SERVICING AGREEMENT
THIS SERVICING AGREEMENT, dated as of _______________, 1998 (the
"Servicing Agreement"), is entered into by and between Transition Leasing
Management, Inc., a Texas corporation ("Transition Leasing"), in its capacity
as servicer of certain motor vehicles lease contracts (the "Servicer"), and
Transition Auto Finance II, Inc., a Texas corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, subject to the terms and conditions of that certain Master
Contract Acquisition Agreement dated of even date herewith between Transition
Leasing and Buyer relating to the acquisition of certain motor vehicles and
motor vehicle lease contracts by Buyer from or through Transition Leasing
(the "Master Contract Acquisition Agreement;" all capitalized terms used
herein and not otherwise herein defined shall have the same meaning as set
forth in the Master Contract Acquisition Agreement or the Indenture). Buyer
desires to acquire certain Leased Vehicles and Contracts that will be
described in Monthly Report Certificates to be delivered by Transition
Leasing to Buyer pursuant to Section 2 of the Master Contract Acquisition
Agreement; and
WHEREAS, Buyer has requested the Servicer to undertake the collection
and servicing responsibilities with respect to any and all of the Contracts
and to account to Buyer therefor as provided herein;
NOW, THEREFORE, the parties agree as follows:
1. APPOINTMENT OF AND ACCEPTANCE BY THE SERVICER OF SERVICING
OBLIGATIONS.
A. The Servicer, on behalf of Buyer, shall during the term of the
Servicing Agreement manage, administer and collect each of the Contracts and
shall exercise discretionary powers involved in such management,
administration and collection, and shall bear all costs and expenses incurred
in connection therewith, that may be necessary or advisable in carrying out
the Agreement. In the management, administration and collection of the
Contracts, the Servicer shall use at least the same care and apply the same
policies that it would exercise if it owned the Contracts, including but not
limited to the servicing criteria as set forth in EXHIBIT A attached hereto.
B. The Servicer shall have the full power and authority to do
those things in connection with such servicing, administration and collection
activities that it may deem necessary or desirable in order to maximize
receipts collected from Obligors or foreclosure and sale of Lease Vehicles
underlying the Contracts. Without limiting the generality of the foregoing,
the Servicer is hereby authorized and empowered to execute and deliver, on
behalf of Buyer, instruments of satisfaction or cancellation, or of partial
or full release or discharge, and all other comparable instruments, in order
to evidence payments received with respect to the Contracts and, after the
delinquency of any Contracts and to the extent permitted under and in
compliance with applicable law and regulations, to commence enforcement
proceedings with respect to such Contracts; PROVIDED, HOWEVER, that the
Servicer shall not commence any legal action against an Obligor in the
1
name of Buyer without the prior written consent of Buyer, which Buyer shall
furnish the Servicer to carry out its servicing and administrative duties
hereunder.
2. TERM. The Servicing Agreement shall commence as of the date first
written above and shall continue so long as the Buyer has any outstanding
Contracts that remain to be collected, absent a Servicer Event of Default (as
defined herein below).
3. COMPENSATION. In exchange for the services provided to Buyer as
described and governed herein, Servicer shall receive on or before the
fifteenth day of the month following a month in which such services are
provided, and upon receipt by Buyer of all required, duly prepared and
properly executed Monthly Report Certificates from Acquisition Agent, a
Contract Servicing Fee (herein so called) equal to Twenty and 00/100 Dollars
($20.00) times the aggregate number of Contracts serviced by Servicer during
the previous month. Such aggregate number of Contracts shall equal the sum
of all Contracts identified in the Monthly Report Certificates, less all
Contracts that have been previously paid in full by their Obligors, and less
all Contracts in which an Obligor default has occurred and Servicer has
assigned the related Leased Vehicle for repossession.
Additionally, any third-party expenditures pursuant to Section II(C) and
III(A) of EXHIBIT A to the Servicing Agreement with respect to any particular
Contract shall be paid for from the proceeds from collection or from resale
of the repossessed Leased Vehicle relating to that Contract.
4. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The Servicer
represents, warrants and covenants to Buyer that:
A. ORGANIZATION AND GOOD STANDING. The Servicer is a corporation
duly organized, existing and in good standing under the laws of Texas, and
has full corporate power, authority and legal right to own its properties and
conduct its business as such properties are presently owned and such business
is presently contemplated, and to execute, deliver and perform its
obligations under the Servicing Agreement.
