (i) if a Servicer Termination Event has occurred and is
continuing, (ii) Servicer has been terminated as such pursuant to Section
8.1 or (iii) Servicer ceases to have the Required Rating, Servicer shall
deposit such amounts (including any amounts then being held by Servicer)
into the Collection Account as provided in the preceding sentence. For
purposes of this Article V, the phrase "payments by or on behalf of the
Obligors" shall mean payments made with respect to the Receivables by
Persons other than Servicer, Company or either Seller.
(b) With respect to each Receivable (other than a Purchased
Receivable), collections and payments by or on behalf of the Obligor (other
than any amounts constituting Supplemental Servicing Fees) for each
Collection Period shall be applied to interest and principal in accordance
with the Simple Interest Method, as applied by Servicer. Any excess shall
be applied to prepay the Receivable. All Liquidation Proceeds shall be
applied to the related Receivable in accordance with Servicer's customary
servicing procedures.
SECTION 5.3. Additional Deposits. Servicer, Compass Auto or a Seller
shall deposit or cause to be deposited into the Collection Account the
aggregate Purchase Amounts with respect to Purchased Receivables and
Servicer shall deposit therein all amounts, if any, to be paid under
Section 9.1. All such deposits shall be made not later than the Deposit
Date following the end of the related Collection Period.
SECTION 5.4. Distributions. (a) On each Determination Date, Servicer
shall calculate all amounts required to determine the amounts to be
deposited on the related Distribution Date into the Collection Account from
the Reserve Account and into the Note Distribution Account and the
Certificate Distribution Account (or, if Compass Auto is the only
Certificateholder, the Compass Account) from the Collection Account.
(b) On or before each Distribution Date, Servicer shall instruct
Indenture Trustee in writing (based on the information contained in the
Servicer's Report delivered on the related Determination Date pursuant to
Section 4.9) to, and the Indenture Trustee shall, withdraw from the Reserve
Account and deposit in the Collection Account (or, with respect to any
portion of the Reserve Account Transfer Amount payable to Noteholders, the
Note Distribution Account) the Reserve Account Transfer Amount for such
Distribution Date.
18
(c) Subject to the last paragraph of this Section 5.4(c), on each
Distribution Date, Servicer shall instruct Indenture Trustee in writing
(based on the information contained in the Servicer's Report delivered on
the related Determination Date pursuant to Section 4.9) to, and Indenture
Trustee shall, make the following deposits and distributions from the
Collection Account for deposit in the applicable account by 11:00 a.m. (New
York time), to the extent of the Total Distribution Amount, in the
following order of priority:
(i) on each Distribution Date after the first Distribution
Date, to Servicer, from the Total Distribution Amount, the Servicing
Fee for the related Collection Period and all accrued and unpaid
Servicing Fees for prior Collection Periods;
(ii) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clause (i), the
Noteholders' Interest Distributable Amount;
(iii) on each Distribution Date after the first Distribution
Date, to Owner Trustee for deposit into the Certificate Distribution
Account (or, if Compass Auto is the only Certificateholder, directly
to the Compass Account), from the Total Distribution Amount remaining
after the application of clause (i) and clause (ii), the
Certificateholders' Interest Distributable Amount;
(iv) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through clause (iii), the Noteholders' Principal Distributable Amount;
(v) on the first Distribution Date, to Servicer, from the
Total Distribution Amount remaining after the application of clauses
(i) through (iv), the Servicing Fee;
(vi) to the Reserve Account, from the Total Distribution
Amount remaining after the application of clauses (i) through (v),
until the amount on deposit in the Reserve Account equals the
Specified Reserve Account Balance;
(vii) on the first Distribution Date, to Owner Trustee for
deposit into the Certificate Distribution Account (or, if Compass Auto
is the only Certificateholder, directly to the Compass Account), from
the Total Distribution Amount remaining after the application of
clauses (ii), (iv), (v) and (vi), the Certificateholders' Interest
Distributable Amount;
19
(viii) to Owner Trustee for deposit in the Certificate
Distribution Account (or, if Compass Auto is the only
Certificateholder, directly to the Compass Account), from the Total
Distribution Amount remaining after the application of clauses (i)
through (vii), the Certificateholders' Principal Distributable Amount;
and
(ix) to Compass Auto, any amounts remaining.
If the Total Distribution Amount is insufficient to make payments
pursuant to clauses (i), (ii), or (iv) above, funds withdrawn from the
Reserve Account pursuant to Section 5.4(b) shall be allocated in the same
priority in clauses (i), (ii) and (iv) as set forth above.
Notwithstanding the foregoing, following the occurrence and during the
continuation of an Event of Default that has resulted in an acceleration of
the Notes, the Total Distribution Amount remaining after the application of
clause (i) and (ii) above shall be deposited into the Note Distribution
Account to the extent necessary to reduce the principal amount of the Notes
to zero in accordance with and in the priority set forth in Section 5.4 of
the Indenture, and the Certificateholders shall not receive any
distributions until the principal amount and accrued interest on the Notes
have been paid in full. If the Collection Account is maintained with an
institution other than Indenture Trustee, Indenture Trustee shall instruct
and cause such institution to make all deposits and distributions pursuant
to this Section 5.4(c) on the related Deposit Date.
(d) Indenture Trustee shall continue to perform its duties under this
Agreement after the Outstanding Amount of the Notes has been reduced to
zero and the Indenture has been discharged in accordance with its terms.
The protections, immunities and standard of care afforded the Indenture
Trustee under the Indenture shall apply to the performance of its duties
hereunder. The initial Paying Agent with respect to the Notes shall be the
Indenture Trustee.
SECTION 5.5. Statements to Certificateholders and Noteholders. On
each Determination Date, Servicer shall provide to Indenture Trustee (with
a copy to each Rating Agency) written instructions for Indenture Trustee to
forward to each Noteholder of record, to each Paying Agent, if any, and to
Owner Trustee, for Owner Trustee to forward to each Certificateholder of
record, a statement substantially in and the form of Exhibit A setting
forth at least the following information as to the Notes and the
Certificates to the extent applicable:
(a) the amount of such distribution allocable to principal of each
class of Notes and to the Adjusted Certificate Balance of the Certificates;
20
(b) the amount of such distribution allocable to interest on or with
respect to each class of Notes and to the Certificates;
(c) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(d) the aggregate outstanding principal balance of each class of the
Notes, the Note Pool Factor for each such class, the Adjusted Certificate
Balance and the Certificate Pool Factor, after giving effect to payments
allocated to principal reported under clause (a) above and the Writeoff
Amounts allocated to the Certificates reported under clause (i) below;
(e) the amount of the Servicing Fee paid to Servicer with respect to
the related Collection Period and with respect to previously accrued and
unpaid Servicing Fees;
(f) the amount of the aggregate Realized Losses, if any, for such
Collection Period;
(g) the Reserve Account Transfer Amount, if any, for such Distribution
Date, the Specified Reserve Account Balance for such Distribution Date, the
amount distributed to Compass Auto from the Reserve Account on such
Distribution Date, and the balance of the Reserve Account (if any) on such
Distribution Date, after giving effect to changes therein on such
Distribution Date;
(h) the Noteholders' Interest Carryover Shortfall, the
Certificateholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, and the Certificateholders' Principal
Carryover Shortfall, if any, in each case as applicable to each class of
Securities, and the change in such amounts from the preceding statement;
(i) the Writeoff Amount (if any) for such Distribution Date;
(j) the aggregate Purchase Amounts paid by either Seller, Compass Auto
or Servicer with respect to the related Collection Period;
(k) the Principal Balance of Receivables which are 30-59 days
delinquent, 60-89 days delinquent and 90 or more days delinquent; and
(l) the Average Delinquency Ratio and the Cumulative Net Loss Ratio
for such Distribution Date.
