EXECUTION COPY
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PURCHASE AGREEMENT
between
ATLANTIC AUTO FINANCE CORPORATION,
as Originator,
and
ATLANTIC AUTO SECOND FUNDING CORPORATION,
as Buyer,
Dated as of June 14, 1996
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Computation of Time Periods . . . . . . . . . . . . . . . . . 14
ARTICLE II
TRANSFERS AND SETTLEMENTS
SECTION 2.1. General Terms . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.2. Purchases from the Originator . . . . . . . . . . . . . . . . 15
SECTION 2.3. Transfers and Assignments . . . . . . . . . . . . . . . . . . 15
SECTION 2.4. Protection of Ownership of the Buyer. . . . . . . . . . . . . 17
SECTION 2.5. Optional Retransfer; Retransfer of Liquidated
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.6. Mandatory Repurchase Under Certain Circumstances. . . . . . . 18
SECTION 2.7. Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.8. Transfers by Buyer. . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.9. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of Originator. . . . . . . . . 19
SECTION 3.2. Representations and Warranties of the Originator
With Respect to Each Sale of Receivables. . . . . . . . . . . 22
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Closing . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.2. Conditions to Purchases . . . . . . . . . . . . . . . . . . . 26
SECTION 4.3. Effect of Payment of Purchase Price . . . . . . . . . . . . . 27
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ARTICLE V
COVENANTS
SECTION 5.1. Covenants of the Originator . . . . . . . . . . . . . . . . . 28
SECTION 5.2. Negative Covenants of the Originator. . . . . . . . . . . . . 33
ARTICLE VI
INDEMNIFICATION
SECTION 6.1. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.2. Tax Indemnification . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.3. Additional Costs. . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.4. Other Costs and Expenses. . . . . . . . . . . . . . . . . . . 38
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.2. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.4. Governing Law; Submission to Jurisdiction;
Integration . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.5. Severability; Counterparts, Waiver of Setoff. . . . . . . . . 40
SECTION 7.6. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.7. Waiver of Confidentiality . . . . . . . . . . . . . . . . . . 40
Exhibit A Form of Purchase Notice
Exhibit B Schedule of Litigation
Exhibit C Schedule of Location of Records
Exhibit D VSI Policy
Exhibit E Form of Compliance Certificate
Exhibit F Schedule of Corporate Names, Trade Names or Assumed Names
Exhibit G Permitted Lockbox Banks and Permitted Lockboxes
Exhibit H Credit and Collection Policy
Exhibit I Form of Subordinated Note
Schedule 1 Schedule of Receivables
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PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of June 14, 1996 (as amended,
supplemented or otherwise modified and in effect from time to time, this
"AGREEMENT"), by and between ATLANTIC AUTO SECOND FUNDING CORPORATION, a
Delaware corporation, as buyer (the "BUYER") and ATLANTIC AUTO FINANCE
CORPORATION, a Delaware corporation, as originator (the "ORIGINATOR").
R E C I T A L S :
- - - - - - - -
WHEREAS, subject to the terms and conditions of this Agreement, the
Originator desires to sell from time to time to the Buyer, and the Buyer desires
to purchase from time to time from the Originator certain retail automotive
installment sales contracts and related property and proceeds (the
"Receivables"), subject to the terms and conditions of this Agreement;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"ADDITIONAL COSTS" shall have the meaning specified in Section 6.3(a).
"ADVERSE CLAIM" shall mean a Lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, another Person
or a Subsidiary of such other Person. A Person shall be deemed to control
another Person if the controlling Person owns, directly or indirectly, 10% or
more of any class of voting securities of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
stock or otherwise.
"AMOUNT FINANCED" with respect to a Receivable means the amount
advanced under the Receivable toward the purchase price of the Financed Vehicle
and any related costs, exclusive of
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any amounts allocable to the premium for physical damage insurance force-placed
by the Originator covering the Financed Vehicle and of prepaid Dealer reserves
and other marketing expenses.
"ANNUAL PERCENTAGE RATE" or "APR" of a Receivable means the annual
rate of Finance Charges stated in the Receivable.
"BANK" shall mean Morgan Guaranty Trust Company of New York, a New
York banking corporation, and its successors and assigns.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which banking institutions or trust companies in The City of New
York are authorized or obligated by law, executive order or governmental decree
to be closed.
"CLOSING DATE" shall mean June 14, 1996.
"COLLECTIONS" shall mean, with respect to each Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all recoveries and cash proceeds of Related Security with respect to
such Receivable, Repurchase Amounts and proceeds received under the VSI Policy.
"CONTRACT" shall mean, with respect to any Receivable, any and all
instruments, agreements, invoices or other writings pursuant to which such
Receivable arises, or which evidences such Receivable including, but not limited
to, the retail installment sales contracts related thereto.
"CONTRACT FILE" shall mean, with respect to each Receivable, the
original Contract, either a copy of the application to the appropriate state
authorities for a Title to the related Financed Vehicle or a standard assurance
in the form commonly used in the industry relating to the provision of the Title
and when issued by the appropriate state authorities, the related Title (but
only to the extent that Title documents are required under applicable state law
to be held by a secured party in order to perfect such secured party's security
interest in the related Financed Vehicle), all original instruments modifying
the terms and conditions of the Receivable and the original endorsements or
assignments of such Contract.
"CREDIT AND COLLECTION POLICY" shall mean the Originator's credit and
collection policies and practices relating to the Contracts and the Receivables
existing on the date hereof in the form of Exhibit H hereto, as the same may
from
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time to time be amended, supplemented or otherwise modified in the ordinary
course of the Originator's business.
"CUSTODIAL AGREEMENT" shall mean the Custodial Agreement dated as of
June 14, 1996, by and among the Originator, the Buyer, the Bank and the
Custodian, as the same may be amended from time to time.
"CUSTODIAN" shall mean Safesite National Business Records Management,
Inc., a Delaware corporation, and its successors and assigns.
"CUSTODIAN CONFIRMATION" means the Custodian's certificate in the form
of EXHIBIT A to the Custodial Agreement confirming that it has received (i) an
itemized schedule of the Receivables (which shall also briefly describe each
related Contract File) and (ii) the Contract File with respect to each such
Receivable.
"DEALER" means the dealer who sold a Financed Vehicle and who
originated and assigned the respective Receivable to the Originator under an
existing agreement between such Dealer and the Originator.
"DEALER RECOURSE" shall mean, with respect to a Receivable, all
recourse rights against the Dealer which originated the Receivable and any
successor Dealer.
"DOLLARS" or "$" shall mean the lawful currency of the United States
of America.
"ELIGIBLE RECEIVABLE" shall mean, on the applicable Purchase Date on
which ownership thereof is first acquired by the Buyer, a Receivable:
(i) (a) which shall have been originated in the United States of
America to an Obligor domiciled in the United States by a Dealer for the
retail sale of a Financed Vehicle in the ordinary course of such Dealer's
business, shall have been fully and properly executed by the parties
thereto, shall have been purchased by the Originator from such Dealer under
an existing dealer agreement which agreement shall be consistent with the
Originator's customary business practices and shall be in a form acceptable
to the Buyer, which Receivable in turn shall have been validly assigned by
such Dealer to the Originator, and then shall be transferred and assigned
to the Buyer, (b) which shall have created or shall create a valid,
subsisting, and enforceable first priority security interest in favor of
the Originator in the Financed Vehicle, which in turn shall be assigned to
the Buyer, (c) which shall contain customary and enforceable
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provisions such that the rights and remedies of the holder thereof shall be
adequate for the realization against the collateral of the benefits of the
security and (d) which arises under a Contract which shall provide for
level monthly payments (PROVIDED that the payment in the first or last
month in the life of the Receivable may be minimally different from the
level payment) that fully amortize the financed amount over no greater than
66 payments;
(ii) with respect to which the Originator is the lienholder of record
on the related Title;
(iii) as to which the Contract File was delivered to the Custodian
prior to the purchase thereof by the Buyer from the Originator, except that
if the original certificate of title shall have been applied for and not
yet received at the time of such purchase, then such certificate shall have
been delivered to the Custodian within 180 days of such purchase;
(iv) as to which only one original executed Contract exists;
(v) as to which the related Obligor is not the United States of
America or any state or any agency, department, subdivision or
instrumentality thereof;
(vi) which shall not have been originated in, or shall be subject to
the laws of, any jurisdiction under which the transfer of such Receivable
under this Agreement shall be unlawful, void or voidable;
(vii) which is denominated and payable only in Dollars in the United
States of America;
(viii) which is less than 30 days delinquent;
(ix) which when transferred by the Originator to the Buyer was
selected at random from the Originator's retail installment sale contracts
at the time of such transfer, but conformed to certain requirements set
forth herein or otherwise agreed by the Originator and the Buyer;
(x) which is "chattel paper" within the meaning of Section 9-105 of
the Relevant UCC;
(xi) which arises under a Contract which, together with such
Receivable, (A) is in full force and effect and constitutes the legal,
valid and binding obligation of the related Obligor, enforceable against
such Obligor in
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accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally, (B) is evidenced by only one original executed
copy, (C) is not the subject of any rescission, setoff, counterclaim or
other defense and (D) shall not have been satisfied, subordinated, or
rescinded;
(xii) which arises under a Contract which (A) does not require the
Obligor under such Contract to consent to the transfer of the rights and
duties of the Originator under such Contract and (B) does not contain a
confidentiality provision that purports to restrict the ability of the
Buyer to exercise its rights under this Agreement, including, without
limitation, its right to review the Contract;
(xiii) no provision of which has been waived by the Originator,
except in accordance with the Credit and Collection Policy;
(xiv) which, together with the Contract related thereto, complied on
the date of its origination and now complies in all material respects with
all requirements of applicable Federal, state and local laws and
regulations thereunder, including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal
Trade Commission Act, the Magnuson-Moss Warranty Act, Regulations B and Z
of the Federal Reserve Board, various state "lemon laws" designed to
prevent fraud in the sale of used vehicles and various state adaptations of
the National Consumer Act and of the Uniform Consumer Credit Code, and
other consumer credit laws and equal credit opportunity and disclosure
laws;
(xv) which satisfies in all material respects all applicable
requirements of the Credit and Collection Policy on the applicable Purchase
Date; and
(xvi) as to which the Originator shall be in full compliance in all
material respects with all of its obligations thereunder and under the
related Contract and any other agreements or instruments relating thereto;
PROVIDED that breach of any notice provision shall not be deemed to cause
this condition to be unsatisfied unless such breach causes the related
Contract to be unenforceable.