B. DUE QUALIFICATION. The Servicer is duly qualified and has
registered as a foreign corporation in each state where such qualification is
required in order to service the Contracts as required by the Servicing
Agreement and has obtained all necessary licenses, approvals or consents as
are required under applicable law to perform its duties hereunder.
C. DUE AUTHORIZATION. The execution, delivery and performance of
the Servicing Agreement has been duly authorized by the Servicer by all
necessary corporate action on the part of the Servicer.
D. BINDING OBLIGATION. The Servicing Agreement constitutes a
legal, valid and binding obligation of the Servicer, enforceable in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereinafter in effect, affecting the enforcement of
creditors' rights in general and such enforceability may be limited by
general principles of equity (whether considered in a proceeding at law or in
equity).
2
E. NO VIOLATION. The execution and delivery of the Servicing
Agreement by the Servicer and the performance of the transactions
contemplated by the Servicing Agreement and the fulfillment of the terms
hereof applicable to the Servicer, will not conflict with, violate, result in
any breach of any of the material terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, any
requirement of law applicable to the Servicer or any indenture, contract,
agreement, mortgage, deed of trust or other instrument to which the Servicer
is a party or by which it is bound.
5. COVENANTS OF THE SERVICER. From and after the date hereof until
such time as the Servicing Agreement terminates, Servicer, as an independent
contractor, shall at its own expense, direct all Obligors on the Contracts to
remit all collections and payments directly to, or otherwise cause all
payments on the Contracts to be deposited in, Servicer's Master Collections
Account. Servicer shall have no ownership in or authority to amend, modify,
change or terminate the Master Collections Account without the prior written
consent of the Buyer. Servicer agrees and covenants that all Obligors will
utilize payment books with remittance instructions or monthly statements
directing all payments to be remitted directly to the Master Collections
Account, and Servicer additionally agrees that all cash, checks, notes,
drafts or other items that it receives otherwise than through the Master
Collections Account attributable to the Contracts including proceeds from
resale of repossessed Leased Vehicles, Leased Vehicles returned upon the
expiration of their lease terms and recoveries on insurance claims, shall be
deposited in the Master Collections Account within two business days of
receipt.
The Servicer acknowledges that any collections or proceeds from the
Contracts in the Master Collection Account, or otherwise in the possession or
control of the Servicer, are the Buyer's property and subject to the security
interest granted to the Trustee under the Indenture. In holding such
proceeds and collections, the Servicer agrees to act as custodian and bailee
of the Buyer and the Trustee at all times. The Servicer agrees, for the
benefit of the Buyer, the Trustee and the holders of the Notes, to act as
such custodian and bailee, and to hold and deal with such proceeds and
collections, as custodian and bailee for the Buyer and the Trustee, in
accordance with the provisions of the Indenture. It is intended that the
Trustee, as a secured party, shall be deemed to have possession of such
proceeds and collections for purposes of Section 9-305 of the UCC of the
state in which such property is located.
A. OPERATIONS. The Servicer shall collect the Contracts in an
orderly and efficient manner consistent with good business practices and in
accordance with all applicable federal, state and local laws and regulations.
B. RECORDS. So long as Buyer has not given notice of termination
pursuant to SECTION 9, the Servicer shall (i) hold in trust and safely keep
all Contract Closing Documents and such other documents as may be required
for the enforcement of the Contracts; (ii) keep such accounts and other
records as will enable Buyer to determine the status of the Contracts; (iii)
keep such books and records at its offices identified in SECTION 14 herein;
and (iv) permit Buyer and its representatives at any time to inspect, audit,
check and make abstracts from Servicer's accounts, records, correspondence
and other papers pertaining to the Contracts, together with the account
3
balance of such accounts and the payment history related thereto. The
Servicer shall provide Buyer with monthly reports updating the information
relating to account balances and activity and certifying the amounts
collected on the Contracts during the preceding month.
C. CONTINUATION STATEMENTS. If Buyer so requests, the
Servicer shall execute and file documents that shall reflect Buyer as the owner
of the Leased Vehicle, including registration of the Certificates of Title in
the name of Buyer and/or any other documents requested by Buyer or that may be
required by law to preserve fully and protect the interest of Buyer in and to
the Contracts.