21
Each amount set forth pursuant to paragraph (a), (b), (d) or (h) above
shall be expressed as a dollar amount per $1,000 of the initial principal
balance of the Notes (or class thereof) or the initial Certificate Balance,
as applicable.
SECTION 5.6. Net Deposits. As an administrative convenience, unless
Servicer is required to remit Collections within two Business Days of
receipt thereof, Servicer shall be permitted to make the deposit of
Collections and Purchase Amounts for or with respect to the Collection
Period net of distributions to be made to Servicer with respect to the
Collection Period. Servicer, however, shall account to Owner Trustee,
Indenture Trustee, the Noteholders and the Certificateholders as if all
deposits, distributions and transfers were made individually.
SECTION 5.7. Reserve Account. (a) Pursuant to the Second Tier
Receivables Purchase Agreement, Compass Auto shall establish with and
maintain in the name of the Indenture Trustee, as agent for Issuer and the
Noteholders, an Eligible Deposit Account for the benefit of all Noteholders
(the "Reserve Account"). The Reserve Account shall be initially established
and maintained with the Indenture Trustee (the "Securities Intermediary").
On the Closing Date, Compass Auto shall deposit or cause to be deposited in
the Reserve Account an amount equal to the Reserve Account Initial Deposit.
(b) Indenture Trustee shall, at the written direction of Servicer,
direct the Securities Intermediary to invest funds on deposit in the
Reserve Account in Eligible Investments selected by Servicer and confirmed
in writing by Servicer to Indenture Trustee; provided that none of
Indenture Trustee, Securities Intermediary, Servicer or Issuer shall be
liable for any loss arising from such investment in Eligible Investments
(except to the extent such Person is the obligor on such Eligible
Investment). Funds on deposit in the Reserve Account shall be invested in
Eligible Investments as directed in writing by Servicer that will mature so
that all such funds will be available at the close of business on each
Deposit Date. Funds deposited in the Reserve Account on a Deposit Date
upon the maturity of any Eligible Investments are not required to be (but
may be) invested overnight.
(c) The Securities Intermediary hereby expressly agrees with Indenture
Trustee that: (i) the Securities Intermediary shall treat Indenture
Trustee as entitled to exercise the rights comprising the investments or
financial assets credited to the Reserve Account; (ii) the investments or
financial assets credited to the Reserve Account shall not be registered in
the name of, payable to the order of or specially indorsed to Indenture
Trustee; and (iii) the Securities Intermediary shall not agree to comply
with entitlement orders originated by any Person with respect to the
investments or financial assets held in the Reserve Account other than
Indenture Trustee.
22
(d) The Reserve Account shall be under the sole custody and control of
Indenture Trustee. If, at any time, the Reserve Account ceases to be an
Eligible Deposit Account, Indenture Trustee shall within 10 Business Days
(or such longer period, not to exceed 30 calendar days, as to which each
Rating Agency may consent) establish a new Reserve Account as an Eligible
Deposit Account and shall transfer or cause to be transferred any cash
and/or any investments that are in the existing account which is no longer
an Eligible Deposit Account to such new Reserve Account.
(e) Servicer shall instruct Indenture Trustee in writing (based on the
information contained in the Servicer's Report delivered on the related
Determination Date pursuant to Section 4.9) to, and Indenture Trustee
shall, make a distribution to Compass Auto from the Reserve Account to the
extent of any Reserve Account Excess for such Distribution Date, for
deposit in Account No.: 062001186, Attn: ▇▇▇ ▇▇▇▇▇▇, of Compass Auto
maintained at Compass Bank, Birmingham, Alabama, or such other account as
may be so designated in writing by Compass Auto to Servicer and delivered
to Indenture Trustee, by 12:00 p.m. (New York time), in an amount equal to
such Reserve Account Excess Amount.
(f) Upon any distribution to Compass Auto of amounts from the Reserve
Account, the Holders shall not have any rights in, or claims to, such
amounts. Amounts distributed to Compass Auto from the Reserve Account in
accordance with this Section shall not be available under any circumstances
to Issuer, Owner Trustee, Indenture Trustee, Company or any Holders and
Compass Auto shall not in any event thereafter be required to refund any
such distributed amounts.
(g) With respect to the Reserve Account, Compass Auto, Issuer and
Indenture Trustee agree that the Reserve Account Initial Deposit and all
other funds and Reserve Account Property shall be delivered to Indenture
Trustee for credit to the Reserve Account. In addition:
(i) any Reserve Account Property that constitutes Physical
Property shall be delivered to Indenture Trustee in accordance with
paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by Indenture Trustee or a
financial intermediary (as such term is defined in Section 8-313(4) of
the UCC) acting solely for Indenture Trustee;
(ii) any Reserve Account Property that is a book entry
security held through the Federal Reserve System pursuant to Federal
book-entry regulations shall be delivered in accordance with paragraph
(b) of the definition of "Delivery" and shall be maintained by
Indenture Trustee pending maturity or disposition, through continued
book entry registration of such Reserve Account Property as described
in such paragraph; and
23
(iii) any Reserve Account Property that is an
"uncertificated security" under Article 8 of the UCC and that is not
governed by clause (ii) above shall be delivered to Indenture Trustee
in accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by Indenture Trustee pending maturity or
disposition, through continued registration of Indenture Trustee's (or
its nominee's) ownership of such security.
Effective upon the crediting of any Reserve Account Property to the Reserve
Account, Indenture Trustee shall be deemed to have represented that it has
purchased such Reserve Account Property for value, in good faith and
without notice of any adverse claim thereto.
