EXECUTION COPY
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SERVICING AGREEMENT
(Funding Notes)
among
AUTOBOND MASTER FUNDING CORPORATION V,
as Issuer
AUTOBOND ACCEPTANCE CORPORATION,
as Servicer
and
DYNEX CAPITAL, INC.,
as Initial Lender
Dated as of June 9, 1998
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION.........................................2
SECTION 1.01. Defined Terms.................................................2
SECTION 1.02. Rules of Interpretation.......................................4
ARTICLE II
SERVICING OF AUTO LOANS......................................................5
SECTION 2.01. Appointment of Servicer.......................................5
SECTION 2.02. Subservicing Agreements Between Servicer and Subservicer......6
SECTION 2.03. Representations and Warranties of the Servicer................7
SECTION 2.04. Duties and Responsibilities of the Servicer...................9
SECTION 2.05. Fidelity Bond, Errors and Omissions Insurance;
Contingent Disaster Relief Protection......................12
SECTION 2.06. Inspection...................................................13
SECTION 2.07. Possession and Payment of Receivables........................13
SECTION 2.08. Monthly Servicing Fee; Servicing Expenses....................13
SECTION 2.09. [RESERVED]...................................................14
SECTION 2.10. Servicer Not to Resign.......................................14
SECTION 2.11. Reliance on the Servicer.....................................14
SECTION 2.12. Events of Servicing Termination..............................15
SECTION 2.13. Appointment of the Successor Servicer........................16
SECTION 2.14. Effect of Service Transfer...................................17
SECTION 2.15. Annual Reports; Statements as to Compliance..................18
SECTION 2.16. Servicer Reports.............................................19
SECTION 2.17. Confidentiality..............................................19
SECTION 2.18. Delivery of Documents........................................20
SECTION 2.20. Standard of Care.............................................20
ARTICLE III
REPOSSESSION AND DISPOSAL...................................................20
SECTION 3.01. Repossession and Disposal....................................20
ARTICLE IV
LIMITATION ON LIABILITY; INDEMNITIES........................................21
SECTION 4.01. Liabilities of Obligors......................................21
SECTION 4.02. Limitation on Liability of the Initial
Lender and the Servicer....................................22
SECTION 4.03. Indemnities of the Servicer..................................22
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ARTICLE V
MISCELLANEOUS...............................................................23
SECTION 5.01. Beneficiaries................................................23
SECTION 5.02. Amendment....................................................23
SECTION 5.03. Notices......................................................23
SECTION 5.04. Severability of Provisions...................................24
SECTION 5.05. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL...................................................24
SECTION 5.06. Counterparts.................................................25
SECTION 5.07. No Proceedings...............................................25
SECTION 5.08. Further Assurance............................................25
SECTION 5.09. Term of Agreement............................................25
EXHIBITS
EXHIBIT A - AUTOBOND PROGRAM MANUAL
EXHIBIT B - FORM OF TRUST RECEIPT
EXHIBIT C - FORM OF MONTHLY SERVICER REPORT
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SERVICING AGREEMENT, dated as of June 9, 1998 (this "Agreement"), among
AUTOBOND MASTER FUNDING Corporation V, a Nevada corporation (the "Issuer"),
AUTOBOND ACCEPTANCE CORPORATION, a Texas corporation, individually ("AutoBond"),
and as servicer (the "Servicer") and DYNEX CAPITAL, INC., as initial lender (the
"Initial Lender").
W I T N E S S E T H:
WHEREAS, the Issuer has purchased, pursuant to the Loan Sale Agreement
dated of June 9, 1998 (the "Sale Agreement"), by and between the Issuer and
AutoBond, certain Auto Loans (as defined herein) and pledged such Auto Loans to
the Trustee pursuant to the Indenture (as defined herein) on behalf of the
holders (the "Noteholders") of the Issuer's Variable Funding Notes (the
"Notes");
WHEREAS, the Trustee has been appointed to hold the Auto Loans conveyed to
it pursuant to the Indenture in trust for the benefit of the Initial Lender and
the Noteholders and to make certain payments with respect thereto;
WHEREAS, the Issuer desires that a servicer be appointed to perform
certain servicing functions in respect of the Auto Loans pledged to the Trustee
on behalf of the Noteholders;
WHEREAS, AutoBond has been requested and is willing to act as the Servicer
hereunder;
WHEREAS, the rights and benefits of the Issuer hereunder (but not the
obligations) have been assigned to the Trustee on behalf of the Noteholders.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
SECTION 1.01. Defined Terms. Capitalized terms used herein and not defined
shall have the meaning specified in the Indenture. As used herein, the following
terms shall have the following meanings:
"Administrator" means AutoBond and any permitted successor to such
functions in accordance, and in connection with, the Indenture in its
capacity as Administrator thereunder and, if AutoBond is acting as
Servicer hereunder, also in its capacity as Servicer.
"Adverse Claim" means any claim of ownership or any lien, security
interest, title retention, trust or other charge or encumbrance, or other
type of preferential arrangement having the effect or purpose of creating
a lien or security interest, other than the interests created in favor of
the Trustee and the Noteholders under the Indenture.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agreement" means this Servicing Agreement, as amended or supplemented
from time to time in accordance with the terms hereof, including all
exhibits and schedules hereto.
"AutoBond" means AutoBond Acceptance Corporation, a Texas corporation.
"AutoBond Program Manual" means the AutoBond Program Manual (including the
Credit and Collection Policies) attached hereto as Exhibit A, as modified
from time to time, with notice of each such modification to the Trustee.
"Auto Loan" means a fixed-rate, closed-end consumer installment automobile
loan which finances the purchase of a new or used automobile, light-duty
truck or van, which loan is secured by a lien and security interest in
such financed vehicle.
"Business Day" means any day other than a Saturday or a Sunday, or another
day on which banks in the City of New York, or the City of Buffalo, New
York or in Texas (or such other cities or states in which the Corporate
Trust Office, the principal administrative offices of the Administrator,
Note Registrar and Paying Agent or the principal offices of the Servicer
are subsequently located, as specified in writing by the Administrator to
the other parties hereto) are required, or authorized by law, to close.
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"Closing Date" means June 9, 1998.
"Continuing Errors" has the meaning specified in Section 2.13(e).
"Electronic Ledger" means the electronic master record of the Receivables
maintained by the Servicer.
"Errors" has the meaning specified in Section 2.13(e).
"Event of Administrator Termination" means an Event of Servicing
Termination hereunder.
"Event of Servicing Termination" has the meaning specified in Section 2.12
hereunder.
"Financed Vehicle" means a new or used automobile, van or light-duty
truck, the purchase of which the Obligor financed with an Auto Loan.
"Governmental Authority" means the United States of America, any state,
local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
thereof or pertaining thereto.
"Indenture" means the Trust Indenture and any supplements thereto.
"Independent Public Accountant" means any certified public accounting firm
that is independent with respect to the Issuer and the Administrator, the
Servicer and any Subservicer, as the case may be, within the meaning of
the Securities Act of 1933, as amended.
"Initial Lender" means Dynex Capital, Inc.
"Issuer" means AutoBond Master Funding Corporation V, a Nevada
corporation, in its capacity as issuer under the Indenture.
"Noteholder" means any of the registered holders of a Funding Note issued
under the Indenture.
"Notes" means any of the Variable Funding Notes issued under the
Indenture.
"Opinion of Counsel" means a written opinion of counsel (who may be
counsel to the Issuer, the Administrator or the Servicer), which opinion
is acceptable to the Trustee.
"Records" means all documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, punch
cards, data processing software and related property and rights) prepared
and maintained by the Servicer or by or on behalf of the Issuer with
respect to Receivables and the related Obligors.