(xvii) which directs payment thereof to be sent to a Permitted
Lockbox;
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(xviii) which is owned solely by the Originator free and clear of all
Liens;
(xix) which, together with the aggregate of the Principal Balances of
other Receivables payable by the same Obligor or any party related to such
Obligor, does not exceed $150,000;
(xx) with respect to which the initial payment in respect thereof is
due no more than 3 months after the date on which the Receivable was
originated;
(xxi) with respect to which the Originator, in accordance with its
Credit and Collection Policy, has required that the Obligor has obtained an
Insurance Policy covering the Financed Vehicle;
(xxii) with respect to which all filings (including Relevant UCC
filings) necessary in any jurisdiction to give the Buyer a first priority
perfected ownership interest in such Receivable have been made;
(xxiii) with respect to which the Obligor was not noted in the
related Records as being (i) the subject of a bankruptcy, insolvency or
similar proceeding or (ii) if the Obligor is a natural person, deceased;
(xxiv) which, if at the time of the creation of such Receivable the
related Financed Vehicle was a used automobile or light-duty truck, such
Receivable, together with similar Eligible Receivables, shall not exceed
70% of the aggregate Principal Balance of Eligible Receivables transferred
to the Buyer hereunder; and
(xxv) which is covered under the VSI Policy.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation issued
thereunder.
"ERISA AFFILIATE" means, with respect to the Originator, any Person
which is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Internal Revenue Code of which the Originator is a member, or
(ii) solely for the purposes of potential liability under Section 302(c)(11) of
ERISA and Section 412(c)(11) of the Internal Revenue Code and the lien created
under Section 302(f) of ERISA and Section 412(n) of the Internal Revenue Code,
described in Section 414(m) or (o) of the Internal Revenue Code of which the
Originator is a member.
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"EVENT OF TERMINATION" shall, with respect to the Originator, mean (i)
with respect to any Plan, a reportable event, as defined in Section 4043(b) of
ERISA, as to which the PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of
such event, or (ii) the withdrawal of the Originator or any ERISA Affiliate from
a Plan during a plan year in which it is a substantial employer, as defined in
Section 4043(b) of ERISA, or (iii) the failure by the Originator or any ERISA
Affiliate to meet the minimum funding standard of Section 412 of the Internal
Revenue Code or Section 302 of ERISA with respect to any Plan, including,
without limitation, the failure to make on or before its due date a required
installment under Section 412(m) of the Internal Revenue Code or Section 302(e)
of ERISA, or (iv) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Originator or any ERISA
Affiliate to terminate any Plan, or (v) the adoption of an amendment to any Plan
that pursuant to Section 401(a)(29) of the Internal Revenue Code or Section 307
of ERISA would result in the loss of tax-exempt status of the trust of which
such Plan is a part if the Originator or an ERISA Affiliate fails to timely
provide security to the Plan in accordance with the provisions of said Sections,
or (vi) the institution by the PBGC of proceedings under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan,
or (vii) the receipt by the Originator or any ERISA Affiliate of a notice from a
Multiemployer Plan that action of the type described in the previous clause (vi)
has been taken by the PBGC with respect to such Multiemployer Plan, or (viii)
the complete or partial withdrawal from a Multiemployer Plan by the Originator
or any ERISA Affiliate that results in liability under Section 4201 or 4204 of
ERISA (including the obligation to satisfy secondary liability as a result of a
purchaser default), or (ix) the receipt by the Originator or any ERISA Affiliate
of notice from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA, or (x) any event or circumstance exists
which may reasonably be expected to constitute grounds for the Originator or any
ERISA Affiliate to incur liability under Title IV of ERISA or under Sections
412(c)(11) or 412(n) of the Internal Revenue Code with respect to any Plan.
"EXPENSE AND TAX-SHARING AGREEMENT" shall mean the Office Space,
Administrative and Office Support Services, and Tax Allocation Agreement dated
as of June 14, 1996, between the Originator and the Buyer.
"FACILITY DOCUMENTS" shall mean collectively, this Agreement, each
Supplemental Conveyance, the Transfer and Administration Agreement, the Lockbox
Agreement, the Custodial
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Agreement, the Support Agreement, the Expense and Tax-Sharing Agreement and all
other agreements, documents and instruments delivered pursuant thereto or in
connection therewith.
"FINANCE CHARGES" shall mean, with respect to a Contract, any finance,
interest or similar charges owing by the Obligor pursuant to such Contract.
"FINANCED VEHICLE" shall mean, with respect to a Receivable, the new
or used automobile or light-duty truck, together with all accessories thereto,
securing the related Obligor's indebtedness thereunder.
"INDEMNIFIED AMOUNTS" shall have the meaning specified in Section 6.1.
"INITIAL PURCHASE DATE" means the date the first Purchase is made
pursuant to this Agreement.
"INSURANCE POLICY" shall mean, with respect to a Receivable, any
insurance policy benefiting the holder of the Receivable providing loss or
physical damage, credit life, credit disability, theft, mechanical breakdown or
similar coverage with respect to the Financed Vehicle or the Obligor.
"LIEN" shall mean a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
which attach to the respective Receivable by operation of law as a result of any
act or omission by the related Obligor.
"LOCKBOX ACCOUNT" shall mean a demand deposit account identified on
Exhibit G hereto maintained with a Permitted Lockbox Bank pursuant to the
Lockbox Agreement for the purpose of depositing payments made by the Obligors or
such other account of which the Originator may have notified the Buyer from time
to time.
"LOCKBOX AGREEMENT" shall mean the agreement relating to lockbox
services in connection with a Permitted Lockbox and related Lockbox Account
which are in form and substance satisfactory to the Buyer, which have been
executed and delivered by the Originator to a Permitted Lockbox Bank.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to the Originator,
a material adverse effect on (i) the financial condition or operations of the
Originator and its Subsidiaries, taken as one enterprise, (ii) the ability of
the Originator to perform its obligations under this Agreement, (iii) the
legality, validity or enforceability of this Agreement, (iv) the Buyer's
ownership of the Receivables or (v) the collectibility of the
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Receivables or of any significant portion of the Receivables, other than, in the
case of clauses (i) through (v), such Material Adverse Effects which are the
direct result of actions or omissions of the Buyer.
"OBLIGOR" shall mean any Person obligated to make payments pursuant to
a Contract.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED LOCKBOX" shall mean a post office box identified on Exhibit
G hereto maintained by a Permitted Lockbox Bank for the purpose of receiving
payments made by the Obligors or such other post office box as the Originator
may identify to the Buyer from time to time.
"PERMITTED LOCKBOX BANK" shall mean a bank identified on Exhibit G
hereto or such other bank as the Originator may identify to the Buyer from time
to time.
"PERSON" shall mean any corporation (including a business trust),
natural person, firm, joint venture, joint stock company, partnership, trust,
unincorporated organization, enterprise, government or any department or agency
of any government.
"PLAN" means any employee benefit or other plan which is or was at any
time during the current year or immediately preceding five years established or
maintained by the Originator or any ERISA Affiliate and which is covered by
Title IV of ERISA, other than a Multiemployer Plan.
"POTENTIAL TERMINATION EVENT" shall mean an event which, but for the
lapse of time or the giving of notice or both, would constitute a Termination
Event.
"PRINCIPAL BALANCE" of a Receivable, as of the close of business on
the last day of a calendar month, means the Amount Financed MINUS the sum of (i)
that portion of all amounts paid by or on behalf of the related Obligor
allocable to principal using the Simple Interest Method, (ii) any payments made
by the Originator and allocable to principal pursuant to Section 2.7, and (iii)
any payment of the Repurchase Amount with respect to the Receivable allocable to
principal.
"PROCEEDS" shall mean "proceeds" as defined in Section 9-306(l) of the
Relevant UCC.
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"PURCHASE" means a purchase of Receivables, Related Security with
respect to such Receivables and Collections with respect thereto by the Buyer
from the Originator pursuant to Section 2.1 and 2.2.
"PURCHASE DATE" means the Initial Purchase Date and thereafter, each
Business Day on which a Purchase occurs.
"PURCHASE NOTICE" means a notice, in substantially the form of Exhibit
A, furnished by the Originator to the Buyer pursuant to Section 2.2.
"PURCHASE PRICE" shall have the meaning specified in Section 2.2(b)
hereof.
"PURCHASED ASSETS" shall mean, the Buyer's (a) ownership interest in
(i) each and every Receivable identified on Schedule 1 hereto, (ii) all Related
Security with respect to each such Receivable, (iii) all Collections with
respect thereto, and (iv) all Proceeds of the foregoing and (b) interest in the
Support Agreement.
"RECEIVABLE" shall mean any retail installment sale contract arising
out of or in connection with the sale of new or used automobiles or light-duty
trucks and includes the right of payment of any Finance Charges and other
obligations of the Obligor with respect thereto, originated by dealers or the
Originator and sold by the Originator to the Buyer hereunder, which shall appear
on Schedule 1 hereto (which Schedule 1 may be in the form of a computer file or
microfiche list), as amended or modified on each Purchase Date and otherwise
from time to time pursuant to the terms hereof.