D. PRINCIPAL EXECUTIVE OFFICE. The Servicer shall not,
without providing thirty days' notice to Buyer, and without filing such
amendments to any previously filed financing statements as Buyer may require,
(i) change the county where its principal executive office or the offices where
the records relating to the Contracts are kept, or (ii) change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed by Buyer or the Servicer
or any provision hereof seriously misleading within the meaning of Section
9-402(7) of any applicable enactment of the Uniform Commercial Code.
E. NO IMPAIRMENT. The Servicer will duly fulfill all
obligations on its part to be fulfilled under or in connection with each
Contract and will do nothing to materially impair the rights of Buyer in the
Contracts.
F. COMPLIANCE WITH LAW. The Servicer will comply, in all
material respects, with all acts, rules, regulations, orders, decrees and
directions of any governmental authority applicable to the Contracts or any part
thereof; PROVIDED, HOWEVER, that the Servicer may contest any act, regulation,
order, decree or direction in any reasonable manner that shall not materially
and adversely affect the rights of Buyer in the Contracts. The Servicer will
comply, in all material respects, with any obligation of a holder of a Contract
to the Obligor thereof arising under such Contract or under applicable law.
G. SECURITY INTEREST. Except for the transfers of Contracts
to the Buyer under the Master Contract Acquisition Agreement, the Servicer will
not sell, pledge, assign or transfer to any other person, or grant, create,
incur, assume or suffer to exist any lien on any Contracts, or the books or
records relating to any Contracts, or any interest therein; the Servicer will
immediately notify Buyer of the existence of any lien on any Contracts; the
Servicer shall defend the right, title and interest of Buyer in, to and under
the Contracts, whether now existing or hereafter transferred to Buyer, against
all claims of third parties claiming through or under the Servicer.
H. PAYMENT OF FEES AND EXPENSES OF TRUSTEE. The Servicer
shall, if the Buyer does not so pay, pay the fees and expenses of the Trustee
under the Indenture as such fees and expenses become payable from time to time
pursuant to Section 7.7 of the Indenture, and hereby agrees to indemnify the
Trustee and its agents as provided in said Section 7.7. The Servicer shall be
entitled to seek reimbursement for such fees and expenses from any funds of the
Buyer that are not subject to the lien of the Indenture.
4
I. SERVICING COMPENSATION. As compensation for the performance
of its obligations under the Servicing Agreement and subject to the terms of
this SECTION 5(I), the Servicer shall be entitled to receive payment of the
Servicing Fees from the Buyer, out of amounts available for that purpose in
the Operating Account pursuant to Section 4.2 of the Indenture. Payment of
such Servicing Fees shall be conditioned upon the availability in the
Operating Account of amounts intended for such purpose after satisfaction of
all higher priority applications of such funds under Section 4.2(f) of the
Indenture and after creation of a reserve to pay all interest due on the
Outstanding Securities on the next Payment Date, any deficiency being carried
over and not payable (without accountability for interest) until sufficient
amounts become available for that purpose in the Operating Account. The
Servicer shall pay all expenses incurred by it in connection with its
servicing activities under the Servicing Agreement and shall not be entitled
to reimbursement of such expenses except to the extent they constitute
Liquidation Expenses and can be reimbursed out of related Liquidation
Proceeds.
J. REALIZATION UPON DEFAULTED CONTRACTS. In accordance with the
servicing procedures specified in the Servicing Agreement, the Servicer shall
repossess, or otherwise comparably convert the ownership of, any Leased
Vehicle securing a Defaulted Contract and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
the Servicing Agreement. In connection with such repossession or other
conversion, the Servicer shall follow such practices and procedures as it
shall deem necessary or advisable and as shall be normal and usual for
responsible holders of lease contracts and as shall be in compliance with all
applicable laws, and, in connection with the repossession of any Leased
Vehicle or any Defaulted Contract, may commence or prosecute any judicial
proceedings in respect of such Contract in its own name, or if the Servicer
deems it necessary, in the name of the Buyer or the Trustee, on behalf of the
Buyer or on behalf of the Trustee. The Servicer's obligations under this
Section are subject to the provision that, in the case of damage to a Leased
Vehicle from an insured cause, the Servicer shall not be required to expend
its own funds in repairing such motor vehicle unless it shall determine (i)
that such restoration will increase the Liquidation Proceeds of the related
Contract, after reimbursement to itself for such expenses, and (ii) that such
expenses will be recoverable by it either as Liquidation Expenses or as
expenses recoverable under an applicable insurance policy. The Servicer
shall be responsible for all other costs and expenses incurred by it in
connection with any action taken in respect of a Defaulted Contract;
provided, however, that it shall be entitled to reimbursement of such costs
and expenses to the extent they constitute Liquidation Expenses or expenses
recoverable under an applicable insurance policy. All Liquidation Proceeds
(net of Liquidation Expenses) and Insurance Proceeds (net of expenses
incurred by the Servicer and recoverable under the related insurance policy
and net of the portion thereof applied to the repair of any Leased Vehicle or
released to an Obligor in accordance with the Servicer's normal servicing
procedures) shall be deposited in the Master Collections Account to the
extent required by the Servicing Agreement.