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"Responsible Officer" means, with respect to any Person, the Person, any
Vice President, any Assistant Vice President, any Assistant Secretary, any
Assistant Treasurer or any other officer of such Person customarily
performing functions similar to those performed by any of the
above-designated officers and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"Scheduled Payment" means a payment due on an Auto Loan in accordance with
its terms.
"Service Transfer" has the meaning specified in Section 2.12.
"Servicer" means AutoBond Acceptance Corporation, in its capacity as
servicer under this Agreement and any successor thereto in accordance with
this Agreement.
"Servicer Duties" has the meaning specified in Section 2.04(a).
"Servicer Report" has the meaning specified in Section 2.17.
"Servicing Officer" means any officer or employee of the Servicer involved
in, or responsible for, the administration and servicing of Receivables
whose name appears on a list of servicing officers attached to Officer's
Certificates furnished to the Issuer and the Trustee by the Servicer, as
such list may be amended from time to time by the party furnishing any
such Officer's Certificate.
"Static Pool" means that set of Specified Auto Loans acquired by the
Issuer and pledged under the Indenture during a specified calendar
quarter.
"Subservicer" means any Person with whom the Servicer enters into a
Subservicing Agreement.
"Subservicing Agreement" means any written contract between the Servicer
and any Subservicer, relating to servicing and collection of Receivables.
"Successor Servicer" has the meaning specified in Section 2.13(a)
hereunder.
"Triggering Event" means, for any Static Pool as of a Determination Date,
(a) a Repossession Ratio in excess of 20%, or (b) a Delinquency Ratio in
excess of 7%.
"Trust Indenture" means the Trust Indenture, dated as of June 9, 1998,
among the Issuer, AutoBond and the Trustee, as amended or supplemented
from time to time in accordance with the terms thereof.
SECTION 1.02. Rules of Interpretation. The following rules apply to this
Agreement:
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(a) the singular includes the plural and the plural includes the
singular;
(b) "or" is not exclusive and "include" and "including" are not
limiting;
(c) a reference to any agreement or other contract includes
permitted supplements and amendments;
(d) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder or any law enacted
in substitution or replacement therefor;
(e) a reference to a person includes its permitted successors and
assigns;
(f) a reference to an Article, a Section, an Exhibit or a Schedule
without further reference is to the relevant Article, Section, Exhibit or
Schedule of this Agreement;
(g) any right may be exercised at any time and from time to time;
(h) the headings of the Articles and the Sections are for
convenience and shall not affect the meaning of this Agreement;
(i) words such as "hereunder", "hereto", "hereof" and "herein" and
other words of like import shall, unless the context clearly indicates to
the contrary, refer to the whole of this Agreement and not to any
particular Article, Section, subsection or clause hereof; and
(j) capitalized terms used but not defined herein shall have the
respective meanings assigned thereto in the Indenture.
ARTICLE II
SERVICING OF AUTO LOANS
SECTION 2.01. Appointment of Servicer. The Issuer hereby appoints the
Servicer, and the Servicer accepts such appointment, to perform its obligations
pursuant to this Agreement on behalf of and for the benefit of the Noteholders,
the Issuer and the Initial Lender in accordance with the terms of this
Agreement, the respective Receivables and applicable law and, to the extent
consistent with such terms, in the same manner in which, and with the same care,
skill, prudence and diligence with which it services and administers Auto Loans
of similar credit quality for itself or other portfolios, if any, giving due
consideration to customary and usual standards of practice of prudent
institutional automobile loan servicers of similar credit quality automobile
loans and, in each case, taking into account its other obligations hereunder,
but without regard to:
(i) any relationship that the Servicer, any Subservicer or any
Affiliate of the Servicer or any Subservicer may have with the related
Obligor; or
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(ii) the ownership, or servicing for others, by the Servicer or any
Subservicer, of any other automobile loans or property.
SECTION 2.02. Subservicing Agreements Between Servicer and Subservicer.
(a) Upon the prior written consent of the Initial Lender, the Servicer may
enter into Subservicing Agreements with a Subservicer for the performance of all
or a part of the Servicer Duties with respect to any Receivable. The Initial
Lender shall have no duty to investigate any Subservicer in connection with the
granting or denial of consent to a Subservicing Agreement. References in this
Agreement to actions taken or to be taken by the Servicer in performance of the
Servicer Duties include actions taken or to be taken by a Subservicer on behalf
of the Servicer. Each Subservicing Agreement will be upon such terms and
conditions as are not inconsistent with this Agreement. Without limiting the
first sentence of this Section 2.02(a), the Servicer shall provide written
notice to the Issuer, the Initial Lender and the Trustee promptly upon the
appointment of any Subservicer. For purposes of this Agreement, the receipt by a
Subservicer of any amount with respect to a Receivable (other than amounts
representing servicing compensation) shall be treated as the receipt by the
Servicer of such amount.
(b) Upon the prior written consent of the Initial Lender, the Servicer
shall be entitled to terminate any Subservicing Agreement that may exist in
accordance with the terms and conditions of such Subservicing Agreement and
without any limitation by virtue of this Agreement.
(c) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer or a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain directly obligated and directly liable to the Issuer,
the Initial Lender and the Trustee for the servicing and administering of the
Receivables in accordance with the provisions of this Agreement without
diminution of such obligation or liability (including its indemnity obligations
under Section 4.03) by virtue of such Subservicing Agreements or arrangements or
by virtue of indemnification from the Subservicer or the Servicer and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Receivables. The Servicer shall be entitled
to enter into any agreement with a Subservicer for indemnification of the
Servicer and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.
(d) Any Subservicing Agreement that may be entered into pursuant to this
Agreement and any other transaction or services relating to the Receivables
involving a Subservicer in its capacity as such that is consented to by the
Issuer, the Initial Lender and the Trustee shall be deemed to be between the
Subservicer and the Servicer alone and the Issuer, the Initial Lender and the
Trustee shall not be deemed parties thereto and shall have no obligations,
duties or liabilities with respect to the Subservicer, but the Trustee, the
Initial Lender and the Issuer shall be third-party beneficiaries thereof.
(e) If the Servicer shall for any reason no longer be the Servicer
hereunder (including by reason of any Event of Servicing Termination), the
Servicer shall thereupon terminate each Subservicing Agreement that may have
been entered into, and neither the Issuer, the Initial
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Lender, the Trustee nor the Successor Servicer shall be deemed to have assumed
any liability or obligation thereunder, the Servicer's interest therein or to
have replaced the Servicer as a party to any such Subservicing Agreement.