"RECORDS" shall mean, with respect to each Receivable, all factory
invoices and work orders describing the related Financed Vehicle, the bill of
sale and guaranty of title, insurance policies, tax receipts, property and
casualty insurance policies or binders naming the Originator as loss payee or
additional named insured, as is appropriate, insurance premium receipts, ledger
sheets, payment records, insurance claim files and correspondence, all
documentation in connection with any modification, release, accommodation,
consigning or guaranty of the Receivable and all other documents and
instruments, including all books, records, files, tapes, correspondence and
other information or materials (including, without limitation, computer
programs, tapes, discs, punch cards, data processing software and related
property and rights) relating to the Receivable, the Contract, the Title and the
Financed Vehicle relating to the Receivable and this Agreement.
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"REGULATION D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended, supplemented or
otherwise modified and in effect from time to time.
"REGULATORY CHANGE" shall mean any change after the date of this
Agreement in United States (federal, state or municipal) or foreign laws or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives or requests applying to a class of banks
(including the Bank) of or under any United States (federal, state or municipal)
or foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"RELATED SECURITY" shall mean, with respect to any Receivable:
(i) all of the Originator's interest in the Financed Vehicle, and all
of the Originator's interest in all insurance contracts with respect
thereto;
(ii) all of the Originator's interest in all other security interest
or liens and property subject thereto from time to time, if any, purporting
to secure payment of the Contract related thereto, whether pursuant to such
Contract or otherwise, together with all financing statements signed by an
Obligor and security agreements describing any collateral securing such
Contract;
(iii) all of the Originator's interest in all guaranties, insurance
and other agreements or arrangements of whatever character from time to
time supporting or securing payment of such Receivable, whether pursuant to
the Contract related to such Receivable or otherwise;
(iv) all of the Originator's interest in Dealer Recourse and all
service contracts and other contracts and agreements associated with such
Receivable;
(v) all of the Originator's interest in Contract Files and all
Records related to such Receivable; and
(vi) all proceeds of the foregoing.
"RELEVANT UCC" shall mean the Uniform Commercial Code as in effect
from time to time in all applicable jurisdictions.
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"REPURCHASE AMOUNT" shall mean the amount described in Section 2.5(a)
and payable in accordance with Sections 2.5, 2.6 and 3.2 (the last paragraph
thereof).
"RESPONSIBLE OFFICER" shall mean, with respect to any Person, the
chief executive officer, principal financial officer, treasurer or controller of
such Person.
"SECTION 6.2 COSTS" shall have the meaning specified in Section 6.2.
"SECTION 6.3 COSTS" shall have the meaning specified in Section
6.3(c).
"SERVICER" shall mean, initially, the Originator, and any successor
Servicer designated pursuant to the Transfer and Administration Agreement.
"SIMPLE INTEREST METHOD" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the APR multiplied by
the unpaid principal balance, multiplied by the quotient obtained by calculating
the period of time elapsed since the preceding payment of interest was made and
dividing such period of time by 360, provided that each monthly period shall be
deemed to have 30 days.
"SUBORDINATED LOAN" shall have the meaning specified in Section 2.2(d)
hereof.
"SUBORDINATED NOTE" shall have the meaning specified in Section 2.2(d)
hereof.
"SUBSIDIARY" shall mean, for any Person, any corporation or other
business organization 50% or more of the outstanding voting securities of which
shall at the time be owned or controlled, directly or indirectly, by such Person
or by one or more such corporations or organizations or by such Person and one
or more such corporations or organizations, and any partnership of which such
Person or any such corporation or organization is a general partner.
"SUPPORT AGREEMENT" shall mean the Support Agreement dated as of
June 14, 1996, executed by UAG in favor of the Buyer, and any amendments or
modifications thereto.
"TERMINATION DATE" means the earliest of (i) that Business Day which
the Buyer designates as the Termination Date by notice to the Originator at
least five Business Days prior to such Business Day, (ii) the occurrence of a
Termination Event and
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(iii) June 13, 1997 ( or such other date as the Originator and the Buyer may
agree in writing).
"TERMINATION EVENT" means the occurrence of any of the following
events:
(a) The net worth of the Originator and its consolidated
subsidiaries, as set forth in the Originator's annual audited financial
statements, shall be less than $2,400,000;
(b) UAG shall fail to pay any principal of or premium or interest on
any indebtedness in a principal amount of at least $1,000,000 when the same
becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such indebtedness, or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such indebtedness and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such even or condition is to
accelerate, or to permit the acceleration of, the maturity of such indebtedness;
PROVIDED, that a Termination Event shall not occur hereunder unless UAG receives
written notice that any of the foregoing events shall have occurred and fails to
cure the foregoing within 15 days following receipt of such notice;
(c) There shall occur a "Change in Control" (as defined below) of
UAG; "Change of Control" shall mean (i) the sale of all or substantially all of
the assets of UAG to an entity not controlled by UAG, (ii) prior to UAG's
"Qualified Public Offering" (as defined below), a reduction in the ownership by
the shareholders of the voting stock of UAG as of the date hereof (the "Initial
Shareholder Group") to less than a majority of UAG's outstanding voting stock,
or (iii) after the Qualified Public Offering, the ownership of another Person or
group of Persons of a greater number of shares of UAG's voting stock than owned
by the Initial Shareholder Group; "Qualified Public Offering" shall mean a
public offering of UAG's capital stock pursuant to which UAG receives gross
proceeds of $30,000,000 or more (when aggregated with all prior public
offerings) and has a market valuation in excess of $100,000,000;
(d) Both of Richard Harrison and Harry Hardy shall cease to be
actively involved in the day-to-day management of the Originator, except as a
result of death or illness;
(e) There shall occur any event which may be reasonably expected to
have a material adverse effect on the Originator or UAG or may be reasonably
expected to cause a
13
material adverse change in the condition or prospects, financial condition or
business of the Originator or UAG; or
(f) There shall occur a breach of the Support Agreement by UAG.
"TITLE" means, with respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
registrar of titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Title"
shall mean only a certificate or notification issued to a secured party.
"TRANSFER AND ADMINISTRATION AGREEMENT" shall mean the Transfer and
Administration Agreement dated as of June 14, 1996 by and among the Originator,
the Buyer, as transferor, and the Bank, as transferee.
"UAG" shall mean United Auto Group, Inc., a Delaware corporation, and
its successors and assigns.
"VSI POLICY" means the vendors single interest physical damage
insurance policy maintained with respect to the Receivables, a copy of which is
attached hereto as EXHIBIT D.
SECTION 1.2. COMPUTATION OF TIME PERIODS. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."
ARTICLE II
TRANSFERS AND SETTLEMENTS
SECTION 2.1. GENERAL TERMS. On the terms and conditions hereinafter
set forth, from the date the conditions precedent to the initial Purchase in
Section 4.1 are satisfied to the Termination Date, the Originator will sell to
the Buyer on each Purchase Date all right, title and interest of the Originator
in, to and under the Receivables which the Originator has determined to sell
hereunder, Related Security with respect to such Receivables and Collections
with respect thereto and the Buyer in its sole discretion may purchase such
Receivables, Related Security and Collections from the Originator. Nothing in
this Agreement shall be deemed to be or construed as a commitment by the Buyer
to purchase any Purchased Assets at any time.
14
SECTION 2.2. PURCHASES FROM THE ORIGINATOR. (a) Each Purchase shall
be made on a Purchase Date, provided, that a Purchase Notice requesting such
Purchase is received by the Buyer by the close of business on such Purchase Date
and provided that all conditions to purchase specified in Section 4.2 are
satisfied. Each such Purchase Notice shall include a schedule of all
Receivables proposed to be sold by the Originator on such Purchase Date and
shall specify the Purchase Price therefor. The Buyer shall promptly thereafter
notify the Originator whether the Buyer has determined to purchase such
Receivables.
(b) The purchase price (the "PURCHASE PRICE") for the Receivables
listed in a Purchase Notice (together with the related Purchased Assets) payable
with respect to any Purchase Date shall be an amount equal to the aggregate
Principal Balance of such Receivables plus accrued Finance Charges on such
Receivables as of such date.
(c) Subject to paragraph (d) below, the Purchase Price for the
Purchased Assets sold by the Originator under this Agreement shall be payable in
full in cash by the Buyer, in each case on the Business Day following the date
of each such Purchase, except that the Buyer may, with respect to any Purchase,
offset against such Purchase Price any amounts owed by the Originator to the
Buyer hereunder and which remain unpaid. Subject to paragraph (d) below, on the
Business Day following the date of each such Purchase, the Buyer shall, upon
satisfaction of the applicable conditions set forth in Article IV, make
available to the Originator the Purchase Price in same day funds.
(d) If, on the Business Day following the date of any Purchase, the
Buyer has insufficient funds to pay in full the Purchase Price owed on such day,
then the amount of the difference between the Purchase Price and such available
funds shall, at option of the Originator (as evidenced by written notice by the
Originator to the Buyer on such date (which notice may be a standing
instruction)) be deemed to be (i) a capital contribution from the Originator to
the Buyer, (ii) a loan by the Originator to the Buyer (a "SUBORDINATED LOAN"),
evidenced by the Subordinated Note (the "SUBORDINATED NOTE") of the Buyer
substantially in the form attached hereto as Exhibit I or (iii) any combination
of capital contribution and Subordinated Loan. Any Subordinated Loan hereunder
shall be fully subordinated to every other obligation of the Buyer.
