Execution Copy - WP Version
Exhibit C
to
Credit Agreement
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SECURITY AGREEMENT
among
AUTOBOND FUNDING CORPORATION II
(as Borrower)
AUTOBOND ACCEPTANCE CORPORATION.
(as Administrator)
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(as Collateral Agent)
Dated as of May 21, 1996
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AUTOBOND FUNDING CORPORATION II
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TABLE OF CONTENTS
Page
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SECTION 1. DEFINED TERMS........................................ 1
SECTION 2. SECURITY INTERESTS................................... 9
SECTION 3. CERTAIN RIGHTS OF SECURED PARTIES WITH
RESPECT TO COLLATERAL................................ 10
SECTION 4. REMEDIES UPON THE OCCURRENCE OF AN
EVENT OF DEFAULT..................................... 11
SECTION 5. REPRESENTATIONS, WARRANTIES AND
COVENANTS............................................ 13
SECTION 6. COLLATERAL ACCOUNT................................... 15
6.01. Establishment and Maintenance of
Lockbox and Collateral Account....................... 15
6.02. Required Deposits to the Accounts.................... 15
6.03. Right of Withdrawal from the
Collateral Account................................... 17
6.04. Application of Funds in the
Collateral Account; Application of
Proceeds of Realization on
Collateral........................................... 17
6.05. Investment of Funds Deposited in
Collateral Account................................... 21
SECTION 7. DISPOSITIONS OF AUTO LOANS........................... 21
SECTION 8. THE COLLATERAL AGENT................................. 21
8.01. Appointment.......................................... 21
8.02. Exculpatory Provisions............................... 22
8.03. Reliance by Collateral Agent......................... 23
8.04. Notice of Default.................................... 23
8.05. Non-Reliance on Collateral Agent..................... 23
8.06. Successor Collateral Agent........................... 24
8.07. Delivery of Collateral and Permitted
Investments.......................................... 25
8.08. Duties and Covenants of Collateral
Agent................................................ 25
8.09. Annual Report and Quarterly
Certificate.......................................... 28
SECTION 9. AMENDMENTS AND WAIVERS............................... 29
SECTION 10. NOTICES.............................................. 30
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Page
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SECTION 11. LIMITATION ON COLLATERAL AGENT'S DUTY
IN RESPECT OF COLLATERAL............................. 31
SECTION 12. SEVERABILITY......................................... 31
SECTION 13. NO WAIVER; CUMULATIVE REMEDIES....................... 31
SECTION 14. PAYMENT OF EXPENSES AND TAXES........................ 32
SECTION 15. SUCCESSORS AND ASSIGNS; GOVERNING LAW................ 34
SECTION 16. ENFORCEMENT RIGHTS OF LENDERS........................ 34
SECTION 17. BANKRUPTCY PETITION AGAINST THE
BORROWER............................................. 35
SECTION 18. MISAPPLICATION OF FUNDS.............................. 35
SECTION 19. COUNTERPART SIGNATURES............................... 35
SECTION 20. THIRD PARTY BENEFICIARY.............................. 35
SECTION 21. STATUS OF COLLATERAL AGENT........................... 35
SECTION 22. ACTS OF LENDERS...................................... 36
EXHIBITS
EXHIBIT A - FORM OF COLLATERAL ASSIGNMENT
EXHIBIT B - FORM OF TRUST RECEIPT
EXHIBIT C - FORM OF COLLATERAL AGENT REPORT
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SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of May 21, 1996 made by and among
AUTOBOND FUNDING CORPORATION II, a Delaware corporation (the "Borrower"),
AUTOBOND ACCEPTANCE CORPORATION, a Texas corporation ("AutoBond") and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION ("Norwest"), as collateral agent (in such
capacity, the "Collateral Agent").
W I T N E S S E T H
WHEREAS, the Borrower has entered into a Credit Agreement dated as
of May 21, 1996 (as may from time to time, be amended, supplemented, or
modified, the "Credit Agreement") with Peoples Security Life Insurance Company,
as lender (the "Initial Lender") and AutoBond, pursuant to which advances will
be made to the Borrower (the "Advances") from time to time;
WHEREAS, the Borrower has entered into the Loan Origination, Sale
and Contribution Agreement, dated as of May 21, 1996 (as from time to time
amended, supplemented or modified, the "Loan Acquisition Agreement"), with
AutoBond, pursuant to which the Borrower agrees to purchase Eligible Auto Loans;
and
WHEREAS, it is a condition to the obligations of the Lenders to make
the Advances under the Credit Agreement that the Borrower and the Collateral
Agent shall have executed and delivered to the Initial Lender this Security
Agreement.
NOW, THEREFORE, to induce the Lenders to make the Advances, the
Borrower hereby agrees with the Collateral Agent, for the benefit of the Secured
Parties, as follows:
SECTION 1. DEFINED TERMS.
(a) The terms "inventory", "goods", "accounts", "contract rights",
"chattel paper", "general intangibles", "checks", "instruments", "securities"
and "documents" have the respective meanings ascribed in the UCC.
(b) Capitalized terms used herein undefined shall, unless otherwise
defined herein, have the respective meanings ascribed in the Credit Agreement;
and the following terms shall have the following meanings:
"Accounts" shall mean the Lockbox Account, the Collateral
Account, the Reserve Account, the Loan Purchase Account and the
Loan Revenue Account.
"Aggregate Net Weighted Average APR" with respect to any Collection
Period shall mean the percentage derived by (a) dividing (i) the sum of the
product for each Specified Sold Auto Loan of (A) its stated annual percentage
rate, (B) its Unpaid Principal Balance and (C) the number of days during such
Collection Period that such Specified Sold Auto Loan was outstanding, divided by
the number of days in such Collection Period, divided by (ii) the sum of the
product for each Specified Sold Auto Loan of (A) its Unpaid Principal Balance
and (B) the number of days during such Collection Period that such Specified
Sold Auto Loan was outstanding, divided by the number of days in such Collection
Period, and (b) subtracting from such percentage the Monthly Servicing Fee
Percentage.
"Amount Financed" shall mean, with respect to any Sold Auto Loan,the
meaning ascribed thereto in the applicable disclosure documents given to the
obligor in satisfaction of the requirements of the Federal Truth-in-Lending Act.
"Approval Date" shall mean, with respect to any Auto Loan, the date
on which AutoBond makes its written credit approval with respect to the obligor
under such Auto Loan.
"Approved Contract/Policy Provider" shall mean any provider of
credit default or vendor's single interest insurance approved by the Initial
Lender.
"Automobile" shall mean a new or used automobile, light- duty truck
or van.
"Collateral" shall have the meaning specified in Section 2.
"Collateral Account" shall have the meaning assigned to such term in
Section 6.01 hereof.
"Collateral Agent Fee" shall mean, as of any Payment Date, the sum
of (a) the product of (i) 1/12th, (ii) 0.20% annual percentage rate and (iii)
the daily average aggregate principal balance of all Specified Sold Auto Loans
that are not Defaulted Auto Loans during such Collection Period immediately
preceding such Payment Date and (b) any expenses reimbursable in accordance with
the Collateral Agent's activities under this Agreement and the Servicing
Agreement, including, without limitation, the costs and expenses incurred by the
Collateral Agent in connection with the assumption of the duties and obligations
of the Servicer pursuant to the Servicing Agreement.
"Collateral Assignment" shall mean a certificate of assignment by
the Borrower to the Collateral Agent, substantially in the form of Exhibit A
giving notice of, and evidencing the
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pledge of Specified Sold Auto Loans and related collateral to the Collateral
Agent for the benefit of the Lenders.
"Collection Agent" shall mean the collection agent under
the Servicing Agreement.
"Collection Agent Fee" shall mean, (a) so long as AutoBond is acting
as collection agent under the Servicing Agreement, a fee equal to the product of
(i) $7 and (ii) the total number of Specified Sold Auto Loans which were
outstanding at any time during the preceding Interest Period, plus Reimbursable
Collection Agent Expenses and (b) if AutoBond is not the Collection Agent under
the Servicing Agreement, a fee equal to the product of (i) $2.50 and (ii) the
total number of Specified Sold Auto Loans which were outstanding at any time
during the preceding Interest Period, plus Reimbursable Collection Agent
Expenses.
"Collection Period" shall mean, (a) with respect to the initial
Collection Period, the period commencing on the Initial Closing Date and ending
on May 31, 1996, and (b) thereafter, with respect to any Payment Date, the
period commencing on the first day of the calendar month preceding the calendar
month in which such Payment Date occurs and ending on the last day of the
calendar month preceding the calendar month in which such Payment Date occurs.
"Defaulted Auto Loan" means an Auto Loan which by its terms had more
than 10% of any installment of principal or interest which is 60 or more days
contractually past due.
"Delinquency Ratio" means, as of any Determination Date, the
percentage equivalent of a fraction (a) the numerator of which equals the sum of
(i) the aggregate Unpaid Principal Balance of Specified Sold Auto Loans which
have become Defaulted Auto Loans as of the end of the most recently ended
Collection Period minus (ii) the sum of the aggregate Unpaid Principal Balance
of (A) all Specified Sold Auto Loans against which insurance claims have been
filed as of the end of the most recently ended Collection Period and (B)
Specified Sold Auto Loans for which the related Financed Vehicles are subject to
repossession as of the end of the most recently ended Collection Period and
which are not included in (B), and (b) the denominator of which equals the
aggregate Unpaid Principal Balance of Specified Sold Auto Loans outstanding as
of the end of the most recently ended Collection Period minus the amount
determined pursuant to clause (ii) above.
"Determination Date" shall mean the 10th day of each month (or the
immediately preceding Business Day, if such day is not a Business Day).
"Excess Reserve Account Amount" shall mean, as of each Payment Date,
the amount, if any, held in the Reserve Account in
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excess of the Reserve Account Required Balance after giving effect to any
withdrawals from the Reserve Account pursuant to Section 6.04(d)(i), (ii) and
(iii) on such Payment Date.
"Event of Purchase Termination" shall have the meaning assigned to
such term in the Loan Acquisition Agreement.
"Financed Vehicle" shall mean a new or used automobile, van or
light-duty truck, the purchase of which the Obligor financed with an Auto Loan.