SECTION 2.03. Representations and Warranties of the Servicer. The Servicer
represents, warrants and covenants to the Issuer, the Initial Lender, the
Trustee and the Noteholders, as follows, as of the date hereof (which
representations and warranties shall be deemed repeated on each date on which a
Servicer Report is due to be delivered hereunder as though made on and as of
such date):
(a) It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas and is duly qualified to do
business, and is in good standing in every jurisdiction in which the
nature of its business requires it to be so qualified; it or a Subservicer
is or will be in compliance with the laws of each state to the extent
necessary to perform its obligations under this Agreement; and it or a
Subservicer has obtained all necessary licenses with respect to it or such
Subservicer required by law to enable it to perform its duties herein;
(b) It has the power and authority to execute, deliver and perform
this Agreement and the transactions contemplated hereby;
(c) The execution and delivery by it and the performance by it or a
Subservicer of this Agreement, and the execution and delivery by it and
the performance by it or a Subservicer of all other agreements,
instruments and documents which may be delivered by it pursuant hereto,
and the transactions contemplated hereby, (i) have been duly authorized by
all necessary corporate action on the part of it, (ii) do not contravene
or cause it to be in default under (A) its organizational documents, (B)
any contractual restriction, with respect to any Debt of it, or otherwise,
or contained in any indenture, loan or credit agreement, lease, mortgage,
security agreement, bond, note, or other material agreement or instrument
binding it or its property or (C) any law, rule, regulation, order, writ,
judgment, award, injunction or decree applicable to or binding it or its
property, and (iii) do not result in or require the creation of any
Adverse Claim upon or with respect to any of its properties;
(d) This Agreement has been duly executed and delivered on behalf of
it;
(e) No consent of, or other action by, and no notice to or filing
with, any Governmental Authority or any other party is required for the
due execution, delivery and performance by it (either directly or through
a Subservicer) of this Agreement or any other agreement, document or
instrument to be delivered by it hereunder, or if required, has been
obtained;
(f) This Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms;
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(g) There is no pending or threatened action, suit or proceeding,
nor any injunction, writ, restraining order or other order of a material
nature against or affecting it, its officers or directors, or its
property, in any court or tribunal, or before any arbitrator of any kind
or before or by any Governmental Authority (i) asserting the invalidity of
this Agreement or any document to be delivered by it hereunder or (ii)
seeking any determination or ruling that would reasonably be expected to
materially and adversely affect (A) the performance by it of its
obligations under this Agreement, or (B) the validity or enforceability of
this Agreement or any document to be delivered by it hereunder or (iii)
which is inconsistent with the due consummation by it of the transactions
contemplated by this Agreement;
(h) Its facilities, plant, personnel, records and products are
adequate for the performance of its duties hereunder;
(i) The Servicer is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which would reasonably be
expected to have consequences that would materially and adversely affect
the condition (financial or otherwise) or operations of the Servicer or
its properties or would reasonably be expected to have consequences that
would materially and adversely affect its performance hereunder;
(j) The transactions contemplated by this Agreement are in the
ordinary course of business of the Servicer;
(k) The Financed Vehicle securing each Receivable shall not be
released by the Servicer or a Subservicer in whole or in part from the
security interest granted by the Obligor, except as contemplated herein;
(l) Each certificate and each statement furnished in writing, report
or electronic medium delivered pursuant to the terms hereof or under the
Indenture by the Servicer is accurate and complete in all material
respects with respect to the information purported to be set forth
therein; and
(m) The practices used by the Servicer to monitor collections with
respect to the Receivables and repossess and dispose of the Financed
Vehicles related to the Receivables have been, and will be, in all
material respects, legal, proper and in conformity with the requirements
of all applicable federal and state laws, rules and regulations, VSI
Policy procedures (if applicable) and as set forth with respect to the
Servicer in the AutoBond Program Manual.
It is understood and agreed that the representations and warranties set forth in
this Section 2.03 shall survive the execution of this Agreement. Upon discovery
by either the Initial Lender, the Issuer, the Trustee or the Servicer of a
breach of any of the foregoing representations and warranties, the party
discovering such breach shall give proper written notice to the other parties
hereto and the Noteholders; provided, that the Trustee shall have no duty or
responsibility to
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inquire, investigate, determine or obtain actual knowledge of facts or events
constituting a breach of any such representations or warranties.
SECTION 2.04. Duties and Responsibilities of the Servicer.
(a) The Servicer shall manage, administer, monitor and service the Auto
Loans, including providing data management, payment processing and customer
service. In performing its duties hereunder, the Servicer shall have full power
and authority to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable,
within the terms of this Agreement (the "Servicer Duties"). Prior to a
resignation or termination of the Servicer pursuant to Sections 2.10 or 2.12,
without limitation of the servicing standard set forth in Section 2.01, the
Servicer will provide the following services (together with other activities not
inconsistent with the description below and implicitly necessary to accomplish
the usual and customary activities, of a subprime automobile loan servicer):
(i) Boarding Functions:
(1) Review for receipt of copies of Loan Documents;
(2) Input of new Receivable information into loan accounting
system; and
(3) Preparation and mailing of welcome letters.
(ii) File Maintenance/Document Control Functions:
(1) Retention of copies of the Loan Documents;
(2) Tracking of customer collision insurance on Financed
Vehicles and reporting of exposed Financed Vehicles; and
(3) Determination of Receivables being satisfied in full.
(iii) Customer Service Functions:
(1) Preparation and transmittal of monthly billing
statements to Obligors;
(2) Response to Obligor inquiries;
(3) Research regarding billing statements and Obligor
inquiries;
(4) Maintenance of Obligor information; and
(5) Preparation and mailing of delinquency notices.
(iv) Payment Processing Functions:
(1) Coordination of lockbox procedures; and
(2) Recording of loan payment information, including
instances of non-sufficient funds.
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(v) Reporting Functions:
(1) Preparation and delivery of Servicer's Report and the
other reports described in Section 2.16 hereof.
(vi) Data Processing Functions:
(1) Entry of data;
(2) Operation of data center;
(3) Operation of telecommunications; and
(4) Operation and maintenance of collection system.
(vii) Collection Functions:
(1) receiving, applying and administering collections on the
Auto Loans;
(2) arranging for and administering repossessions of the
Financed Vehicles related to the Auto Loans;
(3) disposing of each Financed Vehicle related to a
Receivable whether following repossession or otherwise;
and
(4) filing of insurance claims and performing the duties of
the named insured under any VSI Policy with respect to
each Auto Loan affected by a repossession or otherwise.
Notwithstanding any other provision in this Agreement, the Servicer
shall administer collections on Auto Loan at all times in such a manner that
each Auto Loan shall remain eligible for coverage under any Insurance Policy.
The Servicer shall take such reasonable action as shall be necessary to permit
recovery on each Auto Loan under any Insurance Policy and may engage such
liquidation agents, skiptracers, remarketers, repossession agents or similar
agents as it deems necessary.
(b) The Servicer shall hold in trust for the benefit of the Trustee and
Noteholders and shall forward to the Collection Account, the Lender Collection
Account or the Lockbox Account, as applicable, within one (1) Business Day
following receipt thereof any payment or partial payment or deposit (including
all proceeds from all sources in respect of the Auto Loans, including proceeds
from any insurance and refunds from "soft" add-ons) with respect to any
Receivable received by the Servicer. The Servicer shall not assert any right of
set-off or any lien with respect to such payment or deposit.
(c) Except as expressly provided herein in connection with its duty to
effect liquidations and repossessions, the Servicer shall not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create any Adverse
Claim upon or with respect to, any Receivable (or any right to income in respect
thereof), or any account in which any payments with respect to any Receivable
are deposited, or assign any right to receive income in respect of any
Receivable.
(d) The Servicer shall promptly notify the Initial Lender following its
becoming aware that any Financed Vehicle is no longer eligible for coverage
under the Insurance Policy, or
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following its receipt of notice from the Insurer that it has rejected a claim
submitted by the Servicer with respect to any Financed Vehicle or Auto Loan.
(e) Until such time as the Servicer resigns or is removed, the Servicer
shall remain the prior lienholder of record with respect to each Financed
Vehicle relating to the Auto Loans subject to the Lien of the Indenture;
provided that the Servicer shall remain the prior lienholder only in its
capacity as an agent of the Trustee.