SECTION 2.3. TRANSFERS AND ASSIGNMENTS. The Originator hereby
assigns, transfers and conveys to the Buyer and its successors and assigns all
of the Originator's right, title, and interest, whether now owned or hereafter
acquired, in and to (i) the Receivables, (ii) the Related Security with respect
to such Receivables, (iii) all Collections, including all cash
15
collections and other cash proceeds of the Receivables, exclusive of any amounts
allocable to the premium for physical damage insurance force-placed by the
Originator covering any related Financed Vehicle, (iv) all monies from time to
time on deposit in the Lockbox Accounts relating to the Receivables and (v) all
cash and non-cash proceeds of any of the foregoing. It is the intention of the
parties hereto that each Purchase of Receivables, Related Security and
Collections made hereunder shall constitute a "sale of chattel paper," as such
term is used in Article 9 of the UCC, which sales are absolute, irrevocable and
without recourse except as specifically provided herein and provide the Buyer
with the full benefits of ownership of the Receivables and such related
Purchased Assets. In the event that such assignment, transfer or conveyance is
deemed to constitute a pledge rather than an assignment of the aforementioned
property, the Originator does hereby grant to the Buyer a first priority
perfected security interest therein. The possession by the Buyer or its
transferee of notes and such other goods, letters of credit, advises of credit,
money, documents, chattel paper or certificated securities shall be deemed to be
"possession by the secured party," for purposes of perfecting the security
interest pursuant to the Relevant UCC (including, without limitation, Section
9-305 thereof). Notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed to be notifications to, or acknowledgments, receipts or
confirmations from, bailees or agents (as applicable) of the Buyer or its
transferee for the purpose of perfecting such security interest under applicable
laws. The foregoing conveyance does not constitute an assumption by the Buyer
or its successors and assigns of any obligations of the Originator to Obligors
or to any other Person in connection with Receivables or under any agreement or
instrument relating to the Receivables.
In connection with such transfer, the Originator agrees to record and
file, at its own expense, financing statements with respect to the Receivables
now existing and hereafter created for the transfer of chattel paper and general
intangibles (each as defined in Article 9 of the Relevant UCC) meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect the transfer and assignment of the interest in the
Receivables to the Buyer, and to deliver a file-stamped copy of such financing
statements or other evidence of such filing satisfactory to the Buyer on or
prior to the applicable Purchase Date.
In connection with such transfer, the Originator further agrees to
deliver to the Custodian the Contract Files relating to the Receivables.
16
The Originator shall maintain its books and records so that such
records that refer to a Receivable shall indicate clearly that the Originator's
right, title and interest in such Receivable has been sold to the Buyer.
Indication of the Buyer's interest in a Receivable shall be deleted from or
modified on the Originator's records when, and only when, the Receivable shall
have been paid in full or the Buyer's interest in such Receivable shall have
been repurchased or repaid by the Originator hereunder. In addition, the
Originator shall maintain its computer systems so that the Originator's master
computer records (including any back-up archives) that refer to a Receivable
shall indicate clearly that such Receivable has been sold to the Buyer pursuant
to this Agreement and that an interest in such Receivable has been transferred
and assigned by the Buyer to the Bank. The Originator agrees to deliver to the
Buyer a list, which may be a computer file or microfiche list, containing a true
and complete schedule of all such Receivables, identified by account number and
by Principal Balance as of the origination date of such Receivable. Such file
or list shall be marked as the "Receivables Schedule" and Schedule 1 to this
Agreement, delivered to the Buyer as confidential and proprietary, and is hereby
incorporated into and made a part of this Agreement.
SECTION 2.4. PROTECTION OF OWNERSHIP OF THE BUYER. The Originator
agrees that from time to time, at its expense, it will promptly execute and
deliver all instruments and documents and take all action that the Buyer may
reasonably request in order to perfect or protect the Purchased Assets or to
enable the Buyer to exercise or enforce any of its rights hereunder. Without
limiting the foregoing, the Originator will, upon the request of the Buyer, in
order to accurately reflect this transaction, execute and file such financing or
continuation statements or amendments thereto or assignments thereof (as
permitted pursuant to Section 7.6 hereof) as may be reasonably requested by the
Buyer and mark its master data processing records with a notation describing the
acquisition by the Buyer of the Purchased Assets, as the Buyer may reasonably
request. To the fullest extent permitted by applicable law, the Buyer shall be
permitted to sign and file continuation statements and amendments thereto and
assignments thereof without the Originator's signature in such cases where the
Originator is obligated hereunder to sign such statements, amendments or
assignments if, after written notice to the Originator, the Originator shall
have failed to sign such continuation statements, amendments or assignments
within ten (10) Business Days after receipt of such notice from the Buyer.
Carbon, photographic or other reproduction of this Agreement or any financing
statement shall be sufficient as a financing statement. The Originator shall
neither change its name, identity or corporate structure (within the meaning of
Section 9-402(7) of any applicable enactment of the Relevant UCC), nor relocate
its
17
chief executive office or any office where Records are kept unless it shall
have: (i) given the Buyer at least fifteen (15) days' prior notice thereof and
(ii) delivered to the Buyer all financing statements, instruments and other
documents requested by the Buyer in connection with such change or relocation.
SECTION 2.5. OPTIONAL RETRANSFER; RETRANSFER OF LIQUIDATED
RECEIVABLES. (a) Subject to the next succeeding sentence, the Originator shall
have the right to repurchase all of the existing Receivables if, at any time,
the aggregate Principal Balance of the Receivables falls below $3,500,000 (or
such higher amount as the parties hereto may agree from time to time). The
Originator shall be entitled to effectuate such reconveyance on the 15th day of
each month (or if such 15th day is not a Business Day, the next succeeding
Business Day) provided prior written notice has been given to the Buyer at a
repurchase amount equal to the aggregate Principal Balance of the Receivables on
such repurchase date plus accrued and unpaid Finance Charges thereon through
such day (the "REPURCHASE AMOUNT").
(b) The Originator has the option, to be exercised in its sole and
absolute discretion, to repurchase any Liquidated Receivable (as defined in the
Transfer and Administration Agreement), on the 15th day of each month (or if
such 15th day is not a Business Day, the next succeeding Business Day) provided
prior written notice has been given to the Buyer by paying to the Buyer the
Repurchase Amount.
(c) If, on any day with respect to any Receivable which (i) has
become a Liquidated Receivable, as to which the Buyer has been paid the
Principal Balance with respect to such Liquidated Receivable or (ii) has been
repurchased by the Originator pursuant to Section 2.5(a) or (b), 2.6 or 3.2 (the
last paragraph thereof) or repaid in full pursuant to Section 2.7, then, in such
event and upon payment of all amounts due hereunder (if all Receivables have
been repurchased or repaired), the Buyer shall, on such day and at the expense
of the Originator, (i) retransfer to the Originator all of its right, title and
interest in, to and under such Receivable and all Related Security and
Collections with respect thereto, and all Proceeds of the foregoing and (ii)
execute any and all instruments, certificates and other documents reasonably
necessary to effect such retransfer.
SECTION 2.6. MANDATORY REPURCHASE UNDER CERTAIN CIRCUMSTANCES. (a)
The Originator shall repurchase from the Buyer all Receivables if at any time
upon written advice of counsel, the Buyer shall cease to have a first priority
perfected security interest in the Receivables, free and clear of any lien
(except for liens arising from or relating to the financial
18
condition of the Obligor), within three days of notice thereof by the Buyer. The
Repurchase Amount shall be paid by the Originator to the Buyer in connection
with such repurchase.
(b) The Originator shall repurchase from the Buyer any Receivables as
to which the Buyer has not received a Custodian Confirmation within fifteen (15)
Business Days of the Purchase Date on which such Receivable was sold to the
Buyer hereunder, or the Settlement Date next following receipt of notice of
failure to receive such Custodian Confirmation, at the Repurchase Amount.
SECTION 2.7. DILUTION. If the Principal Balance of a Receivable is
either (i) reduced or cancelled as a result of any (a) refunded item included in
the Amount Financed, such as extended warranty protection plan costs or
Insurance Policy premiums, (b) defective or rejected Financed Vehicle, goods or
services, any cash discount or of any adjustment by the Originator, or (ii)
reduced or cancelled as a result of a set off in respect of any claim by any
Person (whether such claim arises out of the same or a related transaction or an
unrelated transaction), the Originator shall pay to the Buyer on such day the
amount of such reduction or, if such transferred Receivable is cancelled, the
amount of the Principal Balance thereof, together with the Finance Charges
accrued thereon through such day.
SECTION 2.8. TRANSFERS BY BUYER. The Originator acknowledges and
agrees that (a) the Buyer will, pursuant to the Transfer and Administration
Agreement, sell the Purchased Assets and assign its rights under this Agreement
to the Bank and (b) the representations and warranties contained in this
Agreement and the rights of the Buyer under this Agreement are intended to
benefit the Bank. The Originator hereby consents to all such sales and
assignments.
SECTION 2.9. FEES. Notwithstanding any limitation on recourse
contained in this Agreement, the Originator shall pay the Buyer the Commitment
Fees (as defined in the Transfer and Administration Agreement) as the same
become due and payable by the Buyer to the Bank pursuant to the Transfer and
Administration Agreement.
19
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF ORIGINATOR. The
Originator represents and warrants to the Buyer on and as of the Closing Date
that:
(a) CORPORATE EXISTENCE AND POWER. The Originator is a corporation
duly organized, validly existing and in good standing under the laws of the
State of its incorporation, and has all corporate power and all governmental
licenses, authorizations, consents and approvals required to carry on its
business relating to the Originator's purchasing and selling of receivables
relating to sales of automobiles and light-duty trucks in each jurisdiction in
which its business is now conducted.
(b) DUE QUALIFICATION. The Originator shall be duly qualified to do
business as a foreign corporation in good standing, and shall have obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(c) CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION. The
execution, delivery and performance by the Originator of this Agreement and each
other Facility Document are within the Originator's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official (except as
contemplated by Section 2.4), and do not contravene or violate, or constitute a
default under, any provision of applicable law or to the best of Originator's
knowledge any order rule, or regulation applicable to the Originator or of the
Certificate of Incorporation or Bylaws of the Originator or of any agreement of
a material nature, judgment, injunction, order, decree or other instrument
binding upon the Originator or result in the creation or imposition of any lien
on assets of the Originator (except as contemplated by Section 2.4). The
Originator has obtained all approvals and releases of security interests from
its creditors as are necessary to sell, transfer and assign the Purchased Assets
to the Buyer hereunder.