(h) Servicer agrees to take or cause to be taken such further actions,
to execute, deliver and file or cause to be executed, delivered and filed
such further documents and instruments (including any UCC financing
statements or this Agreement) as may be determined to be necessary, in an
Opinion of Counsel to Issuer delivered to Owner Trustee and Indenture
Trustee, in order to perfect the interests created by this Section 5.7 and
otherwise fully to effectuate the purposes, terms and conditions of this
Section 5.7. Issuer and Servicer shall:
(1) promptly execute, deliver and file any financing statements,
amendments, continuation statements, assignments, certificates and
other documents with respect to such interests and perform all such
other acts as may be necessary in order to perfect or to maintain the
perfection of Indenture Trustee's security interest; and
(2) make the necessary filings of financing statements or
amendments thereto within five days after the occurrence of any of the
following: (1) any change in their respective names or any trade
names, (2) any change in the location of their respective chief
executive offices or principal places of business and (3) any merger
or consolidation or other change in their respective identities or
corporate structures; and shall promptly notify Owner Trustee and
Indenture Trustee of any such filings.
(i) Investment earnings attributable to the Reserve Account Property
and proceeds therefrom shall be held by Indenture Trustee for the benefit
of Compass Auto or, if Compass Bank is not Servicer, for Servicer in
accordance with Section 4.8. Investment earnings attributable to the
Reserve Account Property shall not be available to pay the distributions
provided for in Section 5.4 and shall not otherwise be subject to any
claims or rights of the Holders or Servicer (except to the extent provided
in Section 4.8). Indenture Trustee shall cause all investment earnings
attributable to the Reserve Account to be distributed on each Distribution
Date to
24
Compass Auto or, if Compass Bank is not Servicer, to Servicer in accordance
with Section 4.8.
(j) Compass Auto may at any time, without consent of Holders, sell,
transfer, convey or assign in any manner its rights to and interests in
distributions from the Reserve Account if: (i) the Rating Agencies confirm
in writing that such action will not result in a reduction or withdrawal of
the rating of any class of Notes, a copy of which notice shall be delivered
to the Indenture Trustee; (ii) Compass Auto provides to Owner Trustee and
Indenture Trustee an Opinion of Counsel from independent counsel that such
action will not cause Issuer to be classified as an association (or
publicly traded partnership) taxable as a corporation for federal income
tax purposes; and (iii) such transferee or assignee agrees in writing to
take positions for federal income tax purposes consistent with the federal
income tax positions agreed to be taken by Compass Auto.
ARTICLE VI. COMPANY.
SECTION 6.1. Representations of Company. Company makes the following
representations on which Issuer is deemed to have relied in acquiring the
Receivables and the other properties and rights included in the Owner Trust
Estate. The representations speak as of the execution and delivery of this
Agreement and shall survive the sale of the Receivables to Issuer and the
pledge thereof to Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. Company has been duly organized
and is validly existing as a Delaware corporation in good standing under
the laws of the State of Delaware, with the power and authority to own its
properties and to conduct its business as such properties are presently
owned and such business is presently conducted and had at all relevant
times, and has, full power, authority and legal right to acquire, own and
sell the Receivables and the other properties and rights included in the
Owner Trust Estate assigned to Issuer pursuant to Article II.
(b) Power and Authority. Company has the power, authority and legal
right to execute and deliver this Agreement and the Basic Documents to
which it is a party and to carry out their respective terms and to sell and
assign the property to be sold and assigned to and deposited with Issuer as
the Owner Trust Estate; and the execution, delivery and performance of this
Agreement and the Basic Documents to which it is a party have been duly
authorized by Company by all necessary corporate action.
(c) No Consent Required. No approval, authorization, consent, license
or other order or action of, or filing or registration with, any
governmental authority, bureau or agency is required in connection with the
execution, delivery or performance of this Agreement or the Basic Documents
to which it is a party or the
25
consummation of the transactions contemplated hereby or thereby, other than
(i) as may be required under the blue sky or securities laws of any State
or the Securities Act of 1933, as amended, and (ii) the filing of UCC
financing statements.
(d) Valid Sale; Binding Obligation. Company intends this Agreement to
effect a valid sale, transfer, and assignment of the Receivables and the
other properties and rights included in the Owner Trust Estate conveyed by
Company to Issuer hereunder, enforceable against creditors of and
purchasers from Company; and each of this Agreement and the Basic Documents
to which it is a party constitutes a legal, valid and binding obligation of
Company, enforceable against Company in accordance with its respective
terms, subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization, conservatorship, receivership, liquidation and other
similar laws affecting enforcement of the rights of creditors generally and
to equitable limitations on the availability of specific remedies.
(e) No Violation. The execution, delivery and performance by Company
of this Agreement and the Basic Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby will not
conflict with, result in any material breach of any of the terms and
provisions of, constitute (with or without notice or lapse of time) a
material default under or result in the creation or imposition of any Lien
upon any of its material properties pursuant to the terms of, (i) the
certificate of incorporation or bylaws of Company, (ii) any material
indenture, contract, lease, mortgage, deed of trust or other instrument or
agreement to which Company is a party or by which Company is bound, or
(iii) any law, order, rule or regulation applicable to Company of any
federal or state regulatory body, any court, administrative agency, or
other governmental instrumentality having jurisdiction over Company.
(f) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of Company, threatened, before any court,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality having jurisdiction over Company or its properties: (i)
asserting the invalidity of this Agreement, any other Basic Document, the
Notes or the Certificates, (ii) seeking to prevent the issuance of the
Notes or Certificates or the consummation of any of the transactions
contemplated by this Agreement or any other Basic Document, (iii) seeking
any determination or ruling that might materially and adversely affect the
performance by Company of its obligations under, or the validity or
enforceability of, this Agreement, any other Basic Document, the Notes or
the Certificates, to the extent applicable, or (iv) that may materially and
adversely affect the federal or state income, excise, franchise or similar
tax attributes of the Notes or the Certificates.
(g) Chief Executive Office. The chief executive office of Company is
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
26
SECTION 6.2. Continued Existence. During the term of this Agreement,
subject to Section 6.4, Company shall keep in full force and effect its
existence, rights and franchises as a corporation organized under the laws
of the State of Delaware and shall obtain and preserve its qualification to
do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, the
other Basic Documents and each other instrument or agreement necessary or
appropriate to the proper administration of this Agreement and the
transactions contemplated hereby.
SECTION 6.3. Liability of Company; Indemnities. (a) Company shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by Company under this Agreement.
(b) Company shall indemnify, defend and hold harmless Issuer, Owner
Trustee and Indenture Trustee and their respective officers, directors,
employees and agents from and against any and all costs, expenses, losses,
claims, damages and liabilities to the extent arising out of, or imposed
upon such Person through or as a result of (i) Company's willful
misfeasance, bad faith or gross negligence in the performance of its duties
under this Agreement, or by reason of reckless disregard of its obligations
and duties under this Agreement and (ii) Company's violation of Federal or
state securities laws in connection with the offering and sale of the Notes
and the Certificates or in connection with any application relating to the
Notes or Certificates under any state securities laws.