(f) In accordance with the standard of care in Sections 2.01 and 2.20, the
Servicer may agree, with the prior consent of the Initial Lender to grant to the
Obligor on any Auto Loan any rebate, refund or adjustment that the Servicer in
good faith believes is required under the Auto Loan or applicable law in
connection with a prepayment or payment in full of the Auto Loan, and, pursuant
to written instructions from the Servicer, the Trustee shall remit the amount of
any such rebate, refund or adjustment to the Servicer to be sent to the
applicable Obligors from the Collection Account. The Servicer may not permit any
rescission or cancellation of any Auto Loan nor may it take any action with
respect to any Auto Loan or Sale Assignment which would invalidate the coverage
afforded by the Insurance Policy to such Receivable or the related Financed
Vehicle, or would impair the rights of the Trustee therein or in the proceeds
thereof.
(g) The Servicer shall not release, and shall not advise the Trustee to
release, the Financed Vehicle securing an Auto Loan from the vehicle lien
granted in connection with such Receivable in whole or in part, except:
(i) when such Auto Loan has been paid in full;
(ii) immediately upon any exchange or substitution of such Financed
Vehicle by the Dealer or manufacturer thereof in settlement of claims as
to defects, breach of warranties, insurance and similar matters, with a
Financed Vehicle of equal or greater collateral value as of the date of
such exchange in the reasonable judgment of the Servicer (subject to all
the terms hereof including the recordation of the lien thereon and the
requirements of the Insurance Policies); or
(iii) in connection with a repossession of a Financed Vehicle; or
(iv) when all Insurance Proceeds with respect to such Financed
Vehicle have been received by the Servicer on behalf of the Trustee and
the Issuer.
The Servicer shall not extend or otherwise amend the terms of any Receivable,
except in accordance with the provisions of Section 2.04(f) of this Agreement.
(h) The Servicer agrees to monitor and track each Financed Vehicle for
maintenance of required physical damage insurance and to notify the Issuer and
the Initial Lender as soon as practicable but not later than 30 days after
becoming initially aware, of circumstances that would lead a reasonable person
to believe that the insurance on any Financed Vehicle is not being or will not
be maintained in accordance with applicable law and the terms of the applicable
retail installment sales contract.
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(i) Except as expressly provided herein, the Servicer shall not sell,
assign (by operation of law or otherwise) or otherwise dispose of, or create any
Adverse Claim upon or with respect to, any Receivable (or any right to income in
respect thereof), or any account in which any payments with respect to any
Receivable are deposited, or assign any right to receive income in respect of
any Receivable.
(j) The Servicer shall instruct each Obligor by written notice that all
payments on Receivables shall be mailed to the Lockbox, and, so long as AutoBond
is serving as the Servicer and the Administrator hereunder, that such payments
shall be made payable to the order of "AutoBond Acceptance Corporation," in its
capacity as Servicer.
SECTION 2.05. Fidelity Bond, Errors and Omissions Insurance; Contingent
Disaster Relief Protection.
(a) The Servicer shall maintain, at its own expense, professional
liability insurance, with broad coverage with responsible insurers on all
officers, employees or other Persons acting on behalf of the Servicer in any
capacity with regard to the Receivables to handle funds, money, documents and
papers relating to the Receivables. Any such insurance shall protect and insure
the Servicer against losses, including forgery, theft, embezzlement, fraud,
errors and omissions and negligent acts of such Persons and shall be maintained
in a form that would meet the requirements of prudent institutional servicers of
similar auto loans, and in the amount of $5,000,000. No provision of this
Section 2.05(a) requiring such insurance shall diminish or relieve the Servicer
from its duties and obligations as set forth in this Agreement. The Servicer
shall be deemed to have complied with this provision with respect to itself if
one of its respective Affiliates has such coverage and, by the terms of such
policy, the coverage afforded thereunder extends to the Servicer. The Servicer
shall cause each and every Subservicer for it to maintain a policy of insurance
which would meet such requirements. Upon request of the Issuer or the Trustee,
the Servicer shall cause to be delivered to the Issuer and the Trustee a
certification evidencing coverage under the Servicer's or any Subservicer's
policy. The Trustee shall have no obligation to request any such certification
or upon receipt of any such certification or of any notice provided for in this
Section 2.05(a), to approve, consent to, or determine its compliance with, the
requirements of this Section 2.05(a). Any such insurance policy shall (i) not be
canceled without the Servicer giving prior written notice to the Issuer, the
Initial Lender and the Trustee immediately following the giving or receipt of
such notice as is required or allowed under the terms of such fidelity bond or
insurance policy, as the case may be and (ii) not be modified in a materially
adverse manner without ten days' prior written notice by the Servicer to the
Issuer, the Initial Lender and the Trustee.
(b) The Servicer currently maintains, at its own expense, a computer
disaster recovery plan and computer disaster recovery procedures in forms
consistent with industry standards of prudent institutional receivables
servicers and shall continue to maintain, at its own expense, such a plan and
such procedures as are consistent with such standards and shall not materially
modify, amend or revoke such procedures without giving prior written notice
thereof to the Trustee. No provision of this Section 2.05(b) requiring such a
plan and such procedures shall diminish or relieve the Servicer from its duties
and obligations as set forth in this Agreement.
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SECTION 2.06. Inspection.
(a) At all times during the term hereof, the Servicer shall afford the
Issuer, the Initial Lender, the Trustee, and each Noteholder owning a Note
evidencing at least 25% of the unpaid principal amount of Notes of such Series,
together with each of their authorized agents (including auditors), upon
reasonable notice, reasonable access (subject to the security rules and
regulations of the Servicer) during normal business hours to its records
relating to the Receivables and will cause its personnel to assist in any
examination of such records by any of such Persons; provided, that the foregoing
shall not require any of such Persons to conduct any inspection. The examination
referred to in this Section 2.06(a) will be conducted in a manner which does not
unreasonably interfere with the Servicer's normal operations or customer or
employee relations or require the Servicer to disclose or expose confidential
information related to its services to its other clients or its other areas of
its operations. Without otherwise limiting the scope of the examination, the
Issuer, the Initial Lender, the Trustee, and each such Noteholder may, using
generally accepted auditing standards, verify the status of each Receivable and
review the copies of the Loan Documents, Electronic Ledger and records relating
thereto for conformity to reports prepared pursuant to Section 2.17 and
compliance with the standards represented or required to exist as to each
Receivable in this Agreement. Nothing in this section shall affect the
obligation of the Servicer to observe any applicable law prohibiting disclosure
of information regarding the Obligors, and failure of the Servicer to provide
access to information as a result of such obligation shall not constitute a
breach of this Section 2.06.
(b) All information obtained by the Issuer, the Initial Lender, the
Trustee, such Noteholders or their respective agents regarding the Obligors and
the Receivables, whether upon exercise of their respective rights under this
Section 2.06 or otherwise, shall be maintained by the Issuer, the Initial
Lender, the Trustee, such Noteholders and their respective agents in confidence
and shall not be disclosed to any other Person other than the Noteholders,
except as otherwise required by applicable law or regulation.
SECTION 2.07. Possession and Payment of Receivables. The Servicer shall
determine when a Receivable has been paid in full. The Servicer shall notify the
Trustee in writing monthly as to each Receivable in connection with which such a
determination has been made. If the Servicer requires possession of any Loan
Documents or any documents related thereto in order to perform its duties or
obligations hereunder, prior to taking possession of any such Receivable or
documents, the Servicer shall deliver to the Trustee a trust receipt
substantially in the form attached hereto as Exhibit B. The Servicer agrees to
promptly return any such Receivable and documents, possession of which the
Servicer takes in accordance with this Section 2.07, after its need for
possession thereof ceases, unless satisfied in full.
SECTION 2.08. Monthly Servicing Fee; Servicing Expenses.
(a) On each Payment Date the Servicer shall be entitled to receive by wire
transfer of immediately available funds to an account designated in writing by
the Servicer to the Initial Lender or the Trustee from the funds on deposit in
the Lender Collection Account or the Collection Account, as the case may be, an
amount equal to the Monthly Administrator Fee as of such Payment Date in
accordance with Section 13.05 of the Indenture.