(d) BINDING EFFECT. This Agreement and the other Facility Documents
constitute the legal, valid and binding obligations of the Originator,
enforceable against the Originator in accordance with their respective terms,
subject to the effect of bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally.
20
(e) ACCURACY OF INFORMATION. All information heretofore furnished by
the Originator for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and such other information hereafter
furnished by the Originator to the Buyer will be, true and accurate in every
material respect, on the date such information is stated or certified.
(f) ACTIONS, SUITS. Except as set forth in Exhibit B, there are no
actions, suits or proceedings pending, or to the knowledge of the Originator
threatened, against or affecting the Originator or their respective properties,
in or before any court, arbitrator or other body, which (i) may have a Material
Adverse Effect, (ii) assert the invalidity of this Agreement, any of the other
Facility Documents or any material amount of Receivables or (iii) seek to
prevent the consummation of the transactions contemplated hereby or thereby.
(g) PLACE OF BUSINESS. The chief place of business and chief
executive office of the Originator are located at 800 Perinton Hills Office
Park, Fairport, New York 14450, and the offices where the Originator keeps all
the Records, are located at the addresses described on Exhibit C or such other
locations notified to the Buyer in accordance with Section 2.4 in jurisdictions
where all action required by Section 2.4 has been taken and completed. Since
its incorporation, the Originator has not merged or consolidated with any other
corporation or been the subject of any bankruptcy proceeding.
(h) NAMES. Except as described in Exhibit F, the Originator has not
used any corporate names, tradenames or assumed names other than its name set
forth on the signature pages of this Agreement.
(i) USE OF PROCEEDS. No proceeds of any Purchase made hereunder will
be used for a purpose which violates, or would be inconsistent with regulations
G, T, U or X promulgated by the Board of Governors of the Federal Reserve System
from time to time.
(j) NO TERMINATION EVENT. No Termination Event or Potential
Termination Event has occurred on or before the Closing Date or Purchase Date,
as applicable.
(k) FINANCIAL CONDITION. The Originator is not insolvent or the
subject of any bankruptcy proceeding and the transfer of the Receivables on such
day will not be made in contemplation of the occurrence thereof.
(l) TAXES. The Originator has filed all income tax returns (federal,
state and local) and all other material tax
21
returns which are required to be filed by them and has paid all taxes due
pursuant to such returns or pursuant to any assessment received by it except for
any such tax assessment, charge or levy the payment of which is being contested
in good faith and by proper proceedings.
(m) BOOKS AND RECORDS. The Originator has indicated on its books and
records (including any computer files), that the Purchased Assets are the
property of the Buyer.
(n) PERMITTED LOCKBOX BANKS. The names and addresses of all
Permitted Lockbox Banks, together with the numbers of all Lockbox Accounts at
such Permitted Lockbox Banks and the addresses of all related Permitted
Lockboxes, are specified in Exhibit G (or such other Permitted Lockbox Banks,
Lockbox Accounts and/or Permitted Lockboxes as have been notified by the
Originator to the Buyer).
(o) INVESTMENT COMPANY. The Originator is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(p) SEPARATE CORPORATE EXISTENCE. The Originator is entering into
the transactions contemplated by this Agreement in reliance on the Buyer's
identity as a separate legal entity from the Originator and each of its
Affiliates, and acknowledges that the Buyer and the other parties to the
Facility Documents are similarly entering into the transactions contemplated by
the other Facility Documents in reliance on the Buyer's identity as a separate
legal entity from the Originator and each such other Affiliate.
(q) NO FRAUDULENT CONVEYANCE. The transactions contemplated by this
Agreement and by each of the Facility Documents are being consummated by the
Originator in furtherance of the Originator's ordinary business, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. By its receipt of the Purchase Prices
hereunder and its ownership of the capital stock of the Buyer, the Originator
shall have received reasonably equivalent value for the Receivables sold or
otherwise conveyed to the Buyer under this Agreement.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR WITH
RESPECT TO EACH SALE OF RECEIVABLES. By selling Receivables to the Buyer on
each Purchase Date, the Originator represents and warrants to the Buyer as of
each such Purchase Date and only as to Receivables sold by the Originator to the
Buyer hereunder on such Purchase Date (in addition to its other
22
representations and warranties contained herein or made pursuant hereto) that:
(a) STATEMENTS. All information set forth on the related Purchase
Notice relating to such Receivables is true and correct as of such date of
Purchase.
(b) ASSIGNMENT. This Agreement vests in the Buyer, all the right,
title and interest of the Originator in and to the Purchased Assets, and
constitutes a valid sale of the Purchased Assets, enforceable against, and
creating an interest prior in right to, all creditors of and purchasers from
such Originator, subject to all applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and general principles of equity,
regardless of whether enforcement is sought in a proceeding in equity or at law.
(c) GOOD TITLE; PERFECTION. The original Title for each Financed
Vehicle shows the Originator as the original secured party and as the holder of
a first priority security interest in the related Financed Vehicle. Immediately
prior to the transfer hereunder, the Originator shall be the legal and
beneficial owner of the Receivables and Related Security with respect thereto,
free and clear of any Adverse Claim and each Receivable shall be secured by a
first perfected security interest in the related Financed Vehicle in favor of
the Originator. This Agreement is effective to, and shall transfer to the
Buyer, a valid and perfected first priority ownership or security interest in
each Receivable and in the Related Security and Collections (to the extent
provided by Section 9-306 of the Relevant UCC) with respect thereto and the
documents entered into in connection therewith, free and clear of any Adverse
Claim (except as created by this Agreement). On or prior to the date hereof,
all financing statements and other documents required to be recorded or filed in
order to perfect and protect the Buyer's interest in the Purchased Assets
against all creditors of and transferees from the Originator will have been duly
filed in each filing office necessary for such purpose and all filing fees and
taxes, if any, payable in connection with such filings shall have been paid in
full. No effective financing statement and other instrument similar in effect
covering any Contract relating to a Receivable or the Related Security or
Collections with respect thereto is on file in any recording office, except
those filed pursuant to this Agreement or the Transfer and Administration
Agreement.
(d) ELIGIBLE RECEIVABLES. Each Receivable transferred to the Buyer
is an Eligible Receivable.
(e) BINDING EFFECT OF RECEIVABLES AND CONTRACT. Each Receivable and
related Contract constitutes a legal, valid and
23
binding obligation of the related Obligor enforceable in accordance with its
terms against such Obligor subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights and remedies generally and general principles of equity.
(f) CREDIT AND COLLECTION POLICY. The Originator has complied in all
material respects with the Credit and Collection Policy in regard to each
Receivable and related Contract. The Originator has not extended or modified
the terms of any Receivable or the related Contract except in accordance with
the Credit and Collection Policy.
(g) INSURANCE POLICIES. The Originator, in accordance with its
normal and customary procedures, shall have determined that the Obligor has
obtained or agreed to obtain an Insurance Policy covering the Financed Vehicle,
and the Obligor is required under the terms of its related Contract to maintain
such Insurance Policy.
(h) FILINGS. On or prior to each Purchase Date, all financing
statements and other documents required to be recorded or filed in order to
perfect and protect the Purchased Assets against all creditors of and purchasers
from the Originator and all other Persons whatsoever will have been duly filed
in each filing office necessary for such purpose and all filing fees and taxes,
if any, payable in connection with such filings shall have been paid in full.
(i) MAINTENANCE OF RECORDS. The Originator maintains at its chief
executive office or shall cause the Servicer to maintain at its chief executive
office the complete Records for each Receivable.
To the extent that any of the statements and representations made in
Section 3.1(e) or Section 3.2(a), (c), (d), (e), (f), (g) or (i) shall prove to
have been untrue or incorrect with respect to any Receivable at the time made
and, if the Originator is unable to remedy such untrue or incorrect statement or
representation within ten (10) days of the Originator's receipt of notice of
such untrue or incorrect statement or representation, such a finding shall not
result in a Termination Event hereunder, but the Originator shall reacquire such
Receivables from the Buyer for an amount equal to the Repurchase Amount at the
time of such repurchase, and (i) all such reconveyed Receivables shall no longer
constitute Receivables hereunder and (ii) following such reacquisition by the
Originator, the Buyer shall have no further remedy against the Originator with
respect to such reconveyed Receivables.