K. APPOINTMENT OF CUSTODIAN FOR CONTRACT DOCUMENTS. Except as
otherwise provided in the Indenture, upon delivery of the Contract Documents
to the Trustee for any Contracts purchased by the Buyer under Section 4.3 of
the Indenture, possession of the Contract Documents will be retained by the
Trustee or any other financial institution appointed by the Buyer and the
5
Trustee to act as custodian and bailee of the Contract Documents for the
Trustee and the Buyer. If another financial institution is appointed, it is
intended that the Trustee, as secured party, shall be deemed to have
possession of the Contract Documents for purposes of Section 9-305 of the UCC
of the state in which the Contract Documents are located.
L. COLLECTING TITLE DOCUMENTS NOT DELIVERED AT THE CLOSING DATE.
If the Title Document for a Leased Vehicle does not reflect the Buyer as
owner and first lienholder and the Trustee as second lienholder at the time
of the Buyer's purchase direct from a Dealer of the Leased Vehicle, the
Servicer shall confirm, prior to the Buyer's purchase, that an appropriate
application has been made to transfer the title of the Title Document to the
Buyer with such Title Document reflecting the Buyer as owner and first
lienholder and the Trustee as second lienholder.
In the case of any Contract in respect of which the Title Document for
the related Leased Vehicle showing the Buyer as owner and first lienholder
and the Trustee as second lienholder has been applied for in connection with
the purchase of the Contract, the Servicer shall use reasonable efforts to
obtain such Title Document and promptly upon receipt thereof to make
application for the transfer of the ownership noted thereon to the Buyer and
the second lien in favor of the Trustee. In the case of any Contract in
respect of which the Title Document for the related Leased Vehicle showing
the Buyer as owner and first lienholder and the Trustee as second lienholder
has been applied for in connection with the purchase of the Contract or
thereafter, the Servicer shall use reasonable efforts to obtain such Title
Document and to deliver it to the Trustee (or other financial institution
appointed as custodian for the Contract Documents) as promptly as possible.
If such Title Document showing the Buyer as owner and first lienholder and
Trustee as second lienholder is not received by the Trustee (or other
custodian) within 30 days after the Purchase Date, then the representation
and warranty in Section 4.4 of the Indenture in respect of such Contract
shall be deemed to have been incorrect in a manner that materially and
adversely affects the Securityholders.
The Servicer shall deliver to the Trustee on a monthly basis a listing
of Contracts that as of the date prior to such delivery do not show the Buyer
as owner and first lienholder and the Trustee as second lienholder on the
Title Documents for such Contracts.
Any fees charged for the transfer of ownership or liens on the Title
Documents for the Leased Vehicles into or out of the Buyer's or Trustee's
name, as appropriate, shall be paid by the Buyer as an Allowed Expense.
M. REPORTING BY THE SERVICER. On or prior to each Servicer Report
Date, the Servicer shall render to the Buyer the Monthly Report, in respect
of the immediately preceding Collection Period, which shall set forth the
following:
(i) A confirmation that all proceeds (including all written
instruments, Full Prepayments, Net Liquidation Proceeds and Net Insurance
Proceeds) received by Servicer during such Collection Period and
attributable to the Contracts (and any related Leased Vehicles) owned by
the Buyer have been deposited into the Master Collections Account;
(ii) A confirmation that all funds that were deposited into the
Master Collections
6
Account during such Collection Period and that were attributable to the
Contracts and related Leased Vehicles owned by the Buyer have been
transferred to the Operating Account;
(iii) Attached to the Monthly report should be detailed
collection, receivables and delinquencies reports listing, by Contract
Number, the daily proceeds received from each Contract during such
Collection Period and deposited in the Master Collections Account
(including any Net Liquidation Proceeds and Net Insurance Proceeds and
any prepayments by Obligors) and the unpaid installment balance and the
past due installments as of the end of the Collection Period for each
Contract;
(iv) Attached to the Monthly Report should be a detailed
repossession, liquidation and loss report listing, by Contract Number,
Contracts assigned for repossession, the repossessions of Leased
Vehicles, the sales of repossessed Leased Vehicles or Leased Vehicles
returned upon the termination of their Contracts and resulting proceeds,
any Net Insurance Proceeds and any other Net Liquidation Proceeds during
the Collection Period; and
(v) Any other information relating to the Contracts reasonably
requested by the Buyer or the Trustee.