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(b) The Servicer shall be required to pay for all expenses incurred by it
in connection with its activities hereunder (including any payments to
accountants, counsel, Subservicers, or any other Person) out of the compensation
paid to it pursuant to Section 2.08(a) above, and shall not be entitled to any
extra payment or reimbursement therefor; provided, however, that the Servicer
shall be entitled to reimbursement by wire transfer of immediately available
funds to an account designated in writing by the Servicer to the Trustee for the
amount of any (x) Reimbursable Administrator Expenses under the Indenture and
(y) other expenses incurred with the prior written consent of the Initial Lender
and the Trustee. No later than ten Business Days prior to each Payment Date, the
Servicer shall provide the Issuer and the Trustee with a list of items eligible
for reimbursement pursuant to the immediately preceding sentence, in such
reasonable detail as the Issuer and the Trustee may request, together with its
certification by a Servicing Officer that all such items are eligible for
reimbursement hereunder.
Any reimbursement to the Servicer for fees or costs pursuant to this
Section 2.08(b) shall be limited to the extent of the funds available for
reimbursement of Servicer and Administrator fees and expenses under the
Indenture.
(c) The Issuer covenants and agrees that upon a Responsible Officer
obtaining actual knowledge of the occurrence of an Event of Default under the
Indenture, it shall promptly give notice thereof to the Servicer.
(d) The Issuer agrees that, without the written consent of the Servicer,
it will not amend the Indenture (i) to change the source and/or priority of the
payment of the Monthly Administrator Fee or (ii) to materially change the
rights, duties and obligations under this Agreement of the Servicer.
SECTION 2.09. [RESERVED]
SECTION 2.10. Servicer Not to Resign.
The Servicer shall not resign from the obligations and duties hereby
imposed on it hereunder, except upon its determination that (i) the performance
of its duties hereunder has become impermissible under applicable law and (ii)
there is no reasonable action which the Servicer could take to make the
performance of its duties hereunder permissible under applicable law. Any such
determination permitting the resignation of the Servicer shall be evidenced as
to clause (i) above by an Opinion of Counsel to such effect delivered to the
Issuer, the Initial Lender and the Trustee before any such resignation and as to
clause (ii) by an Officer's Certificate to such effect delivered to the Issuer,
the Initial Lender and the Trustee before any such resignation.
SECTION 2.11. Reliance on the Servicer. The Issuer and the Initial Lender
have entered into this Agreement with the Servicer in reliance upon its ability
to perform the servicing duties, if necessary, without any delegation thereof;
the adequacy of its plant, personnel, records and procedures; its integrity,
reputation and financial standing and the continuance of each of the foregoing.
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SECTION 2.12. Events of Servicing Termination. If any of the following
events (each, an "Event of Servicing Termination") shall occur and be
continuing:
(a) Any failure by the Servicer to forward to the Lender Collection
Account, the Collection Account or the Lockbox, as applicable, any payment
or partial payment or deposit identified with respect to any Receivable
received by the Servicer and the continuance of such failure for a period
of one Business Day after the date upon which such payment or deposit is
so identified by the Servicer; or
(b) Failure on the part of the Servicer to observe or perform any
term, covenant or agreement in this Agreement, including the Servicer
Duties, which failure continues unremedied for 10 Business Days after
discovery by the Servicer or the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Servicer by the Issuer, the Initial Lender or by the Trustee; or
(c) Any proceeding shall be instituted against the Servicer (or, if
the Servicer is actively contesting the merits thereof, such proceeding is
not dismissed within 60 days) seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or any
of its Debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property, or
any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment
of a receiver, trustee, custodian or other similar official for, it or for
any substantial part of its property) shall occur; or
(d) The commencement by the Servicer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Servicer in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law, or the
consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Servicer or of any substantial
part of its property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay
its Debts generally as they become due, or the taking of corporate action
by the Servicer in furtherance of any such action; or
(e) The Servicer shall fail to deliver a report at the time, in the
form and containing the information expressly required by this Agreement,
which failure continues for a period of 5 Business Days; or
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(f) There is a breach of any of the representations and warranties
of the Servicer set forth in Section 2.03 and such breach shall not have
been cured in all material respects within 10 Business Days or such longer
period as may be agreed to by the Servicer and the Initial Lender after
receipt of written notice thereof by the Servicer (if notice is given by
the Initial Lender or the Issuer) or upon discovery by the Servicer;
(g) A Triggering Event shall have occurred; or
(h) An Event of Default shall have occurred and be continuing under
the Indenture;
then, and in any such event, either the Issuer or the Initial Lender may,
by delivery to the Servicer (and to the Initial Lender, the Trustee or the
Issuer, as applicable) of a written notice specifying the occurrence of
any of the foregoing events, terminate the rights and responsibilities of
the Servicer hereunder, without demand, protest or further notice of any
kind, all of which are hereby waived by the Servicer (such termination and
any termination of the Servicer pursuant to Section 2.10 hereby called a
"Service Transfer"); provided, that in the event any of the events
described in subsections (c) or (d) of this Section 2.12 shall have
occurred, termination of the duties and responsibilities of the Servicer
shall automatically occur, without, demand, protest, or further notice of
any kind, all of which are expressly waived by the Servicer.
SECTION 2.13. Appointment of the Successor Servicer.
(a) Upon the effectiveness of termination of the Servicer's
responsibilities under this Agreement pursuant to Section 2.10 or Section 2.12,
the Initial Lender shall immediately succeed to the duties of the Servicer as a
successor Servicer (the "Successor Servicer"), unless and until another
Successor Servicer has been appointed by the Initial Lender (which may be the
Initial Lender). The Initial Lender shall give the Noteholders not less than 30
days' prior written notice of its intent to appoint a Successor Servicer
pursuant to this Section 2.13(a). Such appointment shall become effective
following the expiration of such 30-day period (or such shorter period agreed to
by the Initial Lender) on a date to be specified by the Initial Lender. Such
Successor Servicer shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Servicer under this Agreement;
provided, that such Successor Servicer shall have no responsibility for any
actions of the Servicer prior to the date of the appointment of such Successor
Servicer as Servicer. Such Successor Servicer shall be authorized and empowered
to execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do any and all
acts or things necessary or appropriate to effect the purposes of such notice of
termination and to perform the duties of the Servicer hereunder (including its
duties as Successor Servicer hereunder but excluding its duty to indemnify
pursuant to Sections 4.03(a) and (b)). The Initial Lender shall have the right
to appoint as its agent a third party to perform the duties and obligations of
the Initial Lender as Successor Servicer hereunder. The Initial Lender shall not
be responsible for compensating the Issuer for any increase in the Monthly
Servicing Fee associated with a Successor Servicer.
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(b) Any Successor Servicer appointed by the Initial Lender hereunder shall
be entitled to reasonable compensation (including the estimated termination
costs of such servicing and a reasonable profit) which shall be determined by
the Initial Lender; provided, however, that the Initial Lender, when acting as
Successor Servicer hereunder, shall receive compensation that is no less than
was being received by the Servicer at the time of its termination. Any Successor
Servicer appointed by a court of competent jurisdiction or any agent of the
Initial Lender as Successor Servicer upon becoming the Successor Servicer
pursuant to Section 2.13 (a) or subservicer to the Successor Servicer, shall be
entitled to compensation (including the estimated costs of servicing and a
reasonable profit) equal to the prevailing market rate for such services.