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ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. CONDITIONS TO CLOSING. On or prior to the Closing Date,
the Originator shall deliver to the Buyer the following documents and
instruments, all of which shall be in form and substance acceptable to the
Buyer:
(a) A Certificate of the Secretary of the Originator certifying (i)
the names and signatures of the officers authorized on its behalf to execute
this Agreement and any other documents to be delivered by it hereunder (on which
Certificate the Buyer may conclusively rely until such time as the Buyer shall
receive from the Originator a revised Certificate meeting the requirements of
this clause (a)(i)), (ii) a copy of the Articles of Incorporation of the
Originator certified as of the date reasonably near the date hereof by the
Secretary of State of the Originator's jurisdiction of incorporation, (iii) a
copy of the By-laws of the Originator, as amended, (iv) a copy of resolutions of
the Board of Directors (or any executive committee designated by the Board of
Directors) of the Originator approving the transactions contemplated hereby,
(v) a certificate as of a date reasonably near the date hereof of the Secretary
of State of the Originator's jurisdiction of incorporation certifying the
Originator's good standing under the laws of such jurisdiction, and
(vi) certificates of qualification as a foreign corporation issued by the
Secretary of State or other similar official of each jurisdiction where such
qualification is material to the transactions contemplated by this Agreement and
either certificates of the appropriate state official in each jurisdiction
specified by the Buyer or search reports by parties acceptable to the Buyer as
to the absence of any tax liens against the Originator under the laws of such
jurisdiction, each such certificate or report to be dated a date reasonably near
the date hereof;
(b) An incumbency and authorization certificate of the Originator in
such form as the Buyer may reasonably request;
(c) Acknowledgment copies of proper financing statements (Form
UCC-1), dated a date reasonably near to the date hereof naming the Originator as
the transferor (debtor) of the Receivables and the Buyer as transferee (secured
party) or other similar instruments or documents as may be necessary or in the
opinion of the Buyer desirable under the Relevant UCC or any comparable law to
perfect the Buyer's fractional undivided ownership interest in the Receivables;
(d) Acknowledgment copies of proper financing statements (Form
UCC-3), if any, necessary to release all
25
security interests and other rights of any Person in the Receivables and Related
Security previously granted by the Originator;
(e) Certified copies of request for information or copies (Form
UCC-11) (or a similar search report certified by parties acceptable to the
Buyer) dated a date reasonably near the date hereof listing all effective
financing statements which name the Originator (under its present name or any
previous or "doing business" name) as transferor or debtor and which are filed
in jurisdictions in which the filings were made pursuant to item (c) above
together with copies of such financing statements (none of which shall cover any
Receivables or related Contracts);
(f) Favorable opinions of Nixon, Hargrave, Devans & Doyle, special
counsel for the Originator, addressed to the Originator and the Buyer as to
corporate enforceability, true sale, substantive consolidation, fraudulent
conveyance, perfection and tax matters, in forms reasonably acceptable to the
Buyer;
(g) The Purchase Notice for the initial Purchase hereunder;
(h) A form of Contract or Contracts;
(i) An executed copy of the Subordinated Note;
(j) Copies of Lockbox Agreements and any amendments thereto and all
other agreements previously given or entered into with each of the Permitted
Lockbox Banks; and
(k) An executed copy of the Custodial Agreement;
(l) An executed copy of the Expense and Tax-Sharing Agreement;
(m) The fully executed VSI Policy; and
(n) Such other documents as the Buyer may reasonably request.
SECTION 4.2. CONDITIONS TO PURCHASES. The Buyer's obligation to
Purchase on any Purchase Date pursuant to Sections 2.1 and 2.2 hereof shall be
subject to satisfaction of the following applicable conditions precedent:
(a) the truth and correctness of:
26
(i) the representations and warranties in Section 3.1 hereof as of
such Purchase Date, as though made on and as of such date, and
(ii) the representations and warranties in Section 3.2 of this
Agreement, but only as to the Receivables sold hereunder by the Originator
to the Buyer on such Purchase Date;
(b) the requirement that no Termination Event or Potential
Termination Event shall exist or shall occur as a result of such purchase;
(c) the Originator shall have delivered to the Buyer any necessary
modifications or additions to Schedule I hereto;
(d) the Originator shall have delivered to the Buyer a Purchase
Notice;
(e) the Originator shall have taken any actions necessary or
advisable to maintain the Buyer's perfected security interest in the Purchased
Assets (including in the Receivables purchased on such Purchase Date);
(f) the satisfactory completion by the Buyer of any due diligence
determined necessary by the Buyer with respect to the Receivables and the
related Obligors and Contracts;
(g) the Originator shall have delivered to the Buyer an executed
Support Agreement;
(h) the receipt by the Buyer of any approvals, opinions or other
documents as the Buyer shall have reasonably requested.
SECTION 4.3. EFFECT OF PAYMENT OF PURCHASE PRICE. Upon the payment
of the Purchase Price for any Purchase, (whether in cash, through a capital
contribution or a Subordinated Loan), title to the Receivables and the other
related Purchased Assets shall vest in the Buyer, whether or not the conditions
precedent to such Purchase were in fact satisfied; PROVIDED, HOWEVER, that the
Buyer shall not be deemed to have waived any claim it may have under this
Agreement for the failure by the Originator in fact to satisfy any such
condition precedent.
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ARTICLE V
COVENANTS
SECTION 5.1. COVENANTS OF THE ORIGINATOR. At all times during the
term of this Agreement, unless the Buyer shall otherwise consent in writing:
(a) FINANCIAL REPORTING. The Originator will maintain a system of
accounting established and administered in accordance with generally accepted
accounting principles, and furnish to the Buyer:
(i) ANNUAL REPORTING. Within 120 days after the close of each of its
fiscal years, a copy of its consolidated financial statements for such year
and consolidated balance sheets as of the end of such year, consolidated
statements of income, cash flow and changes in shareholder equity of the
Originator and its Subsidiaries for such fiscal year, together with
comparative information for the previous fiscal year, and copies of all
reports and management letters, if any, from the independent certified
public accountants to the Originator, which reports and letters shall be
reasonably satisfactory to the Buyer, all certified by the chief financial
officer of the Originator;
(ii) MONTHLY REPORTING. Within 30 days following the close of each
calendar month, consolidated balance sheets of the Originator and its
Subsidiaries as of the end of such month and consolidated statements of
income of the Originator and its Subsidiaries for such month and for the
period commencing at the end of the previous fiscal year and ending with
the end of such month, certified by the chief financial officer of the
Originator;
(iii) COMPLIANCE CERTIFICATE. Together with the annual report
required above, a compliance certificate in substantially the form of
Exhibit E hereto signed by its chief accounting officer or treasurer of the
Originator stating that no Termination Event or Potential Termination Event
exists, or if any Termination Event or Potential Termination Event exists,
stating the nature and status thereof.
(iv) NOTICE OF CANCELLATION OF VSI POLICY. As soon as a Responsible
Officer of the Originator becomes aware thereof, the Originator shall
notify the Buyer of receipt of notice from the issuer of the VSI Policy of
such issuer's intention to cancel, not to renew or to conditionally renew
the VSI Policy, and the action which the Originator proposes to take to
replace such policy.
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(v) NOTICE OF TERMINATION EVENTS OR POTENTIAL TERMINATION EVENTS. As
soon as possible, and in any event within five (5) days after a Responsible
Officer of the Originator obtains knowledge of the occurrence of each
Termination Event or Potential Termination Event, a statement of the chief
financial officer or chief accounting officer of the Originator setting
forth details of such Termination Event or Potential Termination Event and
the action which the Originator proposes to take with respect thereto.
(vi) NOTICE OF MATERIAL ADVERSE CHANGE. As soon as any Responsible
Officer of the Originator becomes aware thereof, the Originator shall give
the Buyer notice of any event which may have a Material Adverse Effect.
(vii) OTHER INFORMATION. Such other information (including non-
financial information) as the Buyer may from time to time reasonably
request.
(b) CONDUCT OF BUSINESS. The Originator will do all things necessary
to remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and will maintain all requisite
authority to conduct its business in each jurisdiction in which its business
requires such authority.
(c) COMPLIANCE WITH LAWS. The Originator will comply in all material
respects with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject and which are
applicable to all Receivables.
(d) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS. The
Originator will furnish to the Buyer, within ten (10) Business Days after
receiving a request therefor, such information with respect to the Receivables
as the Buyer may reasonably request, including, without limitation, listings
identifying the Principal Balance for each Receivable. The Originator will from
time to time on a reasonable basis during regular business hours with prior
written notice permit the Buyer, or its agents or representatives, to visit the
offices of the Originator at the Buyer's expense unless a Potential Termination
Event or a Termination Event shall have occurred for the purpose of discussing
matters relating to Receivables or the Originator's performance hereunder with
any of the officers, directors, employees or independent public accountants of
the Originator having knowledge of such matters.
(e) FULFILLMENT OF OBLIGATIONS. The Originator will duly observe and
perform, or cause to be observed or performed, all material obligations and
undertakings on its part to be
29
observed and performed under or in connection with this Agreement and the
Receivables, will duly observe and perform all material provisions, covenants
and other promises required to be observed by it under the Contracts related to
the Receivables, will do nothing to materially impair the rights, title and
interest of the Buyer in and to the Purchased Assets and will pay when due (or
contest in good faith) any taxes, including without limitation any sales tax,
excise tax or other similar tax or charge, payable in connection with the
Receivables and their creation and satisfaction.
(f) LITIGATION. As soon as possible, and in any event within ten
Business Days of the knowledge of any Responsible Officer, the Originator shall
give the Buyer notice of (i) any litigation, investigation or proceeding against
the Originator which may exist at any time which, in the reasonable judgment of
the Originator, could reasonably be expected to have a Material Adverse Effect
and (ii) any material adverse development in any such previously disclosed
litigation.
(g) FEES, TAXES AND EXPENSES. The Originator shall pay all filing
fees, stamp taxes, other taxes (other than taxes imposed directly on the overall
net income of the Buyer) and expenses, including the fees and expenses set forth
in Sections 2.9 and 6.4 hereof, if any, which may be incurred on account of or
arise out of this Agreement and the documents and transactions entered into
pursuant to this Agreement.
(h) NO OTHER BUSINESS. The Originator shall engage in no business
other than the business contemplated under its Certificate of Incorporation.
(i) MAINTENANCE OF VSI POLICY. The Originator shall maintain in
effect the VSI Policy or other similar insurance policy reasonably acceptable to
the Buyer with respect to all Receivables transferred under this Agreement.
(j) SUBORDINATED NOTE. The Originator shall not transfer the
Subordinated Note to any person.
(k) COPIES OF REPORTS, FILINGS, ETC. The Originator shall furnish to
the Buyer, as soon as practicable after the issuance, sending or filing thereof,
copies of all proxy statements, financial statements, reports and other
communications which the Originator sends to its security holders generally,
and, if the Originator is required to file reports with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended,
copies of all regular, periodic and special reports which the Originator files
with the Securities and Exchange Commission or with any
30
securities exchange on Forms 10-K, 10-Q, 8-K or any successor forms thereto.
(l) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Originator will
maintain and implement administrative and operating procedures, including,
without limitation, an ability to recreate records evidencing Receivables in the
event of the destruction of the originals thereof), and keep and maintain, or
obtain, as and when required, all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the daily
identification of all Collections of and adjustments to each existing
Receivable). The Originator will give the Buyer prompt notice of any material
change in the administrative and operating procedures referred to in the
previous sentence, to the extent such change is likely to have a Material
Adverse Effect.