"Loan Acquisition Price" shall mean with respect to any Specified
Sold Auto Loan to be purchased by the Borrower an amount equal to the product of
(i) 0.98 and (ii) the Unpaid Principal Balance of such Auto Loan and (b) accrued
but unpaid interest on such Auto Loan as of the related Sale Date.
"Loan Documents" means, with respect to a Sold Auto Loan, (a) the
original retail installment loan contract and security agreement evidencing such
a Sold Auto Loan, (b) the original confirmation of title, copy of the
application for title or letter of guaranty from the applicable Dealer, as the
case may be, for the related Financed Vehicle, (c) a copy of the credit
application, (d) the original confirmation of payment of premiums required under
the VSI Policy and (e) a copy of the funding check made to the order of the
Dealer.
"Loan Purchase Account" shall have the meaning assigned to such term
in Section 6.01 hereof.
"Loan Revenue Account" shall have the meaning assigned to such term
in Section 6.01 hereof.
"Lockbox" means the segregated lockbox and account established in
the name of the Collateral Agent on behalf of the Lenders for the sole purpose
of receiving collections on the Specified Sold Auto Loans, pursuant to the
Corporate Cash Management Services Agreement, dated May 21, 1996, between
Comerica Bank - Texas and the Collateral Agent.
"Lockbox Bank" means Comerica Bank - Texas and its successors and
assigns.
"Monthly Servicing Fee Percentage" with respect to any Interest
Period shall mean the percentage equivalent of a fraction (a) the numerator of
which is twelve times the sum of the Servicer Fee, the Collection Agent Fee and
the Collateral Agent Fee payable in respect of such Interest Period, and (b) the
denominator of which is the sum of the product for each Specified Sold Auto Loan
of (i) its Unpaid Principal Balance and (ii) the number of days during such
Collection Period that such Specified Sold Auto Loan
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was outstanding, divided by the number of days in such Collection Period.
"Net Loss Ratio" shall mean, as of any Determination Date, the
percentage equivalent of a fraction (a) the numerator of which equals (i) the
Net Unrealized Amounts on Specified Sold Auto Loans that became subject to
repossession during the most recently ended Collection Period, plus (ii) any
adjustments (which may be positive or negative) to Net Unrealized Amounts from a
prior period and not reflected, and (b) the denominator of which equals the
average aggregate Unpaid Principal Balance of Specified Sold Auto Loans
outstanding during the most recently ended Collection Period.
"Net Unrealized Amount" means, (a) with respect to any Auto Loan
which is more than 90 days contractually past due or where the Financed Vehicle
is otherwise subject to repossession (including voluntary or involuntary, or
upon casualty), the Unpaid Principal Balance of such Auto Loan minus the sum of
(i) any repossession proceeds allocable to principal actually received on such
Auto Loan, (ii) any insurance proceeds allocable to principal actually received
from a claim with respect to such Auto Loan and (iii) refunds received from the
cancellation of any insurance policies or service contracts with respect to such
Auto Loan, and (b) with respect to any Auto Loan where the related Obligor is in
bankruptcy, the amount of losses allocable to principal incurred thereon.
"Net Weighted Average Excess Spread" with respect to any Interest
Period shall mean (a) the Aggregate Net Weighted Average APR, minus (b) LIBOR
for such Interest Period plus 2.60%.
"Post-Sale Adjustment" shall have the meaning assigned to such term
in the Servicing Agreement.
"Payment Date" shall mean the 15th day of each month (or, if such
day is not a Business Day, the next succeeding Business Day) commencing June 15,
1996
"Proceeds" shall have the meaning assigned such term under the UCC
of the State of New York, and of each other jurisdiction whose law governs the
grant or perfection of the Collateral Agent's interest in the particular
proceeds of the Collateral and shall also include (to the extent not already
included): (a) any and all proceeds of any insurance, indemnity, warranty,
guaranty or letter of credit payable to the Borrower from time to time with
respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or rights to amounts payable to the Borrower from time to time
in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person acting under color of governmental
authority), (c) any and all other amounts, products,
5
offspring, rents or profits from time to time paid or payable under or in
connection with the Collateral and (d) all additions to or substitutions or
replacements for any of the Collateral.
"Program Documents" shall mean the Credit Agreement, this Security
Agreement, the Servicing Agreement, the Sale Assignments, the Note and the Loan
Acquisition Agreement.
"Program Manual" shall mean the AutoBond Program Manual in effect as
of the date hereof, as modified from time to time.
"Reserve Account" shall have the meaning assigned to such term in
Section 6.01 hereof.
"Reserve Account Balance" shall mean the amount of funds on deposit
in the Reserve Account.
"Reserve Account Deficiency Amount" shall mean as of any Payment
Date the amount by which the Reserve Account Required Balance exceeds the
Reserve Account Balance as of such Payment Date.
"Reimbursable Collection Agent Expenses" means, with respect to any
Payment Date, all reasonable and customary out-of-pocket fees and expenses of
third parties incurred by the Collection Agent (including expenses related to
financing statements and titles required to be paid or reimbursed by the
Collection Agent) in connection with their respective repossession activities,
including, without limitation, fees of attorneys, appraisers, third party
collateral managers and others (who shall have been retained by the Collection
Agent, in accordance with the Servicing Agreement) for the Collection Period
immediately preceding such Payment Date, but not including expenses paid net of
recoveries.
"Reserve Account Required Balance" shall mean, as of any Payment
Date, the greater of (a) $150,000 and (b) the product of (i) the Target Reserve
Percentage and (ii) the aggregate principal amount of all Advances outstanding
as of such Payment Date (after giving effect to any payments to be made on such
Payment Date, if any).
"Responsible Officer" shall mean, when used with respect to the
Collateral Agent, any officer within the corporate trust department (or any
successor thereof) including any vice president, assistant vice president, or
any officer or assistant officer of the Collateral Agent customarily performing
functions similar to those performed by any of the above-designated officers.
"Secured Parties" shall mean the Lenders from time to time in
respect of the Advances.
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"Servicer Fee" shall mean, as of any Payment Date, the sum of (a) an
initial booking fee equal to the product of (i) $10 and (ii) the number of
additional Specified Sold Auto Loans purchased by the Borrower during the
immediately preceding Interest Period, (b) a servicing fee equal to the product
of (i) $8.00 and (ii) the total number of Specified Sold Auto Loans which were
outstanding at any time during the preceding Interest Period and (c) any
expenses reimbursable in accordance with the Servicing Agreement.
"Sold Auto Loans" shall have the meaning assigned thereto in the
Loan Acquisition Agreement.
"Specified Reserve Allocation Percentage" shall have the following
meaning as of each Determination Date. If the Net Weighted Average Excess Spread
in respect of the preceding Interest Period is:
(i) greater than 7.5%, 35%;
(ii) less than or equal to 7.5% and greater than
6.5%, 60%;
(iii) less than or equal to 6.5% and greater than
5.5%, 75%;
(iv) less than or equal to 5.5% and greater than
5%, 90%; and
(v) less than or equal to 5%, 100%.
"Specified Sold Auto Loan" shall mean each Sold Auto Loan specified
in a Collateral Assignment to be included in the Collateral hereunder.
"Target Reserve Percentage" shall mean 6%; provided, that if, as of
a Determination Date,
(a) the average of the Net Loss Ratios for the immediately
preceding three Collection Periods is greater than or equal to 2.75%
but less than 4%, the Target Reserve Percentage shall equal 9%;
(b) the average of the Net Loss Ratios for the immediately
preceding three Collection Periods is greater than or equal to 4%,
the Target Reserve Percentage shall equal 12%;
(c) the average of the Net Loss Ratios for the immediately
preceding six Collection Periods is less than 4% but equal to or
greater than 2.75%, then the Target Reserve Percentage shall revert
to 9%;
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(d) the average of the Net Loss Ratios for the immediately
preceding six Collection Periods is less than 2.75%, then the Target
Reserve Percentage shall revert to 6%;
(e) the Delinquency Ratio is greater than or equal to 7%, then
the Target Reserve Percentage shall equal 9%; and
(f) the average of the Delinquency Ratio over two Collection
Periods is less than 7%, then the Target Reserve Percentage shall
revert to 6%;
(g) there occurs an Event of Collection Agent Termination with
respect to AutoBond under Sections 3.07(c) or (d) of the Servicing
Agreement, then the Target Reserve Percentage shall equal 10%; and
(h) if the Specified Reserve Allocation Percentage equals 100%,
then the Target Reserve Percentage shall equal 100%.
If more than one of the foregoing clauses is applicable as of a
particular Determination Date, then the applicable Target Reserve Percentage
shall be the highest amount so applicable.
"Upfront Collection Agent Fee" shall mean, so long as AutoBond is
not the Collection Agent, a fee equal to the product of (a) $5 and (b) the total
number of Specified Sold Auto Loans which were outstanding at any time during
the preceding Interest Period.
"Uniform Commercial Code" or "UCC" shall mean, with respect to any
jurisdiction, the Uniform Commercial Code, or any successor statute, or any
comparable law, as the same may from time to time be amended, supplemented or
otherwise modified and in effect.
"Unpaid Principal Balance" shall mean, with respect to any Auto Loan
as of any Determination Date, (a) for an Auto Loan bearing interest calculable
on a simple interest basis, the unpaid principal amount for such Auto Loan or
(b) for a Precomputed Receivable, the Net Principal Balance, in each case as of
the end of the most recent Collection Period, provided that, for any Auto Loan
where the Net Unrealized Amount equals the Unpaid Principal Balance, such Unpaid
Principal Balance shall thereafter equal zero (other than for purposes of
calculating the Net Unrealized Amounts and the Delinquency and the Net Loss
Ratios).
"Unused Facility Amount" shall mean, with respect to any Payment
Date, daily average of the total of (a) $20,000,000 minus (b) the aggregate
principal balance of all Advances outstanding during the immediately preceding
Collection Period.
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"Unused Facility Fee" shall mean, with respect to any Payment Date,
the product of (i) a fraction (A) the numerator of which is the number of days
elapsed during the immediately preceding Collection Period and (B) the
denominator of which is 360, (ii) the Unused Facility Amount and (iii) the
Unused Facility Fee Rate.
"Unused Facility Fee Rate" shall mean the per annum rate agreed to
by the Borrower and the Initial Lender.