(c) The outgoing Servicer, the Initial Lender and the Successor Servicer
shall take such action, consistent with this Agreement and the Indenture, that
shall be reasonably necessary to effectuate any such succession, including,
without limitation, (i) the express assumption by such Successor Servicer of the
duties and obligations of the outgoing Servicer hereunder (except as to the
Initial Lender as the Successor Servicer, the Servicer's indemnification
obligation under Section 4.03(a) and (b) shall not apply), (ii) notifying
Obligors in writing of the existence of the Successor Servicer, and (iii)
providing such Successor Servicer with all Records maintained or held by the
outgoing servicer as Servicer hereunder, including all paper files and all
electronic files and the Servicer shall be reimbursed for related expenses in
accordance with Section 2.08(b).
(d) Upon appointment, any Successor Servicer shall be successor in all
respects to the outgoing Servicer under this Agreement and the transactions set
forth or provided for herein and shall be subject to all responsibilities,
duties and liabilities relating thereto placed upon the Servicer by the terms
and provisions hereof (subject to the same limitations as are contained in this
Section 2.13 with respect to a succession to the outgoing Servicer by the
Initial Lender).
(e) Upon an assumption by a Successor Servicer, or in the event of
transfer of servicing of any Auto Loans to the Successor Servicer from a prior
servicer (including after the execution of this Agreement), the Successor
Servicer is authorized to accept and rely on all of the accounting, records and
work of the prior servicer without any audit or other examination thereof, and
the Successor Servicer shall have no duty, responsibility, obligation or
liability to any Person for any acts or omissions of the prior servicer. If any
error, inaccuracy or omission (collectively, "Errors") exists in any information
received from the prior servicer and such Errors should cause or materially
contribute to the Successor Servicer making, or continuing to make, any Errors
(collectively, "Continuing Errors"), the Successor Servicer shall have no
liability to any Person for such Continuing Errors. In the event the Successor
Servicer becomes aware of any Errors or Continuing Errors, which in the opinion
of the Successor Servicer impair its ability to perform its services hereunder,
the Successor Servicer may with prior written notice to the Issuer and the
Trustee, undertake such data or records reconstruction as it deems appropriate
to correct such Errors and Continuing Errors and to prevent future Continuing
Errors, and the Successor Servicer's reasonable expenses incurred in connection
therewith shall be deemed expenses owing to the Successor Servicer hereunder for
purposes of the Indenture.
SECTION 2.14. Effect of Service Transfer.
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(a) Prior to any Service Transfer, the outgoing Servicer shall notify (or,
to the extent that such Servicer provided such notice pursuant to Section
2.13(c), confirm the notice to) Obligors of the existence of the Successor
Servicer.
(b) After any Service Transfer, the outgoing Servicer shall have no
further obligations with respect to the management, servicing, custody or
monitoring of the collection of the Receivables and the Successor Servicer shall
have all of such obligations.
(c) A Service Transfer shall not affect the rights and duties of the
parties hereunder (including, but not limited to, the obligations and
indemnities of the outgoing Servicer pursuant to Article IV) other than those
relating to the management, servicing, custody or monitoring of the collection
of the Receivables by the Successor Servicer.
SECTION 2.15. Annual Reports; Statements as to Compliance.
(a) On or before ninety (90) days after the end of each fiscal year of the
Servicer, the Servicer shall deliver to the Issuer, the Initial Lender and the
Trustee and each Noteholder, a copy of the financial statements of the Servicer
containing a report of a firm of Independent Public Accountants to the effect
that such firm has examined certain books and records of the Servicer and that,
on the basis of such examination conducted substantially in compliance with
generally accepted audit standards, such financial statements accurately reflect
the financial condition of the Servicer. In the event such firm of Independent
Public Accountants requires the Trustee to agree to the procedures performed by
such firm of Independent Public Accountants, the Servicer shall direct the
Trustee in writing to so agree; it being understood and agreed that the Trustee
will deliver such letter of agreement in conclusive reliance upon the direction
of the Servicer, and the Trustee has not made any independent inquiry or
investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures.
(b) The Servicer shall deliver to the Trustee, the Initial Lender and each
Noteholder by the close of business on the Determination Date of each month the
Officer's Certificate contemplated in Section 2.17, which shall state as to each
signer thereof, that (a) a review of the activities of the Servicer (and each
Subservicer) during the preceding calendar month and of performance under this
Agreement has been made under such officer's supervision and (b) to the best of
such officer's knowledge, based on such review, each of the Servicer and any
Subservicer has fulfilled all its respective obligations under this Agreement
throughout such month, or, if there has been an Event of Servicing Termination
or if an event has occurred that with notice or lapse of time or both would
become an Event of Servicing Termination, specifying each such Event of
Servicing Termination or event known to such officer and nature and status
thereof, and remedies therefor being pursued. Notwithstanding the obligation to
deliver such certificates, the Servicer shall promptly (but in any event within
five Business Days) notify the Issuer, the Initial Lender, the Noteholders and
the Trustee upon receiving actual knowledge of any event which constitutes an
Event of Servicing Termination or would constitute an Event of Servicing
Termination but for the requirement that notice be given or time elapse or both.
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SECTION 2.16. Servicer Reports.
(a) The Servicer shall furnish by close of business on the day prior to
each Payment Date (or the next succeeding Business Day if such day is not a
Business Day), to the Trustee, the Initial Lender and each Noteholder an
Officer's Certificate, substantially in the form attached hereto as Exhibit C
(the "Servicer Report"), which Servicer Report shall contain all information
necessary for the Administrator to prepare the report allowing the Trustee to
make the distributions from, and transfers among, the accounts required by the
Indenture or in such other form as is mutually acceptable to the Servicer, the
Initial Lender and the Trustee. In addition, the Servicer shall provide the
Initial Lender and the Trustee with such additional written information and
certifications as the Initial Lender or the Trustee may request in order for the
Trustee to make the distributions from, and transfers among, the various
accounts required by this Agreement and the Trust Indenture on a daily, or
other, basis. Each of the parties hereto shall provide to the Noteholders
evidencing a Percentage of not less than 50% such additional information as they
may reasonably request in order to assist such Noteholders evidencing a
Percentage of not less than 50% in their ongoing monitoring and assessment of
the performance of the Receivables, including the related computer files.
(b) The Servicer Report shall include a certification (i) that the
information contained in such certificate is accurate, (ii) that no Event of
Servicing Termination, or event that with notice or lapse of time or both would
become an Event of Servicing Termination, has occurred, or if an Event of
Servicing Termination or such event has occurred and is continuing, specifying
the Event of Servicing Termination or such event and its status and (iii) that
the representations and warranties of the Servicer contained in Section 2.03 of
this Agreement are true and correct as though made on and as of the date of such
certificate.
SECTION 2.17. Confidentiality. Each of the Issuer and the Initial Lender
acknowledges the proprietary nature of certain of the software, software
procedures, software development tools, know-how, methodologies, processes and
technologies of the Servicer ("Confidential Material") and agrees (i) that it
shall use the same means as it uses to protect its own confidential information,
but in no event less than reasonable means, to avoid disclosure, by it or its
agents or employees, to any third party of any confidential or proprietary
information of the Servicer identified as such by the Servicer to it, except to
the extent that any such person may be required to disclose any such information
(x) by law or any legal process or proceeding, including, without limitation, in
connection with an examination or audit by any governmental regulatory agency,
in which case such person shall give notice of such event to the Servicer or (y)
in connection with its duties and obligations hereunder and under the other
transaction documents, and (ii) that all such confidential or proprietary
software, software procedures, software development tools, know-how,
methodologies, process and technologies that are based upon trade secrets or
proprietary information of the Servicer identified as such by the Servicer to it
shall be and remain the property of the Servicer and that each of the Issuer and
the Initial Lender will have no ownership interest therein or ownership claim
thereto. Each of the Issuer and the Initial Lender shall confine the knowledge
and use of the Confidential Material only to its employees who require such
knowledge and use in the ordinary course and scope of their employment. Upon any
expiration or termination of this Agreement, each of the Issuer and the
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Initial Lender shall promptly return to the Servicer all property or information
which is covered by this section.