(m) CUSTOMER LIST. The Originator shall at all times maintain a
current list (which may be stored on magnetic tapes or disks) of all Obligors
under Contracts related to Receivables, including the name, address, telephone
number and account number of each such Obligor. The Originator shall deliver or
cause to be delivered a copy of such list to the Buyer as soon as practicable
following the Buyer's request.
(n) ADMINISTRATIVE AND OPERATING PROCEDURES. The Originator shall
maintain and implement administrative and operating procedures adequate to
permit the identification of the Receivables and all collections and adjustments
attributable thereto and shall comply in all material respects with the Credit
and Collection Policy in regard to each Receivable and related Contract.
(o) INSURANCE. The Originator shall keep insured by financially
sound and reputable insurers all property of a character usually insured by
corporations engaged in the same or similar business similarly situated against
loss or damage of the kinds and in the amounts customarily insured against by
such corporations and carry such other insurance as is usually carried by such
corporations.
(p) ERISA EVENTS.
(i) Promptly upon becoming aware of the occurrence of any Event of
Termination which together with all other Events of Termination occurring
within the prior 12 months involve a payment of money by or a potential
aggregate liability of the Originator or any ERISA Affiliate or any
combination of such entities in excess of $5,000,000, the Originator shall
give the Buyer a written notice specifying
31
the nature thereof, what action the Originator or any ERISA Affiliate has
taken and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto.
(ii) Promptly upon receipt thereof, the Originator shall furnish to
the Buyer copies of (i) all notices received by the Originator or any ERISA
Affiliate of the PBGC's intent to terminate any Plan or to have a trustee
appointed to administer any Plan; (ii) all notices received by the
Originator or any ERISA Affiliate from the sponsor of a Multiemployer Plan
pursuant to Section 4202 of ERISA involving a withdrawal liability in
excess of $5,000,000; and (iii) all funding waiver requests filed by the
Originator or any ERISA Affiliate with the Internal Revenue Service with
respect to any Plan, the accrued benefits of which exceed the present value
of the plan assets as of the date the waiver request is filed by more than
$5,000,000, and all communications received by the Originator or any ERISA
Affiliate from the Internal Revenue Service with respect to any such
funding waiver request.
(q) SEPARATE IDENTITY. The Originator shall take all actions
required to maintain the Buyer's status as a separate legal entity, including,
without limitation, (i) not holding the Buyer out to third parties as other than
an entity with assets and liabilities distinct from the Originator and the
Originator's other Subsidiaries; (ii) not holding itself out to be responsible
for the debts of the Buyer or, other than by reason of owning capital stock of
the Buyer, for any decisions or actions relating to the Buyer; (iii) prepare
separate financial statements for the Buyer (which shall be audited by
independent accountants); (iv) cause any financial statements consolidated with
those of the Buyer to state that the Buyer is a separate corporate entity with
its own separate creditors who, in any liquidation of the Buyer, will be
entitled to be satisfied out of the Buyer's assets prior to any value in the
Buyer becoming available to the Buyer's equity holders; (v) taking such other
actions as are necessary on its part to ensure that all corporate procedures
required by its and the Buyer's respective certificates of incorporation and by-
laws are duly and validly taken; (vi) keeping correct and complete records and
books of account and corporate minutes; and (vii) not acting in any other manner
that could foreseeably mislead others with respect to the Buyer's separate
identity.
(r) SOFTWARE. The Originator shall use its reasonable efforts to
enable each of the Buyer, any agent of the Buyer and the Servicer (whether by
license, sublicense, assignment or otherwise) to use all of the computer
software used to account for the Receivables to the extent necessary to
administer the Receivables.
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(s) CUSTODIAN CONFIRMATION. With respect to each Receivable sold on
a Purchase Date, the Originator shall cause the Custodian to deliver to the
Buyer a Custodian Confirmation within two (2) Business Days of the related
Purchase Date.
SECTION 5.2. NEGATIVE COVENANTS OF THE ORIGINATOR. During the term
of this Agreement, unless the Buyer shall otherwise consent in writing:
(a) NAME CHANGE, OFFICES, RECORDS AND BOOKS OF ACCOUNTS. The
Originator shall not change its name, identity or corporate structure (within
the meaning of Section 9-402(7) of the Relevant UCC) nor relocate its chief
executive office or any office where Records are kept unless it shall have: (i)
given the Buyer at least fifteen (15) days, prior written notice thereof and
(ii) delivered to the Buyer all financing statements, instruments and other
documents requested by the Buyer in connection with such change or relocation.
The Originator shall at all times maintain its chief executive office within a
jurisdiction in the United States and in which Article 9 of the Relevant UCC is
in effect and in the event it moves its chief executive office to a location
which may charge taxes, fees, costs, expenses or other charges to perfect the
interests of the Buyer in the Receivables, it shall pay all taxes, fees, costs,
expenses and other charges associated with perfecting interests of the Buyer in
the Receivables and any other costs and expenses incurred in order to maintain
the enforceability of this Agreement and the interest of the Buyer in the
Receivables.
(b) TRANSFERS, LIENS, ETC. Except for the Adverse Claims of the
Buyer created by this Agreement and except as provided in the Lockbox Agreement,
the Originator shall not transfer, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Adverse Claim (including,
without limitation, the filing of any financing statement) upon or with respect
to any Receivable, related Contract, Related Security, Collections, Permitted
Lockbox or Lockbox Account, or upon or with respect to any account to which any
Collections of any Receivable are sent, or assign any right to receive income in
respect thereto.
(c) STATEMENT FOR AND TREATMENT OF SALES. The Originator shall not
prepare any tax returns or reports or financial statements for financial
accounting or reporting purposes which shall account for the transactions
contemplated herein in any manner other than as a sale of the Purchased Assets
to the Buyer unless such sale or treatment is prohibited by GAAP or is not
reportable for tax purposes due to the filing by the Originator of tax returns
on a consolidated basis with those of the Buyer.
33
(d) NO RESCISSIONS OR MODIFICATIONS. The Originator shall not
reduce, rescind or cancel any Receivable or related Contract or modify any terms
or provisions thereof, except in accordance with the Credit and Collection
Policy.
(e) CONSOLIDATIONS MERGERS AND SALES OF ASSETS. The Originator shall
not (i) consolidate or merge with or into any other Person or (ii) sell, lease
or otherwise transfer all or substantially all of its assets to any other
Person; PROVIDED that the Originator may merge with another Person if (A) the
Originator is the corporation surviving such merger and (B) immediately after
and giving effect to such merger, no Termination Event or Potential Termination
Event shall have occurred and be continuing.
(f) NO CHANGES. The Originator shall not (i) make any change in the
character of its business or in the Credit and Collection Policy, which change
would, in either case, impair the collectibility of any material amount of the
Receivables or make any material change in the Credit and Collection Policy or
in its current payment terms with respect to Receivables without prior written
notification to and consent of the Buyer; provided, however, that the Buyer
shall be deemed to have approved any such change unless it shall have
disapproved of such change within ten (10) Business Days of its receipt of such
notice and (ii) change, terminate or waive or consent to any such change,
termination or waiver of any provision of the Custodial Agreement without the
prior written consent of the Buyer; provided, however, that the Buyer shall be
deemed to have approved any such change unless it shall have disapproved of such
change within ten (10) Business Days of its receipt of such notice.
(g) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. The Originator shall
not make any change in its instructions to Obligors regarding payments to be
made with respect to the Receivables (other than changes with respect to the
mailing addresses for remittances) unless the Buyer shall have received, at
least ten (10) Business Days before the proposed effective date therefor,
written notice of such change.
(h) CHANGE IN PAYMENTS OR DEPOSITS OF PAYMENTS. Except with the
prior written notice to the Buyer, the Originator shall not add or terminate any
Person as a Permitted Lockbox Bank from those Persons listed in Exhibit G
hereto, make or permit any change in the location of any Permitted Lockbox or
the location or account number of any Lockbox Account.
(i) ERISA MATTERS. The Originator shall not permit any event or
condition which is described in any of clauses (i) through (vi), clause (viii)
or clause (x) of the definition of Event of Termination to occur or exist with
respect to any Plan
34
or Multiemployer Plan if such event or condition, together with all other events
or conditions described in the definition of Event of Termination occurring
within the prior 12 months involve the payment of money by or an incurrence of
liability of the Originator or any ERISA Affiliate in an amount in excess or
$10,000,000.