On or before 45 days after the end of each fiscal quarter of the
Servicer, the Servicer shall deliver an Officers' Certificate to the Buyer
and the Trustee to the effect that a review of the activities of the Servicer
during the Servicer's preceding fiscal quarter has been made under the
supervision of the officers executing such Officers' Certificate with a view
to determining whether during such period the Servicer has performed and
observed, in all material respects, its obligations under the Indenture and
the Servicing Agreement, and either (A) stating that to the best of their
knowledge no default by the Servicer under the Indenture or the Servicing
Agreement has occurred and is continuing, or (B) if such a default has
occurred and is continuing, specifying such default and the nature and status
thereof. Such certificate need not comply with Section 11.4 of the Indenture.
N. ANNUAL ACCOUNTANTS' REPORTS. On or before 120 days after the
end of each fiscal year of the Servicer, the Servicer and the Buyer shall
deliver to the Trustee separate reports, prepared by a firm of independent
accountants selected by the Servicer and the Buyer, that (i) they have
examined the balance sheets of the Servicer and the Buyer is of the last day
of said fiscal year and the related statements of operations, retained
earnings and changes in financial position for such fiscal year and have
issued an opinion thereon, specifying the date thereof, (ii) they have also
examined certain documents and the records to the Contracts, (iii) their
examination as described under clauses (i) and (ii) above was made in
accordance with generally accepted auditing standards and accordingly
included such tests of the accounting records and such other auditing
procedures as they considered necessary in the circumstances, and (iv) their
examination described under clauses (i) and (ii) above disclosed no
exceptions that, in their opinion, were material, relating to such Contracts,
or, if any such exceptions were disclosed thereby, setting forth such
exceptions that, in their opinion, were material.
O. CORPORATE EXISTENCE; STATUS OF SERVICER; MERGER. The Servicer
shall keep
7
in full effect its existence, rights and franchises as a corporation under
the laws of the State of Texas, and will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of the Contract Documents, the Indenture and the Servicing
Agreement.
The Servicer shall not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets as
an entirety to any person unless the corporation formed by such consolidation
or into which the Servicer has merged or the person that acquires by
conveyance, transfer or lease substantially all the assets of the Servicer as
an entirety is an entity organized and existing under the laws of the United
States or any state or the District of Columbia and executes and delivers to
the Buyer and the Trustee an agreement in form and substance reasonably
satisfactory to the Buyer and the Trustee, which contains an assumption by
such successor entity of the due and punctual performance and observance of
each covenant and condition to be performed or observed by the Servicer under
the Indenture and the Servicing Agreement.
P. THE SERVICER NOT TO RESIGN; ASSIGNMENT. The Servicer shall
not resign from the duties and obligations hereby imposed on it except upon
determination by its Board of Directors that by reason of change in
applicable legal requirements the continued performance by the Servicer of
its duties under the Indenture would cause it to be in violation of such
legal requirements in a manner that would result in a material adverse effect
on the Servicer or its financial condition, said determination to be
evidenced by a resolution of its Board of Directors to such effect. No such
resignation shall become effective unless and until a new servicer acceptable
to the Buyer is willing to service the Contracts and enters into a servicing
agreement with the Buyer in form and substance substantially similar to the
Servicing Agreement. No such resignation shall affect the obligation of the
Servicer to repurchase any Contract pursuant to the Servicing Agreement.
The Servicer may not assign the Servicing Agreement or any of its
rights, powers, duties or obligations hereunder, provided that the Servicer
may assign the Indenture and in connection with a consolidation, merger,
conveyance, transfer or lease made in compliance with SECTION 5(O) and
provided further that the Servicer may contract with industry qualified third
parties for the performance of its duties under the Servicing Agreement,
except that any such contract shall not relieve the Servicer from liability
for its obligations under the Servicing Agreement.