SECTION 2.18. Delivery of Documents.
On the date hereof the Servicer shall have delivered to the Issuer, the
Initial Lender and the Trustee in form and substance satisfactory to the Issuer
an Officer's Certificate from the Servicer certifying that (i) the
representations and warranties of the Servicer contained in Section 2.03 of this
Agreement are true and correct as though made on and as of such date and (ii) no
Event of Servicing Termination, or event that with notice or lapse of time or
both would become an Event of Servicing Termination, has occurred.
SECTION 2.20. Standard of Care. In performing its duties and obligations
hereunder and in administering, tracking and enforcing the insurance policies
maintained by obligors relating to the Receivables pursuant to this Agreement,
the Servicer will follow the standard of care set forth in Section 2.01;
provided, however, that notwithstanding the foregoing, the Servicer shall not,
except pursuant to a judicial order from a court of competent jurisdiction, or
as otherwise required by applicable law or regulation, release or waive the
right to collect the unpaid balance on any Receivable. In performing its duties
and obligations hereunder, the Servicer shall comply with all applicable federal
and state laws and regulations, shall maintain all state and federal licenses
and franchises necessary for it to perform its servicing responsibilities
hereunder, and shall not impair the rights of the Issuer or the Trustee in the
Receivables.
ARTICLE III
REPOSSESSION AND DISPOSAL
SECTION 3.01. Repossession and Disposal.
(a) The Servicer agrees to use its best efforts to arrange with a third
party for the repossession or other conversion of ownership of any Financed
Vehicle by a professional repossession service within 90 days after the related
Auto Loan becomes past due and agrees not to discriminate among Financed
Vehicles in its performance of its duties hereunder based on its right, if any,
to receive bonus or increased compensation with respect to the repossession and
disposal of certain Financed Vehicles, and otherwise in accordance with the
AutoBond Program Manual, in order to maximize collections.
(b) If requested in writing by the Issuer or the Initial Lender, the
Servicer is authorized and empowered by the Issuer and the Initial Lender to
execute and deliver, on behalf of itself, the Issuer, the Initial Lender and the
Trustee, as the case may be, any and all instruments of satisfaction or
cancellation, or partial or full release or discharge, and all other comparable
instruments, with respect to the Financed Vehicles related to the Receivables,
all in accordance with the standard of care set forth in Section 2.20. Without
limiting the generality of the foregoing, the Issuer and the Trustee shall, upon
the receipt of a written request of the Servicer, execute and deliver to the
Servicer any limited powers of attorney and other documents prepared by the
Servicer and reasonably necessary or appropriate (as certified in such written
request) to
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enable the Servicer to carry out its duties hereunder (including, without
limitation, matters relating to the certificates of title with respect to the
Financed Vehicles), and neither the Issuer nor the Trustee shall be held
responsible for any negligence by the Servicer in its use of such limited powers
of attorney.
(c) The Servicer shall forward the proceeds of any disposition of a
Financed Vehicle related to a Receivable upon receipt thereof to the Lockbox,
the Lender Collection Account or the Collection Account. If subsequent to the
disposal of a Financed Vehicle related to a Receivable in accordance herewith
and, as required by this Agreement, with the AutoBond Program Manual, the
transaction disposing of such Financed Vehicle is rescinded or adjusted, through
arbitration or otherwise, due to any condition affecting such Financed Vehicle,
then the Servicer shall be entitled to reimbursement from the Lender Collection
Account or the Collection Account (out of available funds) for any amount which
the Servicer pays in connection with such rescission or adjustment which amount
shall be the "Post-Sale Adjustment".
(d) The Servicer represents and warrants to the Issuer, the Initial
Lender, the Trustee and the Noteholders and shall be deemed to continuously
represent and warrant to the Issuer, the Trustee and the Noteholders, with
respect to each Financed Vehicle assigned to the Servicer pursuant hereto, that
the Servicer will comply in all material respects with all applicable federal,
state and local regulations pertaining to its services hereunder, including
disclosure requirements, required to be complied with in conjunction with such
services. The Servicer shall defend, indemnify and hold the Issuer, the Initial
Lender, the Noteholders and the Trustee harmless from and against any claim,
suit, loss, cost or liability, direct or indirect, including reasonable
attorney's fees, arising out of any breach of any representation or warranty
made by the Servicer in the immediately preceding sentence.
(e) Except as expressly provided herein, in the Indenture and in the
AutoBond Program Manual, the Servicer shall not sell, assign (by operation of
law or otherwise) or otherwise dispose of, or create any Adverse Claim upon or
with respect to, any Financed Vehicle related to any Receivable (or any right to
income in respect thereof), or assign any right to receive income in respect of
any such Financed Vehicle.
ARTICLE IV
LIMITATION ON LIABILITY; INDEMNITIES
SECTION 4.01. Liabilities of Obligors. No obligation or liability of any
Obligor under any of the Receivables is intended to be assumed by the Issuer,
the Initial Lender, the Servicer, the Trustee or any Noteholder under or as a
result of this Agreement and the transactions contemplated hereby and, to the
maximum extent permitted and valid under mandatory provisions of law, the
Issuer, the Initial Lender, the Servicer, and the Trustee or any Noteholder
expressly disclaim such assumption.
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SECTION 4.02. Limitation on Liability of the Initial Lender and the
Servicer.
(a) The Initial Lender and the Servicer shall each have no liability in
connection with this Agreement except to the extent of the obligations
specifically imposed by this Agreement, it being understood that no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or shall otherwise exist against the Initial Lender
or the Servicer.
(b) None of the Trustee, the Initial Lender or the Servicer nor any of the
directors, officers, employees or agents thereof shall be under any liability to
the Issuer, to each other or to any other Person for any action taken, or for
refraining from the taking of any action, in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Servicer, the Initial Lender, the Trustee or any such
Person against any breach of warranties, representations or covenants made
herein or against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations or duties hereunder. The Servicer,
the Initial Lender, the Trustee and any director, officer, employee or agent
thereof may rely in good faith on any document of any kind which, prima facie,
is properly executed and submitted by any appropriate Person respecting any
matters arising hereunder.
(c) Except to the extent resulting from the Servicer's willful
misfeasance, bad faith or negligence in the performance of its duties or by
reason of reckless disregard of its obligation or duties hereunder, the Servicer
shall not be liable to any party indemnified under this Agreement, for any
liability, cost, expenses or financial loss which may arise as a result of the
economic performance of the Receivables or other assets.
SECTION 4.03. Indemnities of the Servicer.
(a) The Servicer agrees to indemnify the Issuer, the Trustee, the Initial
Lender and the Noteholders and any of their respective directors, officers,
employees or agents from, and hold each of them harmless against, any and all
losses, liabilities, damages (other than incidental or indirect damages), claims
or expenses (including reasonable attorneys' fees and expenses) proximately
caused by the Servicer's acts or omissions in violation of this Agreement,
except to the extent the Issuer's, the Trustee's, the Initial Lender's, the
Noteholders' or the directors, officers, employees or agents thereof, as the
case may be, own bad faith, willful misconduct or negligence contributes to the
loss, liability, damage, claim or expense. Except to the extent otherwise
constituting bad faith, willful misconduct or negligence, the Servicer shall not
be liable to any person for any action taken or for refraining from the taking
of any action in good faith pursuant to this Servicing Agreement or for errors
in judgment.