Indemnification under this Section shall survive the resignation or
removal of Owner Trustee or Indenture Trustee and the termination of this
Agreement, the Indenture or the Trust Agreement, as applicable, and shall
include reasonable fees and expenses of counsel and other expenses of
litigation. If Company shall have made any indemnity payments pursuant to
this Section and the Person to or on behalf of whom such payments are made
thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to Company, without interest.
SECTION 6.4. Merger or Consolidation of, or Assumption of the
Obligations of, Company. Any Person (a) into which Company may be merged or
consolidated, (b) which may result from any merger or consolidation to
which Company shall be a party or (c) which may succeed to the properties
and assets of Company substantially as a whole, shall be the successor to
Company without the execution or filing of any document or any further act
by any of the parties to this Agreement; provided that Company hereby
covenants that it shall not consummate any of the foregoing transactions
except upon satisfaction of the following: (i) the surviving Company, if
other than Asset Backed Securities Corporation, executes an agreement of
assumption to perform every obligation of Company under this Agreement, a
copy of which shall be delivered to the Indenture Trustee; (ii) immediately
after giving effect to such transaction, no representation or warranty
27
made pursuant to Section 3.1 or 6.1 shall have been breached; (iii) Company
shall have delivered to Owner Trustee and Indenture Trustee 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 and that all conditions precedent, if any, provided for in this
Section relating to such transaction have been complied with, and that the
Rating Agency Condition shall have been satisfied with respect to such
transaction; (iv) such transaction shall not result in a material adverse
federal or state tax consequence to Issuer, the Noteholders or the
Certificateholders; and (v) unless Asset Backed Securities Corporation is
the surviving entity, Company shall have delivered to Owner Trustee and
Indenture Trustee 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 Owner Trustee and
Indenture Trustee, respectively, in the Receivables 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
interests.
SECTION 6.5. Limitation on Liability of Company and Others. Company
and any director or officer or employee or agent of Company may rely in
good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising under any Basic Document (provided that such reliance shall not
limit in any way Company's obligations under Section 6.3). Company shall
not be under any obligation to appear in, prosecute or defend any legal
action that shall not be incidental to its obligations under this
Agreement, and that in its opinion may involve it in any expense or
liability.
SECTION 6.6. Company May Own Certificates or Notes. Company and any
Affiliate thereof may in its individual or any other capacity become the
owner or pledgee of Certificates or Notes with the same rights as it would
have if it were not Company or an Affiliate thereof, except as expressly
provided herein or in any Basic Document. Except as set forth herein or in
the other Basic Documents, Notes and Certificates so owned by or pledged to
Company or any such Affiliate shall have an equal and proportionate benefit
under the provisions of this Agreement and the other Basic Documents,
without preference, priority or distinction as among all of the Notes and
Certificates.
ARTICLE VII. SERVICER.
SECTION 7.1. Representations of Servicer. Servicer makes the
following representations on which Issuer is deemed to have relied in
acquiring the Receivables and the other properties and rights included in
the Owner Trust Estate. The representations speak as of the execution and
delivery of the Agreement and shall
28
survive the sale, transfer and assignment of the Receivables to Issuer and
the pledge thereof to Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. Servicer has been duly organized
and is validly existing as an Alabama state banking corporation in good
standing under the laws of Alabama, with the power and authority to own its
properties and to conduct its business as such properties are presently
owned and such business is presently conducted, and had at all relevant
times, and shall have, power, authority and legal right to service the
Receivables and the other properties and rights included in the Owner Trust
Estate.
(b) Due Qualification. Servicer is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease
of property or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) requires such qualifications.
(c) Power and Authority. Servicer has the power, authority and legal
right to execute and deliver this Agreement and the other Basic Documents
to which it is a party and to carry out their respective terms; and the
execution, delivery and performance of this Agreement and the other Basic
Documents to which it is a party have been duly authorized by Servicer by
all necessary corporate action.
(d) No Consent Required. No approval, authorization, consent, license
or other order or action of, or filing or registration with, any
governmental authority, bureau or agency is required in connection with the
execution, delivery or performance of this Agreement, the other Basic
Documents to which it is a party or the consummation of the transactions
contemplated hereby or thereby, other than (i) as may be required under the
blue sky or securities laws of any State or the Securities Act of 1933, as
amended, and (ii) the filing of UCC financing statements.
(e) Binding Obligation. Each of this Agreement and the Basic Documents
to which it is a party constitutes a legal, valid and binding obligation of
Servicer, enforceable against Servicer in accordance with its respective
terms, subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization, conservatorship, receivership, liquidation and other
similar laws affecting enforcement of the rights of creditors of banks
generally and to equitable limitations on the availability of specific
remedies.
(f) No Violation. The execution, delivery and performance by Servicer
of this Agreement and the Basic Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby will not
conflict with, result in any material breach of any of the terms and
provisions of, constitute (with or without notice or lapse of time) a
material default under, or result in the
29
creation or disposition of any Lien upon any of its material properties
pursuant to the terms of, (i) the articles of organization or bylaws of
Servicer, (ii) any material indenture, contract, lease, mortgage, deed of
trust or other instrument or agreement to which Servicer is a party or by
which Servicer is bound, or (iii) any law, order, rule or regulation
applicable to Servicer of any federal or state regulatory body, any court,
administrative agency, or other governmental instrumentality having
jurisdiction over Servicer.
(g) No Proceedings. There are no proceedings or investigations
pending, or, to Servicer's knowledge, threatened, before any court,
regulatory body, administrative agency, or tribunal or other governmental
instrumentality having jurisdiction over Servicer or its properties: (i)
asserting the invalidity of this Agreement, any other Basic Document, the
Notes or the Certificates, (ii) seeking to prevent the issuance of the
Certificates or the Notes or the consummation of any of the transactions
contemplated by this Agreement or any other Basic Document, (iii) seeking
any determination or ruling that might materially and adversely affect the
performance by Servicer of its obligations under, or the validity or
enforceability of, this Agreement, any other Basic Document, the Notes or
the Certificates, to the extent applicable, or (iv) that may materially and
adversely affect the federal or state income, excise, franchise or similar
tax attributes of the Certificates.
SECTION 7.2. Indemnities of Servicer. (a) Servicer shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by Servicer under this Agreement.
(b) Servicer shall indemnify, defend and hold harmless Issuer, Owner
Trustee, Indenture Trustee, Company, and their respective officers,
directors, employees and agents from any and all costs, expenses, losses,
claims, damages and liabilities (including reasonable attorneys' fees and
expenses) to the extent arising out of, or imposed upon any such Person
through, the gross negligence, willful misfeasance or bad faith of Servicer
in the performance of its obligations and duties under this Agreement or in
the performance of the obligations and duties of any subservicer under any
subservicing agreement.
