-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QFUtRLu1aZ4jU2VkFaK6+lC/nwBEXv6dIOqfnu2JpH+DaF3grIfsykLYAFKusAYd y7H04fqQL6vfzIwTKj13eA== 0001005477-97-000967.txt : 19970401 0001005477-97-000967.hdr.sgml : 19970401 ACCESSION NUMBER: 0001005477-97-000967 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOINFO INC CENTRAL INDEX KEY: 0000351017 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 132867481 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11497 FILM NUMBER: 97571278 BUSINESS ADDRESS: STREET 1: 1600 ROUTE 208 CITY: FAIR LAWN STATE: NJ ZIP: 07410 BUSINESS PHONE: 2017030500 MAIL ADDRESS: STREET 1: 1600 ROUTE 208 CITY: FAIR LAWN STATE: NJ ZIP: 07410 10-K 1 FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K -------------------------------- (Mark One) |x| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . . . . . . . . . . to . . . . . . . . . . Commission File Number 0-14786 AUTOINFO, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-2867481 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1600 Route 208 Fair Lawn, New Jersey 07410 (Address of principal executive offices) Registrant's telephone number, including area code: (201) 703-0500 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par value $.01 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_| As of March 24, 1997, 8,018,752 shares of the Registrant's common stock were outstanding. The aggregate market value of the common stock (based upon the closing price on the Nasdaq National Market System on March 24, 1997 of $2.375) of the Registrant held by non-affiliates of the Registrant at that date was approximately $17,050,000. DOCUMENTS INCORPORATED BY REFERENCE Part III - Portions of the Registrant's Proxy Statement relating to its 1997 Annual Meeting are incorporated herein by reference. PART 1 Item 1: BUSINESS FORWARD-LOOKING STATEMENTS Certain statements made in this Annual Report on Form 10-K are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the Company's early stage operations, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. General AutoInfo, Inc. (the "Company") is a consumer finance company specializing in the business of purchasing, selling and servicing retail automobile installment contracts ("Contracts") originated by dealers ("Dealers") in the sale of new and used automobiles, light trucks and passenger vans. Through its purchases, the Company provides financing to borrowers with limited credit histories, lower than average incomes or past credit problems ("Non-Prime Borrowers"). The Company serves as an alternative source of financing for Dealers, allowing sales to customers who otherwise might not be able to obtain financing from more traditional sources of automobile financing such as banks, credit unions or finance companies affiliated with major automobile manufacturers. The Company employs a regional center approach, as compared to the branch network or centralized approach utilized by a number of other non-prime finance companies. Management believes that this approach provides a necessary presence in its markets, thereby maximizing the Company's ability to service its dealers and monitor its loan portfolio. In February 1997, the Company unified its operating centers under the name CarLoanCo. All future operating centers will operate under this banner. In December 1995, the Company entered the non-prime automobile finance market (the "Non-Prime Market") through the acquisition, by a wholly-owned subsidiary, of the operating assets of Falk Finance Company ("FFC"), a Norfolk, Virginia based non-prime automobile consumer finance company. During 1996, the Company expanded on the FFC platform in establishing its Mid-Atlantic regional service center which services dealers in Delaware, Georgia, Maryland, North Carolina, South Carolina and Virginia, providing a complete range of automobile consumer finance services including sales and marketing, credit, servicing and collection. 2 In July 1996, the Company commenced operations of its Northeast Regional Center in Norwalk, Connecticut to provide its complete range of services to dealers in the Northeast. This center is presently servicing dealers in Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, Rhode Island and Vermont. The Company's business objective is to maximize the volume of loans it purchases, securitizes and services, while adhering to its underwriting guidelines, through the expansion of its regional centers. To achieve this objective, the Company employs the following strategies: Emphasis on Dealer Relationships--The Company believes that it is crucial to identify and meet dealers' financing needs. When presented with a loan application, the Company attempts to notify the dealer within one hour or less whether it will approve the automobile loan for purchase from the dealer. The Company's business hours generally coincide with those of the dealership and, in some cases, the Company will provide loan processing on the dealer's premises during dealer promotions. The Company also provides dealers with flexibility in developing loan structures to accommodate the needs of their customers, such as extended payment terms or low down-payment requirements when credit quality is deemed adequate. The Company, through its sales force, maintains frequent contacts with dealers and recommends service enhancements when warranted. By employing consistent loan underwriting and purchasing guidelines, the Company believes that it provides dealers with a reliable and consistent source of financing. Expansion of Dealer Network--The Company is constantly undertaking