"VSI Policy" shall mean the Vendor's Single Interest Insurance
Policy (including the Credit Endorsement), issued by Interstate Fire & Casualty
Company to AutoBond, insuring against risk of physical damage and other losses
on the Financed Vehicles.
SECTION 2. SECURITY INTERESTS.
(a) As security for the prompt, complete and unconditional payment
and performance of all obligations of the Borrower in respect of the Advances,
the Borrower hereby pledges, assigns, transfers and delivers to the Collateral
Agent for the benefit of the Secured Parties, and grants to the Collateral Agent
for the benefit of the Secured Parties, a continuing first lien on, and first
and prior security interest in, all of the Borrower's right, title and interest
in, to and under the following:
(i) each Specified Sold Auto Loan, including without limitation,
all rights to payments thereunder, purchased by or otherwise conveyed to
or established by the Borrower pursuant to the Loan Acquisition Agreement;
(ii) each Automobile and all other Property, now or hereafter
acquired, securing or evidenced by, each Specified Sold Auto Loan,
including, without limitation, the certificate of title relating to each
Automobile, any insurance proceeds with respect to any such Automobile or
Specified Sold Auto Loan, the proceeds of any repossession and liquidation
of any such Automobile, rights under judgments with respect to defaulted
obligors, rights to deficiency judgments with respect to defaulted
obligors and rights under any service contracts with respect to any such
Automobile;
(iii) the Loan Purchase Account, the Loan Revenue Account and the
Reserve Account and all moneys, checks, instruments, documents,
securities, Investments, deposits and other credits (whether or not
permitted by the Program Documents) credited to the Collateral Account, or
otherwise held by the Collateral Agent;
(iv) all securities and other Investments held at any time on
behalf of the Borrower in the Collateral Account;
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(v) any proceeds of any credit default and VSI insurance
purchased by the Borrower in respect of each Specified Sold Auto Loan;
(vi) the Loan Acquisition Agreement, the Credit Agreement, the
Lockbox Agreement and the Servicing Agreement; and
(vii) all Proceeds of any of the foregoing.
(b) All rights of the Collateral Agent and the Secured Parties and
all liens and security interests granted hereunder, shall be absolute,
unconditional and irrevocable unless and until released pursuant to the Program
Documents, irrespective of any condition or circumstance whatsoever.
(c) The grant of the security interest to the Collateral Agent
pursuant to this Section 2 shall not: (i) relieve the Borrower from the
performance of any term, covenant, condition or agreement on the Borrower's part
to be performed or observed under or in connection with the Collateral, (ii)
impose any obligation on the Collateral Agent or the Secured Parties to perform
or observe any such term, covenant, condition or agreement on the Borrower's
part to be so performed or observed, or (iii) impose any liability on the
Collateral Agent or the Secured Parties for any act or omission on the part of
the Borrower, or any Person acting as agent for or on behalf of the Borrower,
relative to or for any breach of any representation or warranty on the part of
the Borrower in connection with the Collateral.
SECTION 3. CERTAIN RIGHTS OF SECURED PARTIES WITH RESPECT TO COLLATERAL.
Upon the occurrence and during the continuance of an Event of
Default, the Borrower hereby irrevocably authorizes the Collateral Agent to
execute and deliver, as the attorney-in-fact of the Borrower, any consent,
waiver or amendment which, under the terms of any Program Document, is or may be
executed and delivered by the Borrower with respect to the Collateral, subject
to the provisions of the Program Documents; provided, however, that the
Collateral Agent shall have no duty or obligation to execute and deliver any
such consent, waiver or amendment unless directed in writing to take the actions
specified therein by the Lenders in respect of at least 66 2/3% in aggregate
principal amount of the Advances outstanding; and provided, further, that the
Collateral Agent shall not be required to take any action which the Collateral
Agent reasonably believes may be contrary to applicable law or which would
expose the Collateral Agent to financial liability if the Collateral Agent has
reasonable grounds to believe that repayment of such financial liability is not
reasonably assured to it. The Borrower hereby agrees to remit to the Collateral
Agent
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for deposit in accordance with this Agreement any and all Proceeds
of any Collateral received by the Borrower.
SECTION 4. REMEDIES UPON THE OCCURRENCE OF AN EVENT OF DEFAULT.
(a) (i) If at any time an Event of Default shall have occurred and
be continuing, the Collateral Agent may, without demand of performance or
other demand, advertisement or notice of any kind (except for any notice
of the time and place of public or private sale required by law) to or
upon the Borrower or any other Person (all of which demands,
advertisements and/or notices are hereby expressly waived), and in its own
name or in the name of the Borrower, forthwith demand, collect, receive,
sue for, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, assign, grant an option or options to purchase,
contract to sell or otherwise dispose of and deliver said Collateral, or
any part thereof, in one or more parcels at public or private sale or
sales, at any location or locations at the option of the Collateral Agent
acting upon any instructions received from the Lenders in respect of a
majority in aggregate principal amount of Advances outstanding, all upon
such terms and conditions and at such prices as such Lenders may deem
advisable, for cash or on credit or for future delivery without assumption
of any credit risk, with the right of the Collateral Agent or any Secured
Party upon any such public sale or sales to purchase the whole or any part
of said Collateral so sold, free of any right of redemption in the
Borrower, which right is hereby expressly waived and released. At the
instruction of the Lenders in respect of a majority in aggregate principal
amount of Advances outstanding, the Collateral Agent may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed
for the sale, and such sale may be made at any time or place to which the
same may be so adjourned.
(ii) If at any time an Event of Default shall have occurred and
be continuing and the Lenders in respect of a majority in aggregate
principal amount of Advances outstanding give written direction to the
Collateral Agent as to the disposition of the Collateral or as to the
exercise of remedies against the Collateral, the Collateral Agent hereby
agrees to follow such direction; provided, however, no provision of this
Agreement shall require the Collateral Agent to take any action which it
or its counsel deems to be unlawful nor shall the Collateral Agent be
obligated to expend or risk its own funds or otherwise incur any financial
liability in the performance of any rights, powers or duties hereunder, if
the Collateral Agent shall have reasonable
11
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it. Until all
Advances have been repaid and satisfied in full, the Collateral Agent
shall be obligated, subject to the foregoing proviso, to take direction
only from the Lenders in respect of a majority in aggregate principal
amount of Advances outstanding as to, upon the occurrence and during the
continuance of an Event of Default, the disposition of the Collateral, or
the exercise of remedies against or in connection with the Collateral.
(iii) If an Event of Default shall have occurred and be
continuing, then the Collateral Agent may, at any time thereafter, without
demand of performance or other demand, succeed to the Borrower's rights
and privileges with respect to the Loan Acquisition Agreement, the Credit
Agreement and the Servicing Agreement; provided that, notwithstanding the
foregoing, during such time as an Event of Default is continuing the
Collateral Agent shall have no authority to purchase any additional
Eligible Auto Loans under the Loan Acquisition Agreement to be included in
the Collateral hereunder as Specified Sold Auto Loans; and provided,
further that the Collateral Agent will not have assumed and will not be
obligated to perform any of the duties, obligations, covenants or
agreements of the Borrower under any such agreement.
(iv) Notwithstanding the above provisions of this Section
4(a), the Collateral Agent may not sell or otherwise liquidate the
Collateral following an Event of Default, other than an Event of Default
as described in paragraphs (a) and (b) of Section 13.1 of the Credit
Agreement, unless (A) the Collateral Agent shall have received written
evidence reasonably satisfactory to the Collateral Agent that the Lenders
in respect of 100% in aggregate principal amount of the Advances
outstanding consent thereto, (B) the proceeds of such sale or liquidation
distributable to the Lenders, as determined by the Lenders, are sufficient
to discharge in full the principal of and the accrued interest on and fees
in respect of the Advances at the date of such sale or liquidation;
written evidence of such determination to be provided by the Lenders to
the Collateral Agent or (C) the Lenders determine that the Collateral will
not continue to provide sufficient funds for the payment of principal of
and interest on and fees in respect of the Advances as and when they would
have become due if the Advances had not been declared due and payable and
the Lenders provide written notice to the Collateral Agent to such effect.
(b) If any notification of a proposed disposition of the
Collateral is required by law, such notification shall be deemed
12
reasonably and properly given if made in any manner provided in Section 10
hereof at least ten days before such disposition.
(c) In addition to the rights, powers and remedies granted to it in
this Security Agreement and in any other instrument or agreement securing,
evidencing or relating to the Advances, the Collateral Agent shall have all of
the rights, powers and remedies now or hereafter permitted in law or equity,
including, without limitation, those of a secured party under the UCC of the
State of New York and any other applicable jurisdiction.
(d) The Collateral Agent shall apply the net proceeds of any
collection, recovery, receipt, appropriation, realization or sale referred to
above in this Section 4 in accordance with the provisions of Section 6.04(e)
hereof. The Borrower shall remain absolutely liable for the amount, if any, by
which the amount due under the Advances exceeds the proceeds of any such
collection, recovery, receipt, appropriation, realization or sale.
(e) The Borrower shall provide written payment instructions
(including the account number of the bank account to which payments are to be
directed and the name, address and ABA number of the bank in which such account
is maintained, if payments are to be made to such party by the wire transfer of
immediately available funds) to the Collateral Agent. Failure to provide such
notice shall not affect the Borrower's right to receive any funds to which it is
otherwise entitled in accordance with the Program Documents, but failure to
deliver such notice may result in a delay in the receipt of such funds.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Borrower represents, warrants and agrees, as of the date hereof,
and as of each Closing Date, that:
(a) No security agreement, financing statement, equivalent security
or lien instrument or continuation statement listing the Borrower as debtor
covering all or any part of the Collateral is on file or of record in any
jurisdiction, except such as may have been filed, for the benefit of the Secured
Parties recorded or made by the Borrower in favor of the Collateral Agent
pursuant to this Security Agreement or the Credit Agreement.
(b) Except to the extent that AutoBond remains the prior lienholder
with respect to each Automobile securing a Specified Sold Auto Loan in
accordance with the terms of the Credit Agreement, this Security Agreement is
effective to create a valid and continuing Lien on the Collateral in favor of
the Collateral Agent for the benefit of the Secured Parties, which Lien is prior
to all other Liens except Permitted Liens, and is enforceable as such as against
creditors of and purchasers from the Borrower. All
13
action necessary or desirable to protect and perfect such security interest has
been duly taken.