Q. PURCHASE OF CERTAIN CONTRACTS. The representations and
warranties of the Servicer set forth in Section 4.4 of the Indenture with
respect to each Contract shall survive delivery of the Contract Documents to
the Trustee and shall continue so long as such Contract remains outstanding.
Upon discovery by the Buyer, the Servicer or the Trustee that any of such
representations or warranties was incorrect as of the time made or that any
of the Contract Documents relating to any such Contract has not been properly
executed by the Obligor or the Servicer or contains a material defect or has
not been received by the Trustee, the party making such discovery shall give
prompt notice to the other and to the Trustee (other than in cases where the
Trustee has given notice thereof). If any such defect, incorrectness or
omission materially and adversely affects the interest of the Securityholders
in and to the related Contract, the Servicer shall, within 90 days after
discovery thereof or receipt of notice thereof, cure the defect or eliminate
or otherwise cure the circumstances or condition in respect of which
representation or warranty was
8
incorrect as of the time made. If the Servicer is unable to do so, it shall
purchase such Contract from the Buyer through a deposit into the Master
Collections Account no later than the end of the Collection Period during
which such 90-day period expired of an amount equal to the purchase price
paid by the Buyer for such Contract less any lease payments from the Obligor
relating to the Contract after the Buyer's purchase of the Contract. Upon
such deposit, the Servicer shall be entitled to request a release of the
defective Contract from the lien of the Indenture pursuant to Section 4.4(a)
of the Indenture. Upon any such purchase, the Buyer and the Trustee shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as shall be necessary to vest in the Servicer any Contract
purchased hereunder.
It is understood that, without limiting the meaning of the term
"materially and adversely affects," the interest of the Securityholders shall
be deemed materially and adversely affected if (i) the Buyer, the Trustee or
of any such Securityholders are put under any obligation to pay any other
Person any of such money as a result of any such defect or misrepresentation,
or (ii) the Trustee or the Holders of Securities representing not less than
25% of the aggregate principal amount of the Outstanding Securities, acting
reasonably, determine, by notice to the Buyer, that such defect or
misrepresentation materially and adversely affects the interests of the
Holders of Securities in and to a Contract.
6. MAINTENANCE OF INTERNAL CONTROL AND PROCEDURES. Servicer shall, at
all times during the term of the Servicing Agreement, follow internal control
procedures consistent with loan servicing industry standards and, at the
request of Buyer, will supply same in written form for review purposes.
7. COMPUTER. Servicer shall, at all times during the term of the
Servicing Agreement, utilize in the operation of its business the industry
standard computer software and contract information maintenance system, such
system to be approved by Buyer.
8. SERVICER EVENTS OF DEFAULT. The occurrence and continuation of any
one of the following events shall be a "Servicer Event of Default" under the
Servicing Agreement:
A. Failure on the part of the Servicer to remit collections on
the Contracts to the Master Collections Account when due and continuance of
such failure for four Business Days; or
B. An involuntary case is commenced or filed against the Servicer
under the federal bankruptcy laws, as now or hereafter in effect, or any
other present or future federal or state bankruptcy, insolvency or similar
law, or for the appointment of a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Servicer or of any
substantial part of its property, or for the winding up of the affairs of,
liquidation, dissolution, or reorganization of the Servicer and the
continuance of such case or filing unstayed for a period of thirty
consecutive days; or
C. An order for relief shall be entered in a case under title 11
of the United States Code on which the Servicer is a debtor, or the Servicer
shall become insolvent or admit in writing it s inability to pay its debts as
they come due, or the commencement by the Servicer of a voluntary
9
case under the federal bankruptcy laws, as now or hereafter in effect, or any
other present or future federal or state bankruptcy, insolvency or similar
law, or the consent by the Servicer to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer or of any substantial
part of its property or the making by the Servicer of an assignment for the
benefit of creditors or the failure by the Servicer generally to pay its
debts as such debts become due or the taking of corporate action by the
Servicer in furtherance of any of the foregoing.
D. Failure by Servicer to service and collect amounts due from
Obligors under Contracts in accordance with the servicing criteria described
in EXHIBIT A attached hereto.
9. REMEDIES.
A. If a Servicer Event of Default shall have occurred, Buyer may,
by notice given in writing to the Servicer, terminate all of the rights and
obligations of the Servicer under the Servicing Agreement. Notwithstanding
any termination of the rights and obligations of the Servicer, the Servicer
shall remain responsible for any acts or omissions to act by it as Servicer
prior to such termination.