marketing activities with a view towards expanding its dealer network. These efforts include offering innovative products and services to its dealer network, such as CarLoanNet, the interactive internet loan application service recently introduced by the Company. Maintenance of Underwriting and Loan Purchasing Guidelines--The Company has developed a proprietary credit scoring system designed to maintain rigorous underwriting guidelines for its loan processing operations. The Company's credit approval system monitors many evaluation criteria, including debt-to-income, payment-to-income, loan-to-value, bankruptcy score, credit score and stability factors, and each loan application is reviewed by one of the Company's credit specialists at a regional center to determine whether the loan should be approved. To ensure the integrity of the credit approval system, management tracks on a daily basis the approval rates and delinquency and loss rates. Funding and Liquidity through Warehousing and Securitizations--The Company funds the acquisition of automobile loans principally through its warehouse facility. At December 31, 1996, the Company had a warehouse facility in place with an aggregate capacity of $100 million, of which approximately $82 million was available. The Company securitizes the loans purchased by it as asset-backed securities and uses such securitizations as a cost competitive source of capital compared to traditional sources of corporate debt financing. Securitization enables the Company to finance automobile loans on a regular basis, while retaining the right to receive future servicing fees and excess cash flows, and to use the proceeds from such securitizations to fund the purchase of additional automobile loans. The Company securitized $40 million in automobile loans during 1996. Expansion of Products and Services - The Company is constantly evaluating new and improved services to offer to its Dealer network to both maximize revenues and achieve further operating efficiencies. Expansion of Regional Presence - During 1996, the Company expanded its regional presence from the Mid-Atlantic region to also include the Northeast region. In furtherance of its regional approach, the Company will continue to evaluate further regional expansion. The Company has no currently pending plans for any additional centers. 3 The Non-Prime Auto Finance Industry The automobile finance industry was estimated to be in excess of $370 billion in 1995 (1996 data is not yet available). The market is generally divided by the types of automobiles sold (new versus used) and the credit worthiness of the borrower. Generally, banks, savings and loan associations, credit unions, large independent finance companies and captive finance companies such as Ford Motor Credit, GMAC, Chrysler Credit tend to provide financing for new automobiles purchased by prime customers. The non-prime segment of this overall market is believed to be approximately $95 billion and is comprised of both private and publicly traded companies providing credit availability to consumers who are higher financial risks and who have limited access to traditional financing sources. These independent finance companies tend to provide financing for used automobiles sold through new and used automobile dealerships at higher interest rates commensurate with the higher risk associated with the non-prime consumer. The Non-Prime Market has been fueled by the significant increase in the sale of used automobiles. In 1995, used car sales exceeded 43 million units on sustained compound annual growth rates of 12 - 13%. This increase is the results of a number of factors including (i) the high average price of a new car of $19,819 compared to $8,530 for a used car, (ii) the increased availability of newer late model used automobiles related, to some extent, to the trend towards leasing rather than buying of new vehicles, and (iii) availability of financing alternatives as provided by the growth in the number of independent finance companies servicing the non-prime segment of the market. Operations Dealer Contract Purchase Programs As of March 15, 1997, the Company was a party to agreements ("Dealer Agreements") with approximately 1,100 Dealers in 13 states. Most of these Dealers regularly submit Contracts to the Company for purchase, although such Dealers are under no obligation to submit any Contracts to the Company, nor is the Company obligated to purchase any Contracts. For the twelve months ended December 31, 1996, substantially all of the Contracts purchased by the Company consisted of financing for used cars. When a retail automobile buyer elects to obtain financing from a Dealer, an application is taken for submission by the Dealer to its financing sources. Typically, a Dealer will submit the buyer's application to more than one financing source for review. The Company believes the Dealer's decision to finance the automobile purchase with the Company, rather than other financing sources, is based primarily upon an analysis of the discounted purchase price offered for the Contract, the timeliness of response, the cash resources of the financing source, and any conditions to purchase. The Company receives loan applications by fax or through CarLoanNet, a state of the art internet service developed by the Company. Upon receipt of a loan application from a Dealer, the Company's credit personnel order a credit bureau report on the applicant to document the buyer's credit history. If, upon review by a Company credit officer, it is determined that the application meets the Company's underwriting criteria, a decision is made to purchase the Contract. When presented with a loan application, the Company attempts to notify the Dealer within one hour as to whether it intends to purchase such Contract. The Company buys Contracts directly from Dealers and does not make loans directly to purchasers of automobiles. 