(b) The Servicer agrees to indemnify the Issuer, the Trustee, and the
Noteholders and any of their respective directors, officers, employees or agents
from, and hold each of them harmless against, any and all losses, liabilities,
damages, claims or expenses (including reasonable attorneys' fees and expenses)
arising as a result of the use, ownership or operation by the Servicer or any
agent thereof of any Financed Vehicle.
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(c) Each of the Servicer, the Issuer and the Initial Lender agrees to
promptly notify the indemnifying party hereunder in writing of the commencement
of any action with respect to which indemnification may be owed to it pursuant
to this Section 4.03 promptly after receipt by such party of notice of
commencement thereof, but the omission so to notify such indemnifying party
hereunder will not relieve the indemnifying party from any liability which it
may have hereunder except to the extent the indemnifying party is prejudiced
thereby.
(d) This Section 4.03 shall survive the termination of this Agreement and
the resignation or removal of the Servicer. This Agreement shall also survive
the resignation or removal of the Trustee in respect of rights accrued to it
prior to such resignation or removal.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. Beneficiaries. This Agreement will inure to the benefit of
and be binding upon the parties hereto, the Trustee, the Noteholders and their
respective successors and permitted assigns. The Trustee and the Noteholders are
intended as, and shall be, third party beneficiaries of this Agreement. No other
Person will have any right or obligation hereunder. The Servicer may not assign
any of its respective rights and obligations hereunder or any interest herein,
without the prior written consent of the Issuer and the Initial Lender.
SECTION 5.02. Amendment. This Agreement may be amended from time to time
by the parties hereto only by a written instrument executed by all such parties,
and provided, further, that notice of any such amendment and a copy thereof
shall be given in writing promptly after the execution thereof to the Trustee.
SECTION 5.03. Notices. Unless otherwise expressly specified or permitted
by the terms hereof, notices and other communications required or permitted to
be given or made under the terms hereof shall be in writing. Any such
communication or notice shall be deemed to have been duly made or given (i) when
delivered personally, (ii) in the case of mail delivery, upon receipt, refusal
of delivery or return for failure of the intended recipient to retrieve such
communication or (iii) in the case of transmission by facsimile, upon telephone
and return facsimile confirmation and, in each case, if addressed to the
intended recipient as follows (subject to the next sentence of this Section
5.03):
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If to the Issuer:
AutoBond Master Funding Corporation V
βββ βββββ ββββββ ββββββ, βββββ βββ
βββ βββββ, ββββββ βββββ
If to the Servicer:
AutoBond Acceptance Corporation
βββ ββββββββ ββββββ
ββββββ, βββββ βββββ
Attention: βββββββ β. ββββββββ
Facsimile Number: (βββ) βββ-ββββ
Telephone Number: (βββ) βββ-ββββ
If to the Initial Lender:
Dynex Capital, Inc.
βββββ βββββββ ββββ, βββββ βββββ
ββββ βββββ, ββββββββ βββββ
Attention: Master Servicing Department
Facsimile Number: βββ βββ-ββββ
Telephone Number: βββ βββ-ββββ
Each party hereto may from time to time designate by notice in writing to the
other parties hereto a different address for communications and notices.
SECTION 5.04. Severability of Provisions. If any one or more of the
covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement, and shall in no way affect the validity or enforceability of the
other provisions of this Agreement.
SECTION 5.05. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF
NEW YORK.
24
(b) THE ISSUER, THE SERVICER, AND THE INITIAL LENDER HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY. THE
ISSUER, THE SERVICER AND THE INITIAL LENDER EACH HEREBY WAIVES ANY OBJECTION
BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE
PARTIES HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF ANY OF THEN TO BRING ANY ACTION OR PROCEEDING IN THE COURTS
OF ANY OTHER JURISDICTION.
(c) THE ISSUER, THE SERVICER AND THE INITIAL LENDER EACH HEREBY WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
SECTION 5.06. Counterparts. This Agreement may be executed in counterparts
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
SECTION 5.07. No Proceedings. Each of the Servicer and the Initial Lender
hereby agrees that it will not, directly or indirectly, institute, or cause to
be instituted, against the Issuer any proceeding of the type described in
connection with the Servicer in Section 2.12(c) so long as there shall not have
elapsed one year plus one day since the Notes issued by the Issuer have been
paid in full in cash. The foregoing covenant shall not limit the right of the
Servicer or the Initial Lender, as the case may be, to institute legal
proceedings of a type other than those described in connection with the Servicer
in Section 2.12(c) against the Issuer for any breach by the Issuer of its
obligations hereunder.
SECTION 5.08. Further Assurance. The Servicer shall cause to be promptly
and duly taken, executed, acknowledged and delivered all such further acts,
documents and assurances as the Issuer, the Initial Lender or the Trustee from
time to time may reasonably request in order to carry out more effectively the
intent and purposes of this Agreement and the transactions contemplated hereby.
SECTION 5.09. Term of Agreement. The term of this Agreement shall begin on
the Closing Date and shall continue until the day after the date on which the
Noteholders have been paid in full under the Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this Servicing
Agreement to be executed by their respective officers thereunto duly authorized.
AUTOBOND MASTER FUNDING Corporation V,
as Issuer
By:
-----------------------------------------
Name:
Title:
AUTOBOND ACCEPTANCE CORPORATION
as Servicer
By:
-----------------------------------------
Name:
Title:
DYNEX CAPITAL, INC.
By:
-----------------------------------------
Name:
Title:
26
EXHIBIT B
TRUST RECEIPT
[DATE]
________________________, as Trustee
[Address]
Re: Servicing Agreement, dated as of June 9, 1998 (the "Servicing
Agreement"), among AutoBond Master Funding Corporation V,
AutoBond Acceptance Corporation, and Dynex Capital, Inc.
Ladies and Gentlemen:
In accordance with Section 2.07 of the Servicing Agreement, the
undersigned hereby certifies that it has taken possession of the items set forth
on Annex I hereto with respect to the Receivables identified below. The
undersigned (i) confirms that it holds such items in trust for the benefit of
the Trustee as trustee for AutoBond Master Funding Corporation V and its
Noteholders and (ii) agrees to promptly return such items to the Trustee after
its need for possession of them ceases, except for title and security
instruments which the undersigned is required under applicable law to otherwise
deal with in furtherance of its duties under the Servicing Agreement.
Receivables:
AUTOBOND ACCEPTANCE CORPORATION, as
Servicer
By:
------------------------------------------
Name:
Title:
B-1
EXHIBIT C
FORM OF MONTHLY STATEMENT
Payment Date: ________________
Due Period: __________ - ___________
Under the Servicing Agreement dated as of June 9, 1998 by and among
AutoBond Acceptance Corporation, as Servicer, AutoBond Master Funding
Corporation V, a Nevada corporation, as Issuer, Dynex Capital, Inc., as Initial
Lender, the Servicer is required to prepare certain information each month
regarding the performance of the assets held in trust during the previous month
and payments due on the Issuer's Funding Notes. The information which is
required to be prepared with respect to the Payment Date and Due Period listed
above is set forth below.
Beginning Principal Balance:
Non-Cash Adjustments:
Loans Paid in Full:
Principal Collections:
Defaulted and other Excluded Loans:
Ending Principal Balance:
Interest Collections:
Miscellaneous Fee Collections:
Interest Due on Funding Notes:
Principal Due on Funding Notes:
Cash contributions to Collection Account:
Dated: __________ AUTOBOND ACCEPTANCE CORPORATION
By:
-----------------------------------------
Name:
Title:
C-1