B. Buyer is hereby authorized and empowered (upon the failure of
the Servicer to cooperate) to execute and deliver, on behalf of the Servicer
as attorney-in-fact or otherwise, all documents and other instruments upon
the failure of the Servicer to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of a transfer of servicing rights to a
successor servicer.
C. The Servicer agrees to cooperate with Buyer and any successor
servicer in effecting the termination of the responsibilities and rights of
the Servicer to conduct servicing hereunder, including, without limitation,
the transfer to such successor servicer of all authority of the Servicer to
service the Contracts provided for under the Servicing Agreement.
D. In the event the rights and responsibilities of the Servicer
are terminated, as provided above, Buyer may take such steps as may be
appropriate or necessary to protect and preserve the Trust Estate, and to
assure the orderly transfer of authority and responsibility to the successor
Servicer, and to assure that title to all assets of the Trust Estate are
vested in Buyer, with security interests vested in Buyer and Trustee
(including all steps deemed necessary or advisable by the Trustee), and to do
or accomplish all other acts or things necessary or appropriate to effect
such vesting and assumption, including, without limitation, directing the
Obligors to remit Lease payments and all other payments in respect of the
Contracts to an account or address designated by the Buyer or such new
servicer. This right of termination is cumulative and not exclusive of all
other rights and remedies from time to time conferred upon or reserved to the
Buyer or the Trustee that either of them may have at law or in equity. The
right or remedy may be exercised from time to time and as often as deemed
expedient. No delay or omission in insisting upon the strict observance or
performance of any provision of the Servicing Agreement, or in exercising any
right or remedy, shall be construed as a waiver or relinquishment of such
provision, nor shall it impair such right or remedy.
10
10. COVENANTS OF THE BUYER. From and after the date hereof until such
time as this Servicing Agreement shall terminate, Buyer shall maintain its
right to do business in Texas as a corporation organized under the laws of
the State of Texas, and shall maintain all licenses and qualifications
necessary for it to conduct its business. It will provide to Servicer all
assistance reasonably requested by Servicer to enable Servicer to perform its
obligations under this Servicing Agreement.
11. SUCCESSORS AND ASSIGNS. The Servicing Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. The Servicer may contract with industry-qualified
parties for the performance of any or all of its obligations arising
hereunder but no such contract shall relieve Servicer from liability for its
performance hereunder.
12. BUYER EVENT OF DEFAULT; SERVICER'S REMEDIES. In the event that
Buyer should fail to pay any fees or compensation due under the Servicing
Agreement, within ten (10) days of the date they are due, or are submitted
for payment, whichever is less, or shall fail to perform any of its duties or
to observe or perform any other term, covenant, condition or agreement
provided within the Servicing Agreement, said failure shall constitute an
event of default by the Buyer. In the event of such default, Servicer shall
have the option of terminating the Servicing Agreement in addition to all
remedies available in equity or law.
13. MODIFICATIONS AND WAIVERS. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, not shall any waiver of any right, power or privilege hereunder
operate as a waiver of any other right, power of privilege hereunder, nor
shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof, or the exercise of
any other right, power or privilege hereunder. All rights and remedies
herein provided are cumulative and are not exclusive of any rights or
remedies that the parties hereto may otherwise have at law or in equity. No
waiver shall be valid in the absence of the written and signed consent of the
party against which enforcement of such is sought.
14. NOTICE. Except as otherwise specifically provided herein, any
notice hereunder shall be in writing (including telegraphic or telecopy
communication) and, if mailed, shall be deemed to be given when sent by
registered or certified mail, postage prepaid, or if telegraphed when
delivered to the telegraph company, or if telecopied when transmitted, or
otherwise when delivered in person to the addressee and a receipt given for,
in all such instances addressed to the respective party as follows:
To Servicer: Transition Leasing Management, Inc.
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxx Xxxx, President
To Buyer: Transaction Auto Finance II, Inc.
0000 Xxxxx Xxxx, Xxxxx 000
00
Xxxxxx, Xxxxx 00000
Attn: Xxx Xxxx, President
15. AMENDMENT. The Servicing Agreement may be amended, supplemented
or modified only with the written consent of the parties hereto.
16. CHOICE OF LAW. THE SERVICING AGREEMENT, AND THE VALIDITY AND
ENFORCEMENT HEREOF, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE STATE OF TEXAS.