(c) Servicer shall indemnify, defend and hold harmless Issuer, Owner
Trustee, Indenture Trustee and their respective officers, directors,
employees and agents from and against any taxes that may at any time be
asserted against any such Person with respect to the transactions
contemplated in this Agreement or in the other Basic Documents, including
any sales, gross receipts, general corporation, tangible or intangible
personal property, franchise, privilege, or license taxes, or any taxes of
any kind which may be asserted (but not including any federal or other
income taxes arising out of transactions contemplated by this Agreement and
the other Basic Documents) against Issuer, and costs and expenses in
defending against the same.
30
(d) Servicer shall indemnify, defend and hold harmless Issuer, Owner
Trustee, Indenture Trustee, Company, and their respective officers,
directors, employees and agents from and against any and all costs,
expenses, losses, claims, damages and liabilities (including reasonable
attorneys' fees and expenses) to the extent arising out of or imposed upon
any such Person as a result of any compensation payable to any subcustodian
or subservicer (including any fees payable in connection with the release
of any Receivable File from the custody of such subservicer or in
connection with the termination of the servicing activities of such
subservicer with respect to any Receivable) whether pursuant to the terms
of any subservicing agreement or otherwise.
(e) Servicer shall indemnify, defend and hold harmless Issuer, Owner
Trustee, Indenture Trustee, Company, and their respective directors,
officers, employees and agents from and against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable
fees and expenses of counsel and expenses of litigation, arising out of or
resulting from the use, ownership or operation of any Financed Vehicle.
(f) Servicer shall indemnify, defend and hold harmless Indenture
Trustee, Owner Trustee or their respective officers, directors, employees
and agents from any and all costs, expenses, losses, claims, damages and
liabilities (including reasonable attorneys' fees and expenses) to the
extent arising out of the transactions contemplated by the Indenture and
this Sale and Servicing Agreement unless such costs, expenses, losses,
claims, damages and liabilities are due to the gross negligence, willful
misfeasance or bad faith of the Indenture Trustee or Owner Trustee,
respectively.
Indemnification under this Section shall survive the resignation or removal
of Owner Trustee or Indenture Trustee and the termination of this
Agreement, the Indenture or the Trust Agreement, as applicable, and shall
include reasonable fees and expenses of counsel and other expenses of
litigation. If Servicer shall have made any indemnity payments pursuant to
this Section and the Person to or on behalf of whom such payments are made
thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to Servicer, without interest.
SECTION 7.3. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (a) into which Servicer may be merged
or consolidated, (b) which may result from any merger or consolidation to
which Servicer shall be a party, (c) which may succeed to the properties
and assets of Servicer, substantially as a whole, or (d) 50% of the voting
stock of which is owned directly or indirectly by Compass Bancshares, Inc.,
may become the successor to Servicer; provided that, unless Compass Bank is
the surviving party to such transaction, Servicer hereby covenants that it
shall not consummate any of the foregoing transactions except upon
satisfaction of the following: (i) the surviving
31
Servicer if other than Compass Bank, executes an agreement of assumption to
perform every obligation of Servicer under this Agreement; (ii) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 7.1 shall have been breached and no Servicer
Termination Event, and no event that, after notice or lapse of time, or
both, would become a Servicer Termination Event shall have occurred and be
continuing; (iii) Servicer shall have delivered to Owner Trustee and
Indenture Trustee 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 and that all conditions precedent, if
any, provided for in this Section relating to such transaction have been
complied with, and that the Rating Agency Condition shall have been
satisfied with respect to such transaction; (iv) such transaction will not
result in a material adverse Federal or state tax consequence to Issuer,
the Noteholders or the Certificateholders; and (v) unless Servicer is the
surviving entity, Company shall have delivered to Owner Trustee and
Indenture Trustee 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 Owner Trustee and
Indenture Trustee, respectively, in the Receivables 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
interests.
SECTION 7.4. Limitation on Liability of Servicer and Others. Neither
Servicer nor any of its directors, officers, employees or agents shall be
under any liability to Issuer, the Noteholders or the Certificateholders,
except as provided under this Agreement, for any action taken or for
refraining from the taking of any action by Servicer or any subservicer
pursuant to this Agreement or for errors in judgment; provided that this
provision shall not protect Servicer or any such Person against any
liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties under this Agreement. Servicer
or any subservicer and any of their respective directors, officers,
employees or agents may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement.
Except as provided in this Agreement, Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that shall
not be incidental to its duties to service the Receivables in accordance
with this Agreement, and that in its opinion may involve it in any expense
or liability; provided that Servicer, may (but shall not be required to)
undertake any reasonable action that it may deem necessary or desirable in
respect of the Basic Documents to protect the interests of the
Certificateholders and the Noteholders under this Agreement and the other
Basic Documents. In such event, the legal expense and costs of such action
32
and any liability resulting therefrom shall be expenses, costs and
liabilities of Servicer.
SECTION 7.5. Compass Bank Not To Resign as Servicer. Subject to the
provisions of Section 7.3, Compass Bank hereby agrees not to resign from
the obligations and duties hereby imposed on it as Servicer under this
Agreement except upon determination that the performance of its duties
hereunder shall no longer be permissible under applicable law or if such
resignation is required by regulatory authorities. Notice of any such
determination permitting the resignation of Compass Bank as Servicer shall
be communicated in writing to Owner Trustee and Indenture Trustee at the
earliest practicable time and any such determination shall be evidenced by
an Opinion of Counsel to such effect delivered to Owner Trustee and
Indenture Trustee concurrently with or promptly after such notice. No such
resignation shall become effective until the earlier of Indenture Trustee
or a Successor Servicer having assumed the responsibilities and obligations
of the resigning Servicer in accordance with Section 8.2 or the date upon
which any regulatory authority requires such resignation; it being
understood that upon such assumption, Indenture Trustee or Successor
Servicer, as applicable, shall be entitled to the Servicing Fee and the
Supplemental Servicing Fee.
SECTION 7.6. Existence. Subject to the provisions of Section 7.3,
during the term of this Agreement, Compass Bank shall keep in full force
and effect its existence, rights and franchises as an Alabama state banking
corporation under the laws of the jurisdiction of its organization and
shall maintain its qualification to do business as a foreign corporation,
in each jurisdiction necessary to perform its duties under this Agreement.
SECTION 7.7. Servicer May Own Notes or Certificates. The Servicer,
and any Affiliate of the Servicer, may, in its individual or any other
capacity, become the owner or pledgee of Notes or Certificates with the
same rights as it would have if it were not the Servicer or an Affiliate
thereof, except as expressly provided herein or in any Basic Document.
Except as set forth herein or in the other Basic Documents, Notes and
Certificates so owned by or pledged to Servicer or any such Affiliate shall
have an equal and proportionate benefit under the provisions of this
Agreement and the other Basic Documents, without preference, priority or
distinction as among all of the Notes and Certificates.
ARTICLE VIII. SERVICER TERMINATION EVENTS.