(c) The Borrower's chief executive office is at 301 Congress Avenue,
Austin, Texas 78701 and there have been no other office locations for the prior
four months. The Borrower will not change its name and will not change its
principal place of business or chief executive office unless the Borrower shall
have given the Collateral Agent at least thirty (30) days prior written notice
thereof and the Borrower shall have taken all action necessary to assure
continuous perfection of the security interest held by the Collateral Agent in
the Collateral as evidenced by an opinion of counsel addressed to the Collateral
Agent and the Lenders to the effect that the lien and security interest created
by this Security Agreement with respect to such Collateral will continue to be
maintained, and that the priority thereof will not be affected, after giving
effect to such action or actions.
(d) At any time and from time to time, and at the sole expense of
the Borrower, the Borrower will promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as the
Lenders in respect of a majority in aggregate principal amount of Advances
outstanding may reasonably deem desirable in obtaining the full benefits of this
Security Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements under
the Uniform Commercial Code in effect in any jurisdiction with respect to the
liens and security interests granted hereby. The Borrower also hereby authorizes
the Collateral Agent to file any such financing or continuation statement
without the signature of the Borrower to the extent permitted by applicable law;
provided, however, that such authorization shall not be deemed to create a duty
in the Collateral Agent. If any amount payable under or in connection with any
of the Collateral shall be or become evidenced by any promissory note or other
instrument, or any chattel paper, the Borrower shall immediately notify the
Collateral Agent and shall duly endorse such note, instrument or chattel paper
to the order of the Collateral Agent and deliver such note, instrument or
chattel paper to the Collateral Agent promptly, and shall take such other
actions and execute such other documents as may be required by law to perfect
the Collateral Agent's interest in such note, instrument or chattel paper.
(e) The Borrower will warrant and defend the Collateral Agent's
right, title and interest in and to the Collateral, for the benefit of the
Secured Parties against the claims and demands of all Persons whomsoever.
(f) All authorizations in this Security Agreement for the Collateral
Agent to endorse checks, instruments and securities and to execute, deliver and
file financing statements, continuation
14
statements, security agreements and other instruments with respect to the
Collateral are powers coupled with an interest and are irrevocable so long as
any Advances are outstanding; provided however, the foregoing authorizations
shall not create any duty or obligation on the part of the Collateral Agent
other than those obligations set forth in this Agreement.
SECTION 6. COLLATERAL ACCOUNT.
6.01. Establishment and Maintenance of Lockbox and Collateral
Account. AutoBond shall cause to be established and maintained at all times a
lockbox and related account (the "Lockbox") on behalf of and in the name of the
Collateral Agent. The Collateral Agent shall possess all right, title and
interest in all funds on deposit from time to time in the Lockbox and in all
proceeds thereof. The Lockbox shall be under the sole dominion and control of
the Collateral Agent on behalf of the Lenders. The Collateral Agent agrees to
cause the Lockbox Bank to sweep funds from the Lockbox to the Collateral Account
at least once each week. Autobond agrees to require, and to cause the Servicer
to require, that all payments by Obligors on Specified Sold Auto Loans be made
to the Lockbox (and that only payments on Specified Sold Auto Loans will be
received in the Lockbox and no other funds other than funds in which the
Collateral Agent has an interest hereunder will be commingled therein). In
addition, concurrently with the execution and delivery hereof, the Collateral
Agent shall establish the following segregated accounts entitled (a) the
"AutoBond Funding Loan Purchase Account, Norwest Bank Minnesota, National
Association, as Collateral Agent" (the "Loan Purchase Account"); (b) the
"AutoBond Funding Loan Revenue Account, Norwest Bank Minnesota, National
Association, as Collateral Agent" (the "Loan Revenue Account"); and (c) the
"AutoBond Funding Reserve Account, Norwest Bank Minnesota, National Association,
as Collateral Agent" (the "Reserve Account"). The Loan Purchase Account, the
Loan Revenue Account and the Reserve Account are sometimes collectively referred
to herein as the "Collateral Account". The Collateral Account shall be
maintained in the State of Minnesota in either (i) segregated trust accounts
with the corporate trust department of Norwest or any replacement collateral
agent or (ii) segregated deposit accounts with banks or trust companies (which
may include the Collateral Agent or a replacement collateral agent) the
short-term debt obligations of which are rated "A-1+" by S&P and the short-term
deposits of which are rated no less than "Baa3" by Moody's. The Borrower shall
have no right of withdrawal from the Collateral Account.
6.02. Required Deposits to the Accounts. (a) The Borrower shall
cause the following amounts to be paid to the Collateral Agent for deposit to
the accounts established pursuant to Section 6.01:
15
(i) on the initial Closing Date, an amount equal to the greater
of (A) $150,000 or (B) 2% of the aggregate principal amount of Advances
outstanding on such date, shall be deposited in the Reserve Account;
(ii) all amounts payable to the Borrower by or on behalf of
Lenders in respect of Advances shall be deposited directly in the Loan
Purchase Account;
(iii) all amounts representing payments in respect of Specified
Sold Auto Loans (including, without limitation, all Recoveries on
Receivables, all late charges, all payments in respect of the Repurchase
Price of Specified Sold Auto Loans repurchased by AutoBond in accordance
with the Loan Acquisition Agreement and all proceeds of any Dispositions)
shall be deposited in the Loan Revenue Account;
(iv) all amounts in respect of principal of Permitted Investments
shall be allocated to the account to which the funds applied for purchase
of such Permitted Investments were deposited;
(v) all amounts representing insurance proceeds in respect of
Specified Sold Auto Loans (including, without limitation, the proceeds of
any credit default or VSI insurance) shall be deposited in the Loan
Revenue Account;
(vi) all amounts representing repossession proceeds in respect of
Specified Sold Auto Loans shall be deposited in the Loan Revenue Account;
and
(vii) all other amounts paid to the Borrower under the Program
Documents, other than indemnity payments made to the Borrower in respect
of Specified Sold Auto Loans, and all investment earnings on Permitted
Investments shall be deposited in the Loan Revenue Account.
(b) The Collateral Agent is hereby irrevocably authorized and
empowered, as the Borrower's attorney-in-fact, to endorse any check or any other
instrument or security presented for deposit in the Collateral Account requiring
the endorsement of the Borrower; provided, however, the foregoing authorizations
shall not create any duty or obligation on the part of the Collateral Agent.
(c) Notwithstanding the foregoing provisions of this Section 6.02,
if at any time the Borrower, AutoBond or any Person on behalf of the Borrower or
AutoBond (including the Servicer under the Servicing Agreement), receives any
proceeds or payments required to be deposited in the Collateral Account, all
such amounts shall be held by the Borrower, AutoBond or such other person as the
agent of, and in trust for, the Collateral Agent and shall, forthwith upon
receipt by the Borrower, AutoBond or such
16
other Person, be turned over to the Collateral Agent for deposit to the Loan
Revenue Account or the Loan Purchase Account, as the case may be, in the same
form as received by the Borrower, AutoBond or such other Person (and, if
received in the form of a check, instrument or security requiring endorsement,
duly endorsed on behalf of the Borrower, AutoBond or such other Person to the
order of the Collateral Agent).
(d) The Borrower shall cause all amounts remitted to the Collateral
Agent for deposit pursuant to Section 6.02(a) to be identified to permit the
deposit of the same into the appropriate account; any amounts received by the
Collateral Agent without sufficient identification shall be deposited by the
Collateral Agent into the Loan Revenue Account until such time as sufficient
identification is received, at which time the Collateral Agent is authorized, if
necessary, to withdraw such amounts from the Loan Revenue Account and deposit
same in accordance with such identification.
6.03. Right of Withdrawal from the Collateral Account. In
furtherance of the security interest provided in Section 2, the Collateral
Agent, acting on behalf of the Secured Parties, and the Borrower, agree (a) that
the Collateral Account shall be maintained in the name of the Collateral Agent,
(b) that the Collateral Account shall be subject to the exclusive dominion of
the Collateral Agent, and (c) that the Collateral Agent shall have the sole
right of withdrawal from the Collateral Account. The Borrower, the Lender, the
Servicer and AutoBond shall timely provide written remittance information to the
Collateral Agent specifying payment instructions with respect to amounts payable
pursuant to each provision of Section 6.04. The Collateral Agent shall have no
liability to the Borrower, any Lender or any other Person for failure to pay
funds to any Person in accordance with Section 6.04 in the absence of timely
receipt of such written remittance instructions or in the event of any errors in
such written remittance instructions.
6.04. Application of Funds in the Collateral Account; Application of
Proceeds of Realization on Collateral. (a) Except as otherwise provided in
Section 6.05, if no Event of Default shall have occurred and be continuing, the
Collateral Agent, in the case of clause (iii), on each Payment Date or, in the
case of clause (ii), on each Business Day, shall apply collected funds in the
Loan Purchase Account in the following order of priority pursuant to written
instructions of the Borrower in the case of clauses (i) and (ii) or pursuant to
the Servicer Report (as defined in the Servicing Agreement) in the case of
clause (iii):
(i) on each Closing Date other than the Initial Closing Date,
deposit to the Reserve Account, 2% of each related Advance;
17
(ii) to pay to AutoBond an amount equal to the Eligible Auto
Loan Purchase Prices, in respect of all Specified Sold Auto Loans, if any,
to be acquired by the Borrower on such date (other than with respect to
any Specified Sold Auto Loan conveyed by AutoBond to the Borrower as a
contribution to capital) on or before 10:00 a.m., New York City time;
provided that, with respect to each such Specified Sold Auto Loan, such
amounts shall be payable only if the Collateral Agent has received
original or officially certified copies of each of the Loan Documents with
respect to such Specified Sold Auto Loan from AutoBond; and
(iii) to pay to the Lenders, pro rata, all interest on the
Advances and any Unused Facility Fee then due to the extent funds on
deposit in the Loan Revenue Account and the Reserve Account on such date
are insufficient therefor;
and, if any such funds shall remain unused after being applied for the foregoing
purposes, so long as any Advances remain outstanding the remaining funds shall
be retained in the Loan Purchase Account and continue to be Collateral
hereunder, and if so instructed in writing by AutoBond, may be invested or
withdrawn by the Collateral Agent in accordance with Section 6.05 hereof. The
Collateral Agent may liquidate any investment when required to make an
application pursuant to clauses (i) and (ii) above. No investment made pursuant
to this section will have a maturity later than one Business Day prior to the
date on which such funds will be needed to make payment on the Advances.