17. SEVERABILITY. If any provision of the Servicing Agreement is held
to be illegal, invalid or unenforceable under present or future laws
effective during the term of the Servicing Agreement, the legality, validity
and enforceability of the remaining provisions of the Servicing Agreement,
shall not be affected thereby, and in lieu of each such illegal, invalid or
unenforceable provision there shall be added automatically as a part of the
Servicing Agreement a provision as similar in terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid and
enforceable.
18. ENTIRE AGREEMENT. This instrument embodies the entire agreement
between the parties relating to the subject matter hereof and supersedes all
prior agreements and understandings, if any, relating to the subject matter
hereof.
19. COUNTERPARTS. The Servicing Agreement may be executed in one or
more counterparts, each of which for all purposes is to be deemed an original.
20. SURVIVAL. All covenants, agreements, undertakings, indemnities,
representations and warranties made herein shall survive both the execution
and the termination hereof and shall not be affected by any investigation
made by any party.
21. FURTHER ASSURANCES. Servicer shall furnish to Buyer at the request
of the Buyer such additional information concerning the Contracts as Buyer
may from time to time reasonably request in order to establish compliance
with the terms and conditions of the Servicing Agreement, and shall execute,
acknowledge and deliver, or cause to be executed, acknowledged or delivered,
such supplements hereto and such further instruments as may reasonably be
required or appropriate and permitted by law to further express the
intention, or to facilitate the performance of the Servicing Agreement.
"BUYER"
TRANSITION AUTO FINANCE II, INC.
By:
-------------------------------------
Xxx Xxxx, President
12
"SERVICER"
TRANSITION LEASING MANAGEMENT, INC.
By:
-------------------------------------
Xxx Xxxx, President
13
SERVICING AGREEMENT
EXHIBIT A
SERVICING CRITERIA
At all times during the term of this Servicing Agreement as set forth
in Section 2 therein, Servicer shall perform its duties in material
accordance with the Servicing Agreement, and observe the following covenants
and criteria (referred to as the "servicing criteria"):
I. SERVICING ACTIVITY REPORT
A. Servicer shall prepare a Monthly Report Certificate (the
"Certificate") signed by an officer of Servicer who shall certify
as to the authenticity and accuracy therein, that all Contracts
managed by Servicer were collected and repossessed in accordance
with the terms and conditions of the Servicing Agreement,
including the servicing criteria described herein, and that no
Servicing Event of Default as described in Section 8 of the
Servicing Agreement has occurred since the date of the last such
Certificate.
B. The Certificate shall contain collection information on each
Contract since the date of the last such Certificate, including
adequately segregated information of all past due accounts,
repossessions, charge-offs, and extensions. Supporting documents
shall be made available to Buyer on a demand basis, and such
records shall be properly and safely maintained.
C. The Certificate shall be delivered to Buyer on or before the tenth
day of the month following the month covered thereunder.
II. COLLECTION POLICY
A. All Obligors under related Contracts will be issued a preprinted
payment book, monthly statements or other remittance advice or
instructions that will specifically request that all payments be
made to Servicer's Master Collections Account lockbox.
B. Servicer shall contact any Obligor on a past due Contract within
ten days after the payment due date for the purpose of pursuing
collections and shall adequately update all credit and collection
file records with respect to such activities.
C. Any material extensions, modifications, or acceptances of partial
payments by Obligors, and any related necessary Contract
amendments and/or default waivers by Servicer, shall be approved
by the chief credit officer or president of Servicer or its
assigns, and all necessary third party charges and explanations
relating thereto shall be documented in the collection file
records.
III. OBLIGOR DEFAULT
A. If, at any time, an Obligor is more than thirty days past due on a
payment owed by him under a Contract, Servicer shall engage an
independent third party contractor to repossess the Leased
Vehicle.
B. Following repossession of a Leased Vehicle, (i) Servicer will
proceed to cause the Leased Vehicle to be sold at an automobile
auction and deliver the proceeds to Buyer, or (ii), if the Obligor
has not previously defaulted, Servicer may, in its discretion upon
the exercise of reasonable judgment as to the financial
responsibility of Obligor and any other pertinent factors, allow
Obligor to regain possession of the Leased Vehicle upon payment of
late charges and repossession costs. In the situation in which
Obligor is allowed to regain possession of the Leased Vehicle,
Obligor will be advised that if default occurs a second time, the
Leased Vehicle will be repossessed and sold, and Obligor will not
be given the opportunity to cure the default and regain possession
of the Leased Vehicle, unless otherwise required by applicable
law.