(j) NONPETITION COVENANT. Notwithstanding any prior termination of
this Agreement, the Originator and the Buyer shall not, prior to the date which
is one year and one day after the termination of this Agreement, with respect to
the Buyer, acquiesce, petition or otherwise invoke or cause the Buyer to invoke
the process of any governmental authority for the purpose of commencing or
sustaining a case against the Buyer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Buyer or any
substantial part of its property or ordering the winding-up or liquidation of
the affairs of the Buyer.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1. INDEMNIFICATION. Without limiting any other rights
which the Buyer may have hereunder or under applicable law, the Originator
hereby agrees to indemnify the Buyer and its officers, directors, agents and
assigns (the "Indemnified Parties"; each, an "Indemnified Party") from and
against any and all damages, losses, claims, liabilities, costs and expenses
(other than in respect of taxes, which shall be governed by Section 6.2),
including reasonable attorneys, fees and disbursements (all of the foregoing
being collectively referred to as "INDEMNIFIED AMOUNTS") awarded against or
incurred by any of them arising out of or as a result of any of the
circumstances described below, provided, however, that in no event shall the
Originator indemnify any Indemnified Party for (i) Indemnified Amounts resulting
from the gross negligence or willful misconduct on the part of such Indemnified
Party or (ii) recourse for uncollectible Receivables. The Originator shall
indemnify the Indemnified Parties for Indemnified Amounts relating to or
resulting from:
(a) reliance on any representation or warranty made by the Originator
(or any officers of the Originator) under or in connection with this Agreement,
any Facility Document or any other information or report delivered by the
Originator pursuant hereto, which shall have been false or incorrect in any
material respect when made or deemed made;
35
(b) the failure by the Originator to comply in all material respects
with any applicable law, rule or regulation with respect to any Receivable or
the related Contract, or the nonconformity of any Receivable or the related
Contract with any such applicable law, rule or regulation;
(c) the failure as a result of acts or failures to act on the part of
the Originator or the Servicer, to vest and maintain vested in the Buyer or its
assignee, the Purchased Assets free and clear of any Adverse Claim;
(d) the failure to file, or delay in filing, financing statements or
other similar instruments or documents under the Relevant UCC or other
applicable laws with respect to any Receivable;
(e) any dispute, claim, offset or defense (which dispute, claim,
offset or defense is made in "good faith") (other than discharge in bankruptcy
of an Obligor) of an Obligor to the payment of any Receivable (including,
without limitation, a defense based on such Receivable or the related Contract
not being a legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim resulting from the
sale of merchandise or services related to such Receivable or the furnishing or
failure to furnish such merchandise or services; for the purposes of this
subsection, the term "good faith" shall mean a dispute, claim, offset or defense
that is based on reasonable factual allegations which are likely to survive a
motion to dismiss or which are not interposed for the purposes of hindering or
delaying an Obligor's payment of the Receivable or which is not based
principally on procedural or technical grounds (including, without limitation,
improper service of process, statute of limitations, etc.);
(f) any failure of the Originator to perform its duties or
obligations in accordance with the provisions of this Agreement or the
transactions contemplated by this Agreement; or
(g) any products liability claim or personal injury or property
damage suit arising out of or in connection with merchandise or services which
are the subject of any Receivable.
SECTION 6.2. TAX INDEMNIFICATION.
(a) The Originator hereby agrees to pay, and to indemnify the
Indemnified Parties from and against, any taxes which may at any time be
asserted in respect of this transaction or the subject matter hereof (including,
without limitation, any sales, gross receipts, general corporation, personal
property, privilege or license taxes, but not including any federal or (except
as provided below) other income or franchise taxes
36
imposed upon an Indemnified Party, with respect to its net income or profits
arising out of the transactions contemplated hereby (all such excluded taxes,
the "Excluded Taxes")), whether arising by reason of the acts to be performed by
the Originator or the Buyer hereunder or imposed against the Originator or any
Indemnified Party, the property involved or otherwise. If any tax, fee or
similar charge is imposed or with respect to any payment for the account of any
Indemnified Party provided for in this Agreement by any State or political
subdivision thereof (other than Excluded Taxes), the Originator will, upon
demand by such Indemnified Party, pay an amount necessary to make such
Indemnified Party whole, taking into account any tax consequences to such
Indemnified Party of the payment of such tax and the receipt of the indemnity
provided for by this Section 6.2, including the effect of such tax or refund on
the amount of tax measured by net income or profits which is or was payable by
such Indemnified Party in the jurisdiction in which its principal executive
office is located.
SECTION 6.3. ADDITIONAL COSTS.
(a) The Originator shall pay to the Buyer, from time to time on
demand of the Buyer, such amounts as the Buyer may reasonably determine to be
necessary to compensate it for any increase in costs which determines are
attributable to its acquiring and funding the Receivables under this Agreement
or the Transfer and Administration Agreement, or any reduction in any amount
receivable by the Buyer in respect of any such acquisition or funding (such
increases in costs, payments and reductions in amounts receivable being herein
called "ADDITIONAL COSTS") resulting from any Regulatory Change which (i)
changes the method or basis of taxation of any amounts payable to the Buyer
under this Agreement or payable by the Buyer in connection with the financing of
the purchase of the Receivables or (ii) imposes any other condition affecting
this Agreement (or any of such extensions of credit or liabilities). The Buyer
will notify the Originator of any event that will entitle Buyer to compensation
pursuant to this Section 6.3(a) no later than fifteen (15) Business Days after
it obtains knowledge thereof.
(b) Determinations and allocations by the Buyer for purposes of this
Section 6.3 shall be conclusive, provided that such determinations and
allocations are made in good faith and on a reasonable basis, reasonable
evidence (including an explanation of the applicable Regulatory Change and an
accounting for any amounts demanded) of which shall be provided to the
Originator upon request.
(c) The Buyer agrees to promptly notify the Originator if the Buyer
receives notice of any potential tax liability for which the Originator may be
liable pursuant to Sections 6.2 or
37
6.3 hereof. The Buyer further agrees that the Originator shall bear no cost
(including costs relating to penalties and interest) relating to the failure of
the Buyer to file in a timely manner any tax returns required to be filed by the
Buyer in accordance with applicable statutes and regulations.
SECTION 6.4. OTHER COSTS AND EXPENSES. The Originator shall pay on
demand all costs and expenses in connection with the preparation, execution,
delivery and administration of this Agreement and any other documents delivered
hereunder or contemplated hereby, including, without limitation, reasonable fees
and out-of-pocket expenses of legal counsel for the Buyer (which such counsel
may be employees of the Buyer) with respect thereto and with respect to advising
the Buyer as to its rights and remedies under this Agreement or the Transfer and
Administration Agreement, and all costs and expenses, if any, including
reasonable counsel fees and expenses in connection with the enforcement or
amendment of this Agreement and the other documents delivered hereunder or
contemplated hereby. The Originator shall reimburse the Buyer on demand for all
other costs and expenses incurred by the Buyer or any agent or assign of the
Buyer ("OTHER COSTS"); including, without limitation, the cost of the Buyer's
auditors auditing the Originator's books, records and procedures, and the
reasonable fees and out-of-pocket expenses of counsel for the Buyer or any
counsel for any agent or assign of the Buyer with respect to advising the Buyer
or such agent or assign as to matters relating to the Buyer's operation.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. SURVIVAL. The indemnification and payment provisions of
Article VI shall be continuing and shall survive any termination of this
Agreement, subject to applicable statutes of limitation; PROVIDED FURTHER,
HOWEVER, that any such indemnification or payment claim must be presented to the
Originator within ten (10) Business Days after the Buyer receives notice or
otherwise becomes aware of such claim.
SECTION 7.2. WAIVERS; AMENDMENTS. No failure or delay on the part of
the Buyer in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other further exercise thereof or the
exercise of any other power, right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or remedies provided
by law. Any provision of this Agreement may be amended if, but only if, such
amendment is in writing and is signed by the parties hereto.
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SECTION 7.3. NOTICES. Except as provided below, all communications
and notices provided for hereunder shall be in writing (including bank wire,
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other party at its address or telecopy number set forth hereunder
or at such other address or telecopy number as such party may hereafter specify
for the purposes of notice to such party. Each such notice or other
communication shall be effective if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in this Section 7.3 and the
appropriate written confirmation is received or, if given by any other means,
when received at the address specified in this Section 7.3. The Originator
further agrees to deliver promptly to the Buyer a written confirmation of each
telephonic notice signed by an authorized officer of the Originator. However,
the absence of such confirmation shall not affect the validity of such notice.
IF TO THE BUYER:
ATLANTIC AUTO SECOND FUNDING CORPORATION
P.O. Box 1502
800 Perinton Hills Office Park
Fairport, New York 14450
Telephone: (716) 421-2982
Telecopy: (716) 421-1954
Attention: President
IF TO THE ORIGINATOR:
ATLANTIC AUTO FINANCE CORPORATION
P.O. Box 1502
800 Perinton Hills Office Park
Fairport, New York 14450
Telephone: (716) 421-2985
Telecopy: (716) 421-1954
Attention: President
SECTION 7.4. GOVERNING LAW; SUBMISSION TO JURISDICTION; INTEGRATION.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York. The Originator hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State Court sitting in New York, New York for
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. The Originator and the Buyer hereby
irrevocably waive, to the fullest extent they may effectively do so, any
objection which they may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a
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court has been brought in an inconvenient forum. Nothing in this Section 7.4
shall affect the right of the Buyer to bring any action or proceeding against
the Originator or its properties in the courts of other jurisdictions. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire understanding among the parties hereto with respect to the
subject matter hereof superseding all prior oral or written understandings.
SECTION 7.5. SEVERABILITY; COUNTERPARTS, WAIVER OF SETOFF. This
Agreement may be executed in any number.of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The Originator hereby agrees to waive any right of setoff
which it may have or to which it may be entitled against the Buyer and its
assets.
SECTION 7.6. ASSIGNMENTS. This Agreement shall be binding on the
parties hereto and their respective successors and assigns; PROVIDED, HOWEVER,
that the Originator may not assign any of its rights or delegate any of its
duties hereunder without the prior written consent of the Buyer. No provision
of this Agreement shall in any manner restrict the ability of the Buyer to
assign, participate, grant security interests in, or otherwise transfer any
portion of the Purchased Assets. Any transfer in contravention of this Section
7.6 shall be null and void and shall not confer upon the transferee thereof any
of the rights under this Agreement.
SECTION 7.7. WAIVER OF CONFIDENTIALITY. The Buyer and the
Originator shall hold all non-public information obtained pursuant to this
Agreement and the transactions contemplated hereby or effected in connection
herewith in accordance with customary procedures for handling confidential
information of this nature and in any event may make disclosure (a) reasonably
required by a bona fide transferee, (b) necessary in order to obtain any
consents, approvals, waivers or other arrangements required to permit the
execution, delivery and performance by the Originator of this Agreement, or
(c) as required or requested by any governmental body, agency or
instrumentality, regulatory authority, court, tribunal or arbitrator or pursuant
to legal process or required by applicable law.
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IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be executed and delivered by their duly authorized officers as of
the date hereof.
ATLANTIC AUTO SECOND FUNDING CORPORATION,
as Buyer
By: /s/ Suzanne A. O'Connor
---------------------------
Name:
Title:
ATLANTIC AUTO FINANCE CORPORATION,
as Originator
By: /s/ Richard J. Harrison
----------------------------
Name:
Title:
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