SECTION 8.1. Servicer Termination Event. If any one of the following
events (a "Servicer Termination Event") shall occur and be continuing:
(a) any failure by Servicer to deliver to Indenture Trustee or Owner
Trustee for deposit in any of the Trust Accounts, the Certificate
Distribution Account
33
or the Compass Account any required payment or to direct Indenture Trustee
or Owner Trustee to make any required distributions therefrom that shall
continue unremedied for a period of five Business Days after discovery of
such failure by an Authorized Officer of Servicer or written notice of such
failure shall have been given (A) to Servicer by Owner Trustee or Indenture
Trustee or (B) to Servicer, Owner Trustee and Indenture Trustee by the
Holders of Notes evidencing not less than 25% of the Outstanding Amount of
the Notes or, if the Notes have been paid in full, Holders of Certificates
evidencing not less than 25% of the Adjusted Certificate Balance, as
applicable; or
(b) failure on the part of Servicer duly to observe or to perform in
any material respect any other covenants or agreements of Servicer, as
applicable, set forth in this Agreement or any other Basic Document to
which it is a party, which failure shall (i) materially and adversely
affect the rights of either the Certificateholders or Noteholders and (ii)
continue unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given (A) to Servicer by Owner Trustee or Indenture Trustee or (B) to
Servicer, Owner Trustee and Indenture Trustee by the Holders of Notes
evidencing not less than 25% of the Outstanding Amount of the Notes or, if
the Notes have been paid in full, Holders of Certificates evidencing not
less than 25% of the Adjusted Certificate Balance, as applicable; or
(c) an Insolvency Event occurs with respect to Servicer or any of its
respective successors;
then, and in each and every case, so long as any Servicer Termination Event
shall not have been remedied, either Indenture Trustee, or the Holders of
Notes evidencing not less than 25% of the Outstanding Amount of the Notes
(or, if no Notes are then Outstanding, either the Owner Trustee or the
Holders of Certificates evidencing not less than 25% of the Adjusted
Certificate Balance), by notice then given in writing to Servicer (and to
Owner Trustee or Indenture Trustee, as applicable, if given by the Holders)
may terminate all the rights and obligations (other than the obligations
set forth in Section 7.2) of Servicer under this Agreement. On or after the
receipt by Servicer of such written notice, all authority and power of
Servicer under this Agreement, whether with respect to the Notes, the
Certificates or the Receivables or otherwise, shall, without further
action, pass to and be vested in Indenture Trustee or such Successor
Servicer as may be appointed under Section 8.2; and, without limitation,
Indenture Trustee and Owner Trustee are hereby authorized and empowered to
execute and deliver, on behalf of the predecessor Servicer at such
predecessor's expense, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the
Receivables and related documents, or otherwise. The predecessor Servicer
shall cooperate with the Successor Servicer, Indenture
34
Trustee and Owner Trustee in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this
Agreement, including the transfer to the Successor Servicer for
administration by it of all cash amounts that shall at the time be held by
the predecessor Servicer for deposit, or shall thereafter be received by it
with respect to a Receivable. Servicer shall promptly transfer its
electronic records relating to the Receivables to the Successor Servicer in
such electronic form as the Successor Servicer may reasonably request and
shall promptly transfer to the Successor Servicer all other records,
correspondence and documents necessary for the continued servicing of the
Receivables in the manner and at such times as the Successor Servicer shall
reasonably request. All reasonable costs and expenses (including attorneys'
fees) incurred in connection with transferring the Receivable Files to the
Successor Servicer and amending this Agreement to reflect such succession
as Servicer pursuant to this Section shall be paid by the predecessor
Servicer upon presentation of reasonable documentation of such costs and
expenses. Upon receipt of notice of the occurrence of a Servicer
Termination Event, Indenture Trustee shall give notice thereof to the
Rating Agencies.
SECTION 8.2. Appointment of Successor. (a) Upon Servicer's receipt
of notice of termination, pursuant to Section 8.1 or Servicer's resignation
(if and to the extent permitted in accordance with the terms of this
Agreement), the predecessor Servicer shall continue to perform its
functions as Servicer under this Agreement, in the case of termination,
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 earlier of (i) the date 45 days
from the delivery to Owner Trustee and Indenture Trustee of written notice
of such resignation (or written confirmation of such notice) in accordance
with the terms of this Agreement and (ii) the date upon which the
predecessor Servicer shall become unable to act as Servicer, as specified
in the notice of resignation and accompanying Opinion of Counsel. In the
event of Servicer's termination or resignation hereunder, Issuer shall
appoint a Successor Servicer, and the Successor Servicer shall accept its
appointment by a written assumption in form acceptable to Owner Trustee and
Indenture Trustee. If 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, Indenture Trustee without further action
shall automatically be appointed and Successor Servicer, and Indenture
Trustee shall be entitled to the Servicing Fee and Supplemental Servicing
Fee. Notwithstanding the above, Indenture Trustee shall, if it shall be
unwilling or unable so to act, appoint or petition a court of competent
jurisdiction to appoint, any established institution, having a net worth of
not less than $100,000,000 and whose regular business shall include the
servicing of motor vehicle receivables, as the successor to Servicer under
this Agreement; provided, that the appointment of any such Successor
Servicer shall satisfy the Rating Agency Condition.
35
(b) Upon appointment, the Successor Servicer (including Indenture
Trustee acting as Successor Servicer) shall be the successor 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 and shall be entitled to the
Servicing Fee and Supplemental Servicing Fee and all the rights granted to
the predecessor Servicer by the terms and provisions of this Agreement. No
Successor Servicer shall be liable for any acts or omissions of any
predecessor Servicer.
(c) A transfer of servicing hereunder shall not affect the rights and
duties of the parties hereunder (including the obligations and indemnities
of Company pursuant to Sections 4.3, 6.1 and 6.3 or, with respect to
obligations and indemnities arising prior to, or concurrently with, a
transfer of servicing hereunder, the predecessor Servicer pursuant to
Section 4.7, 7.1 or 7.2) other than those relating to the management,
administration, servicing, custody or collection of the Receivables and the
other rights and properties included in the Owner Trust Estate. The
Successor Servicer shall, upon its appointment pursuant to Section 8.2 and
as part of its duties and responsibilities under this Agreement, promptly
take all action it deems necessary or appropriate so that the predecessor
Servicer (in whatever capacity) is paid or reimbursed all amounts it is
entitled to receive under this Agreement on each Distribution Date
subsequent to the date on which it is terminated as Servicer hereunder.
Without limiting the generality of the foregoing, the predecessor Servicer
shall be entitled to receive all accrued and unpaid Servicing Fees through
and including the effective date of the termination of the predecessor
Servicer.
SECTION 8.3. Payment of Servicing Fee. If Servicer shall be
replaced, the predecessor Servicer shall be entitled to receive any accrued
and unpaid Servicing Fees through the date of the Successor Servicer's
acceptance hereunder and any Supplemental Servicing Fees accrued and unpaid
or received prior to such date, in each case in accordance with Section
4.8.