(b) [Reserved].
(c) If no Event of Default or Amortization Event shall have occurred
and be continuing, the Collateral Agent on each Payment Date shall apply funds
held in the Loan Revenue Account in respect of the prior Collection Period in
the following order of priority (in accordance with the Servicer Report):
(i) to the Lenders, pro rata, an amount equal to accrued
and unpaid interest on the Advances;
(ii) to the Collateral Agent, the Servicer and the
Collection Agent (to the extent AutoBond is not the Collection Agent), an
amount equal to the Collateral Agent Fee, the Servicer Fee, and the
Upfront Collection Agent Fee, respectively, payable on such Payment Date;
(iii) to the Lenders, pro rata, an amount equal to the
Unused Facility Fee payable on such Payment Date;
(iv) to the Loan Purchase Account for reinvestment in
Advances, all remaining amounts allocable to principal unless directed by
the Initial Lender to pay to the
18
Lenders, pro rata, as payment of principal on the Advances an amount equal
to any principal received in respect of Specified Sold Auto Loans during
the immediately preceding Collection Period;
(v) to the Reserve Account, an amount equal to the lesser
of (A) the Specified Reserve Allocation Percentage of available remaining
funds and (B) the Reserve Account Deficiency Amount, until the Reserve
Account Balance equals the Reserve Account Required Balance;
(vi) to the Collection Agent, an amount equal to the sum of
(i) the Collection Agent Fee payable on such Payment Date and (ii) any
late charges received in respect of Specified Sold Auto Loans during the
immediately preceding Collection Period;
(vii) to the discharge of all other obligations of the
Borrower which are then due under the Program Documents (or, to the extent
such obligations have not yet matured, to be set aside and held in trust
solely to satisfy such obligations, as and when they mature or otherwise
become due) in an amount equal to such obligations; and
(viii) to the Borrower, an amount equal to any funds
remaining in the Loan Revenue Account.
(d) If no Event of Default or Amortization Event shall have occurred
and be continuing, the Collateral Agent on each Payment Date shall apply funds
held in the Reserve Account in the following order of priority (in accordance
with the Servicer Report):
(i) to the Lenders, pro rata, an amount equal to the accrued and
unpaid interest and fees on the Advances (including, any accrued and
unpaid Unused Facility Fees) to the extent that funds on deposit in the
Loan Revenue Account on such date are insufficient therefor;
(ii) on each Maturity Date, to the Lenders, pro rata, an amount
equal to the principal of the Advances due and payable on such date to the
extent that funds on deposit in the Loan Revenue Account on such date are
insufficient therefor;
(iii) to the Loan Revenue Account, if 30 days have passed since
the cancellation of any optional credit life, accident and health
insurance policy or optional extended service contract in respect of any
Specified Sold Auto Loan and the Borrower has not received a refund of any
unearned Dealer's commission or insurance premium, an amount equal to such
unearned Dealer's commission or insurance premium; and
19
(iv) to the Loan Revenue Account, an amount equal to the Excess
Reserve Account Amount.
(e) If an Event of Default or an Amortization Event shall have
occurred and be continuing, the Collateral Agent shall apply all amounts held in
the Loan Purchase Account, the Loan Revenue Account and the Reserve Account and
the proceeds of any collection, recovery, receipt, appropriation, realization or
sale of any Collateral in connection with any Event of Default (after deducting
all reasonable costs and expenses of every kind incurred in any way relating to
the exercise of rights of the Collateral Agent with respect to the Collateral
upon an Event of Default, including reasonable attorney's fees and expenses) in
the following order of priority (in accordance with the Servicer Report):
(i) to the Collateral Agent, an amount equal to all fees,
costs and expenses owing to the Collateral Agent under this Agreement;
(ii) to the Servicer, an amount equal to all fees, costs and
expenses owing to the Servicer under the Servicing Agreement;
(iii) to the Lenders, pro rata, in the following order of
priority (A) an amount equal to all unpaid interest on, (B) other amounts
due or to become due with respect to including, without limitation, any
accrued and unpaid Unused Facility Fees, and (C) principal of, the
Advances, (in the event any such principal is not due and the Advances
have not been accelerated, all such amounts shall be retained in the
Collateral Account and applied solely to pay principal of and interest on,
and other amounts due or to become due with respect to, the Advances, as
and when due until all principal and interest on, and other amounts due or
to become due with respect to, the Advances shall have been paid and
satisfied in full);
(iv) to the discharge of all other obligations of the Borrower
which are then due (or, to the extent such obligations have not yet
matured, to be set aside and held in trust solely to satisfy such
obligations, as and when they mature or otherwise become due) in an amount
equal to such obligations; and
(v) to the Borrower, an amount equal to any funds remaining in
the Collateral Account.
20
6.05. Investment of Funds Deposited in Collateral Account. The
Collateral Agent shall, in accordance with the provisions of this Section 6.05,
invest and reinvest, at the written direction of AutoBond, in the Collateral
Agent's own name or in the name of the Collateral Agent's nominee, collected
funds in each of the Loan Purchase Account, the Loan Revenue Account and the
Reserve Account in Permitted Investments which shall mature, or be redeemed at
the option of the holder, prior to the respective dates when the money invested
in such Permitted Investments is required for application in accordance with
this Section 6. [To the extent that the sum of amounts held in the Loan Purchase
Account exceeds $5,000,000, the Collateral Agent shall notify the Borrower and
the Lender. In the event that three (3) Business Days following the Business Day
on which the amount on deposit in the Loan Purchase Account exceeded $5,000,000,
the amount on deposit in the Loan Purchase Account (after giving effect to any
disbursements pursuant to Section 6.04(a) on such date) is still greater than
$5,000,000, the Collateral Agent, unless otherwise directed by the Initial
Lender, shall withdraw an amount equal to the amount by which the amount on
deposit in the Loan Purchase Account exceeds $4,000,000 and disburse such amount
to the Lenders, pro rata as a prepayment of Advances in accordance with Section
8 of the Credit Agreement.]
SECTION 7. DISPOSITIONS OF AUTO LOANS.
The Collateral Agent at the written direction of the Initial Lender
shall release from the lien of this Agreement any of the Specified Sold Auto
Loans held as Collateral upon a Disposition, a prepayment of Advances or a
repurchase by AutoBond in accordance with the terms of the Credit Agreement;
provided, that the proceeds of any such Disposition, voluntary prepayment or
repurchase (net of expenses and costs) have been deposited into the Loan Revenue
Account for application in accordance with Section 6.04(c); provided, however,
that, upon satisfaction of the conditions set forth in this Section 7, the
Collateral Agent will release to or at the direction of AutoBond the certificate
of title with respect to a Financed Vehicle subject to a Disposition within one
Business Day of such request by AutoBond. Any Disposition shall in and of itself
have no effect on the obligation of the Lender under the Credit Agreement to
make Advances.
SECTION 8. THE COLLATERAL AGENT.
8.01. Appointment. By accepting the benefits of the security
interest granted herein, each Secured Party hereby irrevocably designates and
appoints Norwest Bank Minnesota, National Association as the Collateral Agent of
such Secured Party under this Security Agreement, and each such Secured Party
irrevocably authorizes Norwest Bank Minnesota, National Association as the
Collateral Agent for such Secured Party, to take such action
21
on its behalf under the provisions of this Security Agreement and to exercise
such powers and perform such duties as are expressly delegated to the Collateral
Agent by the terms of this Security Agreement together with such other powers as
are reasonably incidental thereto but in each instance solely at the written
instruction of the Lenders in respect of at least a majority in aggregate
principal amount of Advances outstanding. Notwithstanding any provision to the
contrary elsewhere in this Security Agreement, the Collateral Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
in the Servicing Agreement, or any fiduciary relationship with any Secured
Party, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Security Agreement or
otherwise exist against the Collateral Agent. Norwest Bank Minnesota, National
Association hereby accepts its appointment as Collateral Agent, subject to, and
in reliance upon, the provisions of this Section 8.01.
8.02. Exculpatory Provisions. Neither the Collateral Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
shall be (a) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Security Agreement (except for
its or such Person's own negligence or wilful misconduct), or (b) responsible in
any manner to any of the Secured Parties for any recitals, statements,
representations or warranties made by the Borrower or any officer thereof
contained herein or in the Loan Acquisition Agreement, the Servicing Agreement,
the Credit Agreement or in any certificate, report, statement or other document
referred to or provided for in, or received by the Collateral Agent under or in
connection with, this Agreement, the Loan Acquisition Agreement, the Servicing
Agreement or the Credit Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency (except with respect to
enforceability of this Agreement and the Servicing Agreement as it relates to
the Collateral Agent) of this Agreement, the Loan Acquisition Agreement, the
Servicing Agreement, the Lockbox Agreement, the Credit Agreement, the Advances
or the Collateral or for any failure of the Borrower to perform its obligations
hereunder or under the Loan Acquisition Agreement, the Servicing Agreement, the
Lockbox, the Credit Agreement or the Advances. The Collateral Agent shall not be
under any obligation to any Secured Party to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, any of the Program Documents, or to inspect the properties, books or records
of the Borrower or the Servicer. Except for its duty to maintain possession of
the Auto Loans and as set forth in this Agreement, the Collateral Agent shall at
no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any security interest in any Automobile
or any Auto Loan, or the perfection or priority of such a security interest or
the maintenance of any such perfection or priority or for or with respect to the
ability of the Auto Loans
22
to generate the payments to be distributed to the Lender under the Credit
Agreement, including, without limitation, the existence, condition, location and
ownership of any Financed Vehicle; the existence of any insurance thereon
(including, without limitation, any credit default or VSI insurance thereon);
the compliance by the Borrower, the Servicer or the Collection Agent with any
covenant or the breach by the Borrower, the Servicer or the Collection Agent of
any warranty or representation made under this Agreement or the Servicing
Agreement or in any related document; the accuracy of any such warranty or
representation; any investment of monies by the Collateral Agent in accordance
with the terms of this Agreement or the Servicing Agreement or any loss
resulting therefrom; the acts or omissions of the Borrower, the Servicer, the
Collection Agent or any Obligor; or any action of the Servicer or the Collection
Agent taken in the name of the Collateral Agent.
8.03. Reliance by Collateral Agent. The Collateral Agent shall be
entitled to rely, and shall be fully protected in relying, upon any Advance,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the Collateral
Agent. The Collateral Agent shall be fully justified in failing or refusing to
take any action under this Security Agreement unless it shall first receive such
written advice or concurrence as it deems appropriate or it shall first be
indemnified to its satisfaction (by one or more Secured Parties) against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Collateral Agent may from time to time
consult with legal counsel, independent accountants or other experts of its own
selection in the event of any disagreement, controversy, question or doubt as to
the construction of any provision of this Agreement or any of its duties
hereunder, and the Collateral Agent shall be fully protected in acting in good
faith in reliance upon the advice or opinion of any such counsel or other
expert.
8.04. Notice of Default. The Collateral Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event of Default under the
Credit Agreement unless a Responsible Officer has received written notice from
the Lenders of a majority in aggregate principal amount of Advances outstanding
or the Borrower referring to this Security Agreement and describing such Event
of Default or unless a Responsible Officer otherwise has actual knowledge of
such Event of Default.
8.05. Non-Reliance on Collateral Agent. Neither the
Collateral Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any
23
representations or warranties to the Secured Parties, and no act by the
Collateral Agent hereafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or warranty by the
Collateral Agent to any Secured Party. Each Secured Party represents (or will be
deemed to have represented at such time as such party becomes a Secured Party
hereunder) to the Collateral Agent that it has, independently and without
reliance upon the Collateral Agent, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to extend credit to
the Borrower. Each Secured Party will, independently and without reliance upon
the Collateral Agent, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Security
Agreement, and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished by the Collateral Agent hereunder,
the Collateral Agent shall have no duty or responsibility to provide any Secured
Party with any credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of the Borrower
which may come into the possession of the Collateral Agent or any of its
officers, directors, employees, agencies, attorneys-in-fact or affiliates.
8.06. Successor Collateral Agent. The Collateral Agent may resign as
collateral agent hereunder and under the Servicing Agreement upon 60 days'
notice to the Borrower, AutoBond and the Lenders. The Collateral Agent may be
removed at any time by the Borrower acting at the direction of, or with the
consent of, the Lenders in respect of the majority in aggregate principal amount
of the Advances outstanding if at any time the Collateral Agent shall fail to
comply with its obligations under this Security Agreement. No such resignation
or removal shall be effective unless and until a successor collateral agent has
accepted appointment as such pursuant to this Agreement and in the case of a
removal, any and all amounts then due to the Collateral Agent hereunder have
been paid in full. If the Collateral Agent shall resign or be removed as
collateral agent, then the Borrower shall appoint a commercial bank having a
combined capital and surplus of at least $250,000,000, subject to supervision or
examination by federal or state authority and having an established place of
business in the United States as successor collateral agent for the Secured
Parties upon (a) acceptance of such appointment by such successor collateral
agent, (b) the approval of such appointment by the Lenders in respect of a
majority in aggregate principal amount of the Advances outstanding, and (c) the
filing of any necessary amendments to any UCC financing statements to reflect
such
24
appointment. Such successor collateral agent shall succeed to the rights, powers
and duties of the Collateral Agent, and the term "Collateral Agent" shall mean
such successor collateral agent effective upon its appointment, and the former
Collateral Agent's rights, powers and duties as Collateral Agent shall be
terminated, without any other or further act or deed on the part of such former
Collateral Agent. Such successor collateral agent shall be entitled to amend any
UCC financing statements and any other filings, recordation and declarations it
deems advisable or necessary in connection with such termination and
cancellation. After any retiring Collateral Agent's resignation or removal
hereunder as Collateral Agent, the provisions of this Section 8 and Section 14
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Collateral Agent under this Security Agreement. Notwithstanding the
foregoing, if no successor collateral agent shall be appointed as aforesaid, or
if appointed, such successor shall not have accepted its appointment within
thirty (30) days after resignation of the Collateral Agent, the Collateral Agent
may petition a court of competent jurisdiction to make such appointment.
8.07. Delivery of Collateral and Permitted Investments. All
certificates representing or evidencing the Collateral and Permitted Investments
from time to time shall be delivered to and held by or on behalf of the
Collateral Agent pursuant hereto and shall, in the case of the Collateral, be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank. Each Secured Party hereby
appoints the Collateral Agent as its agent for the purpose of holding any Auto
Loans and Permitted Investments. The Collateral Agent shall be the agent solely
of the Secured Parties and shall not be the agent of the Borrower. The
Collateral Agent shall not release possession of any Auto Loans or any documents
related thereto except (a) upon receipt of a trust receipt substantially in the
form attached hereto as Exhibit B obligating the Servicer or AutoBond, acting as
subservicer under the Servicing Agreement, to hold same in trust for the benefit
of the Secured Parties and obligating the Servicer or AutoBond, as the case may
be, to return same when the need therefor no longer exists, (b) upon receipt of
written notification from the Servicer pursuant to Section 2.07 of the Servicing
Agreement that the Auto Loan has been paid in full, (c) in connection with a
Disposition or other prepayment in full of Advances or (d) in connection with
any repurchase by AutoBond in accordance with the terms of the Loan Acquisition
Agreement upon the receipt by the Collateral Agent of the Repurchase Price.
8.08. Duties and Covenants of Collateral Agent.
(a) The Collateral Agent undertakes to perform the duties as are set
forth in this Agreement, including, without limitation:
25
(i) upon the request of AutoBond and/or the Servicer, providing
information reasonably within its possession and within reasonable time
constraints regarding payments and receipt of funds from and to AutoBond
and the Servicer;
(ii) acting as custodian of all documents delivered to it related
to the Collateral;
(iii) depositing funds received by it, whether as proceeds of
Advances, as collections on Auto Loans, as proceeds of repossession or
otherwise in accordance with the terms of this Agreement;
(iv) making payments from amounts held in the Collateral Account,
whether on the Advances, to the Servicer, to AutoBond or otherwise based
solely upon timely receipt of remittance information from the Borrower,
the Lenders, the Servicer and AutoBond in accordance with the terms of
this Agreement;
(v) upon the request of the Servicer, providing information
reasonably within its possession and within reasonable time constraints
regarding servicing, repossession and insurance with respect to the Auto
Loans to the Servicer;
(vi) providing the collateral agent report, substantially in form
of Exhibit C hereto, with respect to the Auto Loans on or before the
fifteenth (15th) day of each month (or if such fifteenth day is not a
Business Day, the next succeeding business day), except in the case where
the seventh (7th) Business Day of such month falls on or after the
eleventh (11th) day of the month, in which case, the collateral agent
report shall be provided on or before the seventeenth (17th) day of such
month (or if such seventeenth day is not a Business Day, on the next
succeeding Business Day); and
(vii) providing to the Borrower and the Servicer, a weekly report
summarizing each application for title with respect to any Automobile
securing a Specified Sold Auto Loan for which the Collateral Agent has
not, as of 10 weeks following the date of such Specified Sold Auto Loan's
related Contract, received a new title certificate from the appropriate
state agency;
(b) The Collateral Agent covenants and agrees that it will:
(i) not directly or indirectly create, incur, assume or suffer
to exist any Lien against the Collateral or any part thereof other than as
set forth herein;
26
(ii) upon receipt of written notice from the Servicer that an
Auto Loan has been paid in full (to the extent such amounts have been
deposited in the Loan Revenue Account), execute and return to the Servicer
documents prepared and furnished to the Collateral Agent by the Servicer
as shall be necessary to release the lien over the related Automobile;
(iii) upon receipt pursuant to the Servicing Agreement of the
Servicer Report, annual financial statements or monthly compliance
statements, promptly forward a copy of such documents to the Lender;
(iv) determine whether officer's certificates and opinions of
counsel delivered pursuant to the Servicing Agreement comply in form with
the Servicing Agreement and in making such determination the Collateral
Agent may request direction from the Lender (or, if multiple Lenders, the
Lenders in respect of a majority in aggregate principal amount of the
Advances outstanding);
(v) upon the written direction of a Lender, request from the
Servicer certification evidencing the fidelity bond and insurance coverage
required by the Servicing Agreement and upon receipt shall forward such
certification to the Lender and the Borrower;
(vi) upon receipt from the Servicer of a written notice of
cancellation or modification of the fidelity bond and insurance coverage
required by the Servicing Agreement, promptly forward a copy of such
notice to the Lender and the Borrower;
(vii) upon the written direction of the Lender (or, if multiple
Lenders, the Lenders in respect of a majority in aggregate principal
amount of the Advances outstanding), consent to a change in business,
merger, consolidation or disposition of assets of the Servicer;
(viii) upon a Responsible Officer obtaining actual knowledge of the
occurrence of a change in business, merger, consolidation or disposition
of assets by the Servicer, promptly give notice of such event to the
Lender and the Borrower and, if directed to do so by the Lender (or, if
multiple Lenders, the Lenders in respect of a majority in aggregate
principal amount of the Advances outstanding), terminate the
responsibilities of the Servicer, in accordance with the Servicing
Agreement;
(ix) upon a Responsible Officer obtaining actual knowledge of the
occurrence of an Event of Servicing
27
Termination or an Event of Default, promptly give notice to the Lender and
the Borrower of such occurrence;
(x) upon the written direction of the Lender (or, if multiple
Lenders, the Lenders in respect of a majority in aggregate principal
amount of the Advances outstanding), deliver notice to the Servicer
stating that an Event of Servicing Termination has occurred and thereby
terminate the responsibilities of the Servicer under the Servicing
Agreement; and
(xi) upon a Responsible Officer obtaining actual knowledge of the
occurrence of an event the occurrence of which together with notice to the
appropriate party would constitute an Event of Servicing Termination,
Event of Purchase Termination or an Event of Default, promptly give notice
of the occurrence of such event to the Lender and the Borrower.