SECTION 8.4. Notification to Noteholders and Certificateholders.
Upon any termination of, or appointment of a successor to, Servicer
pursuant to this Article VIII, Owner Trustee shall give prompt written
notice thereof to Certificateholders and Indenture Trustee shall give
prompt written notice thereof to Noteholders and Rating Agencies.
SECTION 8.5. Waiver of Past Defaults. The Holders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes
(or the Holders of Certificates evidencing not less than a majority of the
Adjusted Certificate Balance, as applicable, in the case of any default
which does not adversely affect Indenture Trustee or the Noteholders) may,
on behalf of all Noteholders and Certificateholders, as the case may be,
waive in writing by notice to Indenture Trustee and Servicer any default by
Servicer in the performance of its obligations hereunder and its
36
consequences, except a default in making any required deposits to any of
the Trust Accounts in accordance with this Agreement. Upon any such waiver
of a past default, such default shall cease to exist, and any Servicer
Termination Event arising therefrom shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.
ARTICLE IX. TERMINATION.
SECTION 9.1. Optional Purchase of All Receivables; Termination
Notice. (a) On the last day of any Collection Period preceding a
Determination Date as of which the then outstanding Pool Balance is 5% or
less of the Original Pool Balance, Servicer shall have the option to
purchase the Owner Trust Estate, other than the Trust Accounts and the
Certificate Distribution Account, and any funds or investments therein. To
exercise such option, Servicer shall notify Indenture Trustee in writing in
accordance with Section 10.2 of the Indenture, and deposit pursuant to
Section 5.4 into the Collection Account an amount which, when added to the
amounts on deposit in the Collection Account for such Distribution Date,
equals the sum of (i) the unpaid principal amount of the then outstanding
Class A-3 Notes, plus accrued and unpaid interest thereon, plus (ii) the
Adjusted Certificate Balance plus accrued and unpaid interest thereon. The
Class A-3 Notes and the Certificates shall be redeemed concurrently
therewith.
(b) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder.
(c) Notice of any termination of Issuer shall be given by Servicer to
Owner Trustee, Indenture Trustee and the Rating Agencies as soon as
practicable after Servicer has received notice thereof.
ARTICLE X. MISCELLANEOUS PROVISIONS.
SECTION 10.1. Amendment. (a) This Agreement may be amended by
Company, Servicer, Issuer and Indenture Trustee (which consent may not be
unreasonably withheld), but without the consent of any of the Noteholders
or the Certificateholders: (i) to cure any ambiguity, (ii) to correct or
supplement any provisions in this Agreement, or (iii) for the purpose of
adding any provisions to, or changing in any manner or eliminating any of
the provisions of, this Agreement; provided that such action in this clause
(iii) shall not, as evidenced by an Opinion of Counsel delivered to Owner
Trustee and Indenture Trustee, adversely affect in any material respect the
interests of the Company or any Noteholder.
37
(b) This Agreement may also be amended from time to time by Company,
Servicer, Issuer and Indenture Trustee, with the consent of the Holders of
Notes evidencing not less than a majority of the Outstanding Amount of the
Notes and the consent of the Holders of Certificates evidencing not less
than a majority of the Adjusted Certificate Balance for the purpose of
adding any provisions to or changing in any manner or eliminating any of
the provisions of this Agreement or of modifying in any manner the rights
of the Noteholders or the Certificateholders; provided that no such
amendment shall (i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Receivables
or distributions that shall be required to be made for the benefit of the
Noteholders or the Certificateholders or (ii) reduce the aforesaid
percentage of the Outstanding Amount of the Notes and the Adjusted
Certificate Balance, the Holders of which are required to consent to any
such amendment, without the consent of the Holders of all the outstanding
Notes and the Holders of all the outstanding Certificates of each class
affected thereby.
(c) Prior to the execution of any such amendment or consent, Servicer
shall furnish written notification of the substance of such amendment or
consent to each Rating Agency. Promptly after the execution of any such
amendment or consent, Servicer shall furnish written notification of the
substance of such amendment or consent to each Noteholder and
Certificateholder.
(d) It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof.
(e) Prior to the execution of any amendment to this Agreement, Owner
Trustee and Indenture Trustee shall be entitled to receive and conclusively
rely upon an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Section and that all
conditions precedent in this Section to the execution and delivery of such
amendment have been satisfied and the Opinion of Counsel referred to in
Section 10.2(i) has been delivered. Owner Trustee and Indenture Trustee
may, but shall not be obligated to, enter into any such amendment which
affects Owner Trustee's or Indenture Trustee's, as applicable, own rights,
duties or immunities under this Agreement or otherwise.
SECTION 10.2. Protection of Title to Trust Property. (a) Company
shall execute each financing statement and continuation statement prepared
by Servicer in accordance with this Section 10.2 and Servicer shall cause
to be prepared for execution by Company and filed such continuation
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of Issuer and the
interests of Indenture Trustee in the Receivables and the proceeds thereof.
Servicer shall deliver (or cause to be delivered) to Owner Trustee
38
and Indenture Trustee file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such
filing.
(b) Neither Company nor Servicer shall change its name, identity or
corporate structure in any manner that would, could or might make any
financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of (S) 9-402(7)
of the UCC, unless it shall have given Owner Trustee and Indenture Trustee
written notice thereof within 30 days after such change and filed
appropriate amendments to all previously filed financing statements or
continuation statements within 60 days after any such change.
(c) Each of Company and Servicer shall give Owner Trustee and
Indenture Trustee written notice of any relocation of its principal
executive office within 30 days after any such relocation 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 and shall promptly file any
such amendment or new financing statement within 60 days after any such
relocation. Servicer shall at all times maintain each office from which it
shall service Receivables, and its principal executive office, within the
United States of America.
(d) Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to
know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited into the Collection
Account in respect of such Receivable.
(e) Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables, Servicer's
master computer records (including any backup archives) that refer to a
Receivable shall indicate that such Receivable is owned by Issuer.
Indication of Issuer's and Indenture Trustee's interest in a Receivable
shall be deleted from or modified on Servicer's computer systems when, and
only when, the related Receivable shall have been paid in full or
repurchased by a Seller or purchased by Servicer.
(f) If at any time a Seller or Servicer shall propose to sell, grant a
security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee,
Servicer shall give to such prospective purchaser, lender or other
transferee computer tapes, records or printouts (including any restored
from backup archives) that, if they shall refer in any manner whatsoever to
any Receivable, shall indicate clearly that such Receivable has been sold
and is owned by Issuer and has been pledged to Indenture Trustee.
39
(g) Servicer shall permit Indenture Trustee, Owner Trustee and their
respective agents at any time during the Servicer's normal business hours
to inspect, audit and make copies at no charge of and abstracts from
Servicer's records regarding any Receivable.