8.09. Annual Report and Quarterly Certificate.
(a) The Collateral Agent shall deliver to the Lender as soon as
available, but in any event within 120 days after the end of each of its fiscal
years, a consolidated and consolidating balance sheet of it or its parent and
its subsidiaries, if any, as at such last day of the fiscal year, consolidated
statements of income and retained earnings and statements of cash flow, for each
such fiscal year, each prepared in accordance with generally accepted accounting
principles, in reasonable detail, and as to the consolidated statements,
certified without qualification by an independent public accountant, who may
also render other services to the Collateral Agent or any of its affiliates, and
certified, as to the consolidating statements, by the chief financial officer of
the Collateral Agent, as fairly presenting the financial position and the
results of operations of the Collateral Agent as at and for the year ending on
its date and as having been prepared in accordance with generally accepted
accounting principles.
(b) The Collateral Agent shall deliver to the Lender by the 5th
Business Day following the end of each fiscal quarter an Officer's Certificate
stating, as to each signer thereof, that (a) a review of the activities of the
Collateral Agent during the preceding fiscal quarter and of performance under
this Agreement has been made under such officer's supervision and (b) to the
best of such officer's knowledge, based on such review, the Collateral Agent has
fulfilled all its obligations under this Agreement throughout such fiscal
quarter, or, if there has been a default in the fulfillment of any such
obligation, or if an event has occurred that with notice or lapse of time or
both would become a default under this Agreement specifying each such default or
event known to such officer and the nature and status thereof and remedies
therefor being pursued.
28
8.10. Delivery of Documents. On or before the Initial Closing Date,
the Collateral Agent shall have delivered to the Borrower and the Lender the
following, in form and substance satisfactory to the Borrower and the Lender:
(a) a certificate of an assistant secretary of the Collateral Agent
certifying as to certain corporate matters in a format acceptable to the
Lender; and
(b) a certificate of an officer of the Collateral Agent as to the
establishment of the Lockbox Account, the Loan Purchase Account, the Loan
Revenue Account and the Reserve Account.
8.11. Instructions of the Lender. Whenever the Collateral Agent is
required to consent to any action hereunder or under the Servicing Agreement,
the Collateral Agent shall so notify the Lenders and shall act in accordance
with the written instructions of Lenders holding 51% of Advances outstanding.
SECTION 9. AMENDMENTS AND WAIVERS.
With the written consent of AutoBond (such consent not to be
unreasonably withheld) and the Lenders in respect of a majority in aggregate
principal amount of Advances outstanding, the Collateral Agent and the Borrower
may, from time to time, enter into written amendments, supplements or
modifications hereto for the purpose of adding any provision to this Security
Agreement or changing in any manner the rights of the Collateral Agent or the
Borrower hereunder, and, with the written consent of (a) on or prior to the
Initial Closing Date, the Lender and (b) after the Initial Closing Date, the
Lenders in respect of at least 66-2/3% in aggregate principal amount of Advances
outstanding, the Collateral Agent on behalf of the Secured Parties may execute
and deliver to the Borrower a written instrument waiving, on such terms and
conditions as may be specified in such instrument, any of the requirements of
this Security Agreement; provided, however, that no such waiver and no such
amendment, supplement or modification shall (a) amend the definition of Secured
Parties or amend, modify or waive any provision of Section 6 hereof or this
Section 9 without the written consent of each Secured Party whose rights under
this Security Agreement would be affected thereby, or (b) amend, modify or waive
any provision of Section 8 or otherwise alter the duties, rights or obligations
of the Collateral Agent without the written consent of all the Secured Parties.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Secured Parties and shall be binding upon the Borrower,
the Secured Parties and the Collateral Agent.
In executing any supplement, amendment or modification of this
Security Agreement, the Collateral Agent shall be entitled to
29
receive and shall be fully protected in relying upon an opinion of counsel
stating that the execution of such supplement, amendment or modification is
authorized or permitted by this Section 9. The Collateral Agent may, but shall
not be obligated to, enter into any such supplement, amendment or modification
that affects the Collateral Agent's own rights, duties or immunities under this
Security Agreement or otherwise.
The Borrower and the Secured Parties agree not to execute any
supplement, amendment or modification to any Program Document to which the
Collateral Agent is not a party, without the prior written consent of the
Collateral Agent, if the effect of such supplement, amendment or modification
would be to affect the Collateral Agent's rights, duties, or immunities under
this Security Agreement, and they agree to promptly forward to the Collateral
Agent any such supplement, amendment or modification.
SECTION 10. NOTICES.
Unless otherwise expressly provided herein, all notices, requests
and demands to or upon the respective parties hereto to be effective shall be in
writing and, unless otherwise expressly provided herein, shall be deemed to have
been duly given or made when delivered by hand, or when deposited in the mail,
postage prepaid, or in the case of telegraphic notice, when delivered to the
telegraph company, or, in the case of facsimile notice, when sent, confirmation
received, addressed as follows, or to such other addresses as may be hereafter
notified by the respective parties hereto:
The Borrower:
AutoBond Funding Corporation II
301 Congress Avenue
Austin, Texas 78701
Attention: President
Telecopy: (512) 472-1548
AutoBond:
AutoBond Acceptance Corporation
301 Congress Avenue
Austin, Texas 78701
Attention: William Winsauer
Telecopy: (512) 472-1548
30
The Collateral Agent:
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department - William T. Milbauer
Telecopy: (612) 667-9825
To the Lenders at the address as the Lenders shall have furnished to the
Borrower (with a copy to the Collateral Agent) in writing;
provided, that any notice to or upon the Borrower shall be deemed to have been
duly given or made as aforesaid when so given or made to the Borrower whether or
not any other party indicated above as the recipient of a copy thereof shall
have received a copy of each notice.
SECTION 11. LIMITATION ON COLLATERAL AGENT'S DUTY IN RESPECT OF
COLLATERAL.
Except as set forth herein and beyond the safe custody thereof, the
Collateral Agent shall not have any duty as to any Collateral in its possession
or control or the possession or control of any agent or nominee of it or any
income thereof or as to the preservation of rights against prior parties or any
other rights pertaining thereto.
SECTION 12. SEVERABILITY.
Any provision of this Security Agreement which is prohibited or
unenforceable in any jurisdiction shall as to such jurisdiction be ineffective
to the extent of such prohibition or unenforceability without invalidation of
the remaining provisions hereof and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
SECTION 13. NO WAIVER; CUMULATIVE REMEDIES.
Neither the Collateral Agent nor the Secured Parties shall by any
act, delay, omission or otherwise be deemed to have waived any of its or their
rights or remedies hereunder and no waiver shall be valid unless in writing,
signed by the Collateral Agent on behalf of the Secured Parties, and then only
to the extent therein set forth. A waiver by the Collateral Agent of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Collateral Agent or the Secured Parties would
otherwise have had on any future occasion. No
31
failure to exercise nor any delay in exercising on the part of the Collateral
Agent or the Secured Parties any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently and are not exclusive of any rights and remedies provided by law.
SECTION 14. PAYMENT OF EXPENSES AND TAXES.
(a) The Borrower hereby agrees to pay to the Collateral Agent a fee
for its services hereunder equal to the Collateral Agent Fee. AutoBond agrees to
pay, indemnify, and to hold the Collateral Agent harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp and other similar taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent under or in
respect of, this Security Agreement, and any such other documents, and to pay,
indemnify, and hold the Collateral Agent and its officers, directors,
shareholders, employees, agents and representatives harmless from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Security Agreement and any such other documents
(including, but not limited to, those incurred by any negligent act or negligent
omission to act of the Collateral Agent) (all the foregoing, collectively, the
"indemnified liabilities"); provided, that AutoBond shall not be liable to the
Collateral Agent for any (i) losses incurred by the Collateral Agent as a result
of the fraudulent actions, misrepresentations, negligence or willful misconduct
of the Collateral Agent or (ii) losses, claims, damages, liabilities and
expenses arising out of the imposition by any taxing authority of any federal
income, state or local income or franchise taxes, or any other taxes imposed on
or measured by gross or net income, gross or net receipts, capital, net worth
and similar items (including any interest, penalties or additions with respect
thereto) upon the Collateral Agent with respect to its receipt of the Collateral
Agent Fee hereunder (including any liabilities, costs or expenses with respect
thereto). The obligations of AutoBond under this Section 14 shall survive the
termination of this Security Agreement and the discharge of the other
obligations of AutoBond hereunder and also shall survive the resignation or
removal of the Collateral Agent hereunder.
32
(b) Promptly after receipt by the Collateral Agent of notice of the
commencement of any action, such Collateral Agent shall, if a claim in respect
thereof is to be made against AutoBond under this Section 14, notify AutoBond in
writing of the commencement thereof; but the omission so to notify AutoBond will
not relieve AutoBond from any liability which it may have to the Collateral
Agent except to the extent AutoBond is prejudiced thereby. In case any action is
brought against the Collateral Agent, and it notifies AutoBond of the
commencement thereof, AutoBond will be entitled to appoint counsel satisfactory
to AutoBond (who shall not, except with the consent of the Collateral Agent, be
counsel to the Borrower or AutoBond) to represent the Collateral Agent in such
action; provided, however, that, if the defendants in any action include both
the Collateral Agent and AutoBond and the Collateral Agent shall have reasonably
concluded that there may be legal defenses available to it which are different
from or additional to those available to AutoBond, the Collateral Agent shall
have the right to select separate counsel to defend such action on behalf of it.
Upon receipt of notice from AutoBond to the Collateral Agent of its election so
to appoint counsel to defend such action and approval by the Collateral Agent of
such counsel, AutoBond will not be liable to the Collateral Agent under this
Section 14 for any legal or other expenses subsequently incurred by the
Collateral Agent in connection with the defense thereof unless (i) the
Collateral Agent shall have employed separate counsel in accordance with the
proviso to the next preceding sentence, (ii) AutoBond shall not have employed
counsel satisfactory to the Collateral Agent to represent the Collateral Agent
within a reasonable time after notice of commencement of the action or (iii)
AutoBond has authorized the employment of counsel for the Collateral Agent at
the expense of AutoBond; and except that, if clause (i) or (iii) is applicable,
such liability shall be only in respect of the counsel referred to in such
clause (i) or (iii).