(h) Upon request at any time Owner Trustee or Indenture Trustee shall
have reasonable grounds to believe that such request is necessary in
connection with the performance of its duties under this Agreement or any
of the Basic Documents, Servicer shall furnish to Owner Trustee or to
Indenture Trustee, within 30 Business Days, a list of all Receivables (by
contract number and name of Obligor) then owned by Issuer, together with a
reconciliation of such list to the Schedule of Receivables and to each of
Servicer's Reports furnished before such request indicating removal of
Receivables from Issuer.
(i) Servicer shall deliver to Owner Trustee and Indenture Trustee,
promptly after the execution and delivery of this Agreement and of each
amendment thereto, an Opinion of Counsel either (A) stating that, in the
opinion of such counsel, all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of Issuer and Indenture Trustee in the
Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) stating that,
in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interest.
(j) Company shall, to the extent required by applicable law, cause the
Notes to be registered with the Commission pursuant to Section 12(b) or
Section 12(g) of the Exchange Act within the time periods specified in such
sections.
SECTION 10.3. Notices. All demands, notices and communications upon
or to Company, Servicer, Owner Trustee, Indenture Trustee or the Rating
Agencies under this Agreement shall be in writing, personally delivered,
sent by overnight courier or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt: (a) in
the case of Company, to Asset Backed Securities Corporation, ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Secretary; (b) in the case of
Servicer, to Compass Bank, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Manager, Structured Finance, with a copy to the General Counsel
thereof; (c) in the case of Issuer or Owner Trustee, at the Corporate Trust
Office; (d) in the case of Indenture Trustee, at the Corporate Trust
Office; (e) in the case of Moody's, to ▇▇▇▇▇'▇ Investors Service, Inc., ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention of Asset Backed
Securities Group; and (f) in the case of Standard & Poor's, to Standard &
Poor's, ▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇▇▇), ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention of
Asset Backed Surveillance Department. Any notice required or permitted to
be mailed to a Noteholder or Certificateholder shall be given by first
class mail, postage prepaid, at the address of
40
such Person as shown in the Note Register or the Certificate Register, as
applicable. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether
or not the Noteholder or Certificateholder shall receive such notice.
SECTION 10.4. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 3.3, 4.1, 6.4 and 7.3 and
as provided in the provisions of this Agreement concerning the resignation
of Servicer, this Agreement may not be assigned by Company or Servicer
without the prior written consent of Owner Trustee, Indenture Trustee, and
unless the Rating Agency Condition shall have been satisfied.
SECTION 10.5. Limitations on Rights of Others. The provisions of
this Agreement are solely for the benefit of Company, Servicer, Issuer,
Owner Trustee, Indenture Trustee and for the benefit of the
Certificateholders and the Noteholders, as third-party beneficiaries, and
nothing in this Agreement, whether express or implied, shall be construed
to give to any other Person any legal or equitable right, remedy or claim
in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 10.6. Severability. Any provision of this Agreement that is
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
create or render unenforceable such provision in any other jurisdiction.
SECTION 10.7. Separate Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 10.8. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 10.9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401), AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
41
SECTION 10.10. Assignment to Indenture Trustee. Company hereby
acknowledges and consents to any mortgage, pledge, assignment and grant of
a security interest by Issuer to Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders of all right, title and
interest of Issuer in, to and under the Receivables and/or the assignment
of any or all of Issuer's rights and obligations hereunder to Indenture
Trustee.
SECTION 10.11. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement:
(a) Servicer and Company shall not, prior to the date which is one
year and one day after the termination of this Agreement with respect to
Issuer, acquiesce, petition or otherwise invoke or cause Issuer to invoke
the process of any court or government authority for the purpose of
commencing or sustaining a case against Issuer, under any Federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of
Issuer or any substantial part of its property, or ordering the winding up
or liquidation of the affairs of Issuer.
(b) Issuer shall not, prior to the date which is one year and one day
after the termination of this Agreement with respect to Company, acquiesce,
petition or otherwise invoke or cause Issuer to invoke the process of any
court or government authority for the purpose of commencing or sustaining a
case against Company, under any Federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of Issuer or any
substantial part of its property, or ordering the winding up or liquidation
of the affairs of Company.
SECTION 10.12. Limitation of Liability of Owner Trustee and
Indenture Trustee. (a) Notwithstanding anything contained herein to the
contrary, this Agreement has been countersigned by The Bank of New York
Trust Company of Florida, N.A., not in its individual capacity but solely
in its capacity as Owner Trustee of Issuer and in no event shall The Bank
of New York Trust Company of Florida, N.A., in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee have
any liability for the representations, warranties, covenants, agreements or
other obligations of Issuer hereunder or in any of the certificates,
notices or agreements delivered pursuant hereto, as to all of which
recourse shall be had solely to the assets of Issuer. For all purposes of
this Agreement, in the performance of its duties or obligations hereunder
or in the performance of any duties or obligations of Issuer hereunder,
Owner Trustee shall be subject to, and entitled to the benefits of, the
terms and provisions of Articles VI, VII and VIII of the Trust Agreement.
42
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by The Chase Manhattan Bank not in its
individual capacity but solely as Indenture Trustee and in no event shall
The Chase Manhattan Bank have any liability for the representations,
warranties, covenants, agreements or other obligations of Issuer or any
other party hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had solely
to the assets of Issuer.
SECTION 10.13. Further Assurances. Company and Servicer agree to do
and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by Owner Trustee or
Indenture Trustee more fully to effect the purposes of this Agreement,
including the execution of any financing statements or continuation
statements relating to the Receivables for filing under the provisions of
the UCC of any applicable jurisdiction.
SECTION 10.14. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Owner Trustee,
Indenture Trustee, the Noteholders or the Certificateholders, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges therein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers
as of the day and year first above written.
COMPASS AUTO RECEIVABLES TRUST
1998-A
By: THE BANK OF NEW YORK TRUST
COMPANY OF FLORIDA, N.A., a national banking
association, not in its individual capacity,
but solely as Owner Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
ASSET BACKED SECURITIES
CORPORATION, Company
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
COMPASS BANK, an Alabama state
banking corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Financial Officer
THE CHASE MANHATTAN BANK,
a New York banking corporation, not in its
individual capacity but solely as Indenture
Trustee
By: /s/ Jo ▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
Name: Jo ▇▇▇ ▇▇▇▇▇▇▇
Title: Trust Officer
S-1
SCHEDULE A
Schedule of Receivables
-----------------------
Delivered on Disk to Indenture Trustee and Owner Trustee
Schedule A-1
SCHEDULE B
Location of Receivables Files
-----------------------------
The Receivables sold by each Seller to Company and sold by Company to
Issuer are located at the offices of Servicer listed below.
Compass Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Schedule B-1
EXHIBIT A Attached
------------------
Form of Servicer's Report and Monthly Certificateholder
--------------------------------------------------------
and Noteholder Statement
------------------------
Exhibit A-1