(c) If the indemnification provided for in this Section 14 is
unavailable or insufficient to hold harmless the Collateral Agent under
subsection (a) or (b) above, then AutoBond shall contribute to the amount paid
or payable by the Collateral Agent as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by AutoBond on the one
hand and the Collateral Agent on the other from the transactions contemplated by
this Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of AutoBond on the one hand and the Collateral Agent on the other in
connection with the actions or omissions which resulted in such losses, claims,
damages or liabilities as well as any other relevant equitable considerations.
The Collateral Agent and AutoBond agree that it would not be just and
33
equitable if contributions pursuant to this subsection (c) were to be determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the first sentence of
this subsection (c). The amount payable by AutoBond as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (c) shall be deemed to include any legal or other expenses reasonably
incurred by the Collateral Agent in connection with investigating or defending
any action or claim which is the subject of this subsection (c). No person found
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(d) The obligations of the Borrower, AutoBond and the Collateral
Agent under this Section 14 shall be in addition to any liability which each of
them may otherwise have.
(e) The agreement, indemnities and other statements of the parties
hereto in or made pursuant to this Section 14 will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by or on behalf of any other parties hereto or any of the officers,
directors or controlling persons referred to in this Section 14. The provisions
of this Section 14 shall survive the termination or cancellation of this
Agreement.
SECTION 15. SUCCESSORS AND ASSIGNS; GOVERNING LAW.
This Security Agreement and all obligations of the Borrower
hereunder shall be binding upon the successors and assigns of the Borrower, and
shall, together with the rights and remedies of the Collateral Agent hereunder,
inure to the benefit of the Collateral Agent, the Secured Parties and their
respective successors and assigns. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY,
AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
SECTION 16. ENFORCEMENT RIGHTS OF LENDERS.
Unless the Collateral Agent shall fail to take action required to be
taken by it under the terms of this Agreement, no Lender shall have any right
directly to enforce the security interests granted by this Security Agreement.
No Lender shall have any right to require the Collateral Agent to take or fail
to take any action under this Security Agreement, except as otherwise provided
in this Security Agreement.
34
SECTION 17. BANKRUPTCY PETITION AGAINST THE BORROWER.
The Collateral Agent hereby covenants and agrees that, until the
expiration of the later of (a) the date which is one year and one day after the
payment in full of all outstanding Advances, and (b) the date which is one year
and one day after the payment in full of all investor certificates or other
securities outstanding and issued pursuant to a Disposition, it will not
institute against, or join any other Person in instituting against, the Borrower
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other similar proceeding under the laws of the United States or
any state of the United States.
SECTION 18. MISAPPLICATION OF FUNDS.
The Collateral Agent agrees that any funds incorrectly paid to it by
the Borrower shall be promptly returned to the Borrower upon receipt of written
notice from the Borrower that such funds were incorrectly paid to the Collateral
Agent prior to the Collateral Agent's transfer of such funds in accordance with
this Agreement. The Collateral Agent shall be completely protected against any
liability for returning such funds in reliance on such written notice that funds
were incorrectly paid.
SECTION 19. COUNTERPART SIGNATURES.
This Agreement may be executed and delivered to you simultaneously
in two (2) or more counterparts, each of which shall be deemed an original, but
all such counterparts shall together constitute but one and the same instrument.
SECTION 20. THIRD PARTY BENEFICIARY.
For all purposes of this Agreement, each of the Lenders shall be a
third party beneficiary of the agreements and covenants herein contained and the
Servicer shall be a third party beneficiary of the provisions of this Agreement
which specify the amount and priority of payment of the Servicer Fee.
SECTION 21. STATUS OF COLLATERAL AGENT.
The parties hereto acknowledge and agree that upon payment in full
of all amounts owing under the Credit Agreement and the release of the Secured
Parties' security interest in the Collateral, the rights of the Collateral Agent
to indemnification and payment of its fees and expenses under this Agreement
shall continue.
35
SECTION 22. ACTS OF LENDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by the
Lender may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by the Lender in person or by agents duly
appointed in writing; and except as herein otherwise expressly provided such
action shall become effective when such instrument or instruments is or are
delivered to the Collateral Agent. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Agreement if made in the manner provided in this Section 22.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Collateral Agent
deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Lender shall bind the Lender in respect of
anything done, omitted or suffered to be done by the Collateral Agent in
reliance thereon, whether or not notation of such action is made upon the Note.
36
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed by their duly authorized officers as of the date first
set forth above.
AUTOBOND FUNDING
CORPORATION II
By:_________________________
Name:
Title:
AUTOBOND ACCEPTANCE CORPORATION
By:__________________________
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Collateral Agent
By:___________________________
Name:
Title:
Acknowledged as of this
21st day of May, 1996
PEOPLES SECURITY LIFE INSURANCE COMPANY
as Initial Lender
By:_________________________
Name:
Title:
37
EXHIBIT A
[FORM OF COLLATERAL ASSIGNMENT]
COLLATERAL ASSIGNMENT, dated as of __________, 199_ among AutoBond Funding
Corporation II (the "Transferor"), AutoBond Acceptance Corporation ("AutoBond")
and Norwest Bank Minnesota, National Association, as Collateral Agent (the
"Collateral Agent").
1. We refer to the Security Agreement (the "Security Agreement"), dated as
of May 21, 1996, by and among the Borrower, AutoBond Acceptance Corporation, as
Administrator and the Collateral Agent and acknowledged by Peoples Security Life
Insurance Company, as Initial Lender. All provisions of such Security Agreement
are incorporated by reference. All capitalized terms shall have the meanings set
forth in the Security Agreement.
2. As security for the prompt, complete and unconditional payment and
performance of all obligations of the Borrower in respect of the Advances, the
Borrower hereby pledges, assigns, transfers and delivers to the Collateral Agent
for the benefit of the Secured Parties, and grants to the Collateral Agent for
the benefit of the Secured Parties, a continuing first lien on, and first and
prior security interest in, all of the Borrower's title and interest in, to and
under following:
(i) each Specified Sold Auto Loan listed on Schedule 1 hereto,
including without limitation, all rights to payments thereunder, purchased
by or otherwise conveyed to or established by the Borrower pursuant to the
Loan Acquisition Agreement;
(ii) each Automobile and all other Property, now or hereafter
acquired, securing or evidenced by, each such Specified Sold Auto Loan,
including, without limitation, the certificate of title relating to each
Automobile, any insurance proceeds with respect to any such Automobile or
such Specified Sold Auto Loan, the proceeds of any repossession and
liquidation of any such Automobile, rights under judgments with respect to
defaulted obligors, rights to deficiency judgments with respect to
defaulted obligors and rights under any service contracts with respect to
any such Automobile;
(iii) any proceeds of any credit default and VSI Policy or any
other insurance policy purchased by the Borrower in respect of each such
Specified Sold Auto Loan; and
(iv) all Proceeds of any of the foregoing.
3. Each of AutoBond and the Borrower does hereby certify:
A-1
(i) the representations and warranties of the Borrower set
forth in Sections 2.1 and 2.3(a) of the Credit Agreement and the
Administrator in Section 3.02 of the Servicing Agreement, are true
and correct on and as of the date hereof, before and after giving
effect to the transfer evidenced hereby and to the application of
the proceeds therefrom, as though made on and as of such date;
(ii) no event has occurred, or would result from such assignment
or from the application of the proceeds therefrom, which constitutes
an Event of Default or a Funding Termination Event or would
constitute an Event of Default or a Funding Termination Event but
for the requirement that notice be given or time elapse or both;
(iii) Each of AutoBond and the Borrower is in compliance with
each of its covenants set forth in the Security Agreement; and
(iv) the aggregate Unpaid Principal Balance of the Receivables
listed on Schedule 1 hereto to be transferred by the Secured Parties
pursuant to this Collateral Assignment is $__________.
IN WITNESS WHEREOF, the parties have caused this Collateral
Assignment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
AUTOBOND FUNDING CORPORATION II, as
Borrower
By:__________________________
Name:
Title:
NORWEST BANK MINNESOTA, National
Association, as Collateral Agent
By:__________________________
AutoBond Acceptance Corporation
Individually and as Administrator
By:_____________________________
Name:
Title:
A-2
Schedule 1
to
Collateral Assignment dated _____________, 1996
A-3
EXHIBIT B
TRUST RECEIPT
[DATE]
AutoBond Funding Corporation I
301 Congress Avenue
Austin, Texas 78701
Re: Amended and Restated Servicing
Agreement, dated as of May 21, 1996
(the "Servicing
Agreement") among AutoBond Funding
Corporation II, AutoBond Acceptance
Corporation, CSC Logic/MSA
L.L.P. and Norwest Bank Minnesota,
National Association
Ladies and Gentlemen:
In accordance with Section 2.07 of the Servicing Agreement, the
undersigned hereby certifies that it has taken possession of the items set forth
on Annex I hereto with respect to the Auto Loans identified below. The
undersigned (i) confirms that it holds such items in trust for the benefit of
the Lender and (ii) agrees to promptly return such items to the Collateral Agent
after its need for possession of them ceases, except for title and security
instruments which the undersigned is required under applicable law to otherwise
deal with in furtherance of its duties under the Servicing Agreement.
Auto Loans:
[CSC LOGIC/MSA L.L.P. or
AutoBond Acceptance Corporation]
By: ______________________________
Name:
Title:
B-1
EXHIBIT C
FORM OF COLLATERAL AGENT REPORT
The undersigned, a duly authorized representative of Norwest Bank
Minnesota, National Association, as collateral agent pursuant to the Security
Agreement, dated as of May 21, 1996 (the "Security Agreement"), between AutoBond
Funding Corporation II, AutoBond Acceptance Corporation and Norwest Bank
Minnesota, National Association, does hereby certify as follows:
1. Aggregate amount on deposit in the Loan
Purchase Account as of the end of the
most recent Collection Period......................$_______________.
2. Aggregate amount on deposit in the Loan
Revenue Account as of the end of the most
recent Collection Period...........................$_______________.
3. Aggregate amount on deposit in the Reserve
Account as of the end of the most recent
Collection Period..................................$_______________.
4. The Reserve Account Required Balance...............$_______________.
Capitalized terms used in this Certificate have their meanings set forth
in the Security Agreement. This Certificate is delivered pursuant to Section
8.08 of the Security Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
this ____ day of __________, ____.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Collateral Agent
By:_____________________
Name:
Title:
C-1