4 The Company currently purchases Contracts from Dealers at discounts up to 20% of the total amount financed under the Contracts, depending on the perceived credit risk of the Contract. Discounts averaged 14.7% for the twelve months ended December 31, 1996. The Company attempts to control Dealer misrepresentation by carefully screening the Contracts it purchases, by establishing and maintaining professional business relationships with Dealers, and by including certain representations and warranties by the Dealer in the Dealer Agreement. Pursuant to the Dealer Agreement, the Company may require the Dealer to repurchase any Contract in the event that the Dealer breaches its representations or warranties. There can be no assurance, however, that any Dealer will have the financial resources to satisfy its repurchase obligations to the Company. In conjunction with the acquisition of FFC, the Company entered into a ten year agreement with Charlie Falk Auto Wholesale, Incorporated ("CFAW"). This agreement provided and established the basis for conducting business and the criteria under which the Company purchased contracts from CFAW. Effective December 31, 1996, the Company and CFAW mutually agreed to and entered into a termination agreement which, among other provisions, provides for the Company to continue to purchase contracts which meet established underwriting criteria only through March 31, 1997. In 1996, approximately 38% of all contracts funded by the Company were purchased from CFAW. Contract Purchase Criteria To be eligible for purchase by the Company, a Contract must have been originated by a Dealer that has entered into a Dealer Agreement to sell Contracts to the Company. The Contracts must be secured by a first priority lien on a new or used automobile, light truck or passenger van and must meet the Company's underwriting criteria. In addition, each Contract requires the borrower to maintain physical damage insurance covering the financed vehicle and naming the Company as a loss payee. The Company or any purchaser of the Contract from the Company may, nonetheless, suffer a loss upon theft or physical damage of any financed vehicle if the borrower fails to maintain insurance as required by the Contract or is unable to pay for repairs to or replacement of the vehicle or is otherwise unable to fulfill its obligations under the Contract. The Company believes that its objective underwriting criteria enable it to evaluate effectively the creditworthiness of Non-Prime Borrowers and the adequacy of the financed vehicle as security for a Contract. These criteria include standards for price, term, amount of down payment, installment payment and add-on interest rate, mileage, age and type of vehicle, amount of the loan in relation to the value of the vehicle, borrower's income level, job and residence stability, credit history and debt serviceability, and other factors. These criteria are subject to change from time to time as circumstances may warrant. Upon receiving this information with the borrower's application, the Company's credit department will verify the borrower's employment, residency, insurance and credit information provided by the borrower by contacting various parties noted on the borrower's application, credit information bureaus and other sources. Further, the Company conducts a direct telephonic interview with the prospective borrower. The Company typically completes its credit review and consummates its purchase of a Contract within 48 hours of a complete financing package from the Dealer. All of the Contracts purchased by the Company are self-amortizing and provide for level payments over the term of the Contract. For Contracts purchased by the Company in the twelve months ended December 31, 1996, the retail purchase price of the related automobiles averaged $10,700. Contracts financing such purchases had annual percentage rates of interest ("APRs") averaging 22%. The average original principal amount financed under Contracts purchased in the twelve months ended December 31, 1996, was approximately $9,000, with an average original term of approximately 44 months and an average down payment of 16%. 5 All Contracts may be prepaid at any time without penalty. In the event a borrower elects to prepay a Contract in full, the payoff amount is calculated by deducting the unearned interest (as determined by the "Rule of 78's" method, where applicable) from the Contract balance. Each Contract purchased by the Company prohibits the sale or transfer of the financed vehicle without the secured party's consent and allows for the acceleration of the maturity of a Contract upon a sale or transfer without such consent. In most circumstances, the Company will not consent to a sale or transfer of a financed vehicle unless the related Contract is prepaid in full. The Company believes that the most important requirements to succeed in the Non-Prime Market are the ability to control borrower and Dealer misrepresentation at the point of origination; the development and consistent implementation of objective underwriting criteria specifically designed to evaluate the creditworthiness of Non-Prime Borrowers; and the maintenance of an active program to monitor performance and collect payments. Collection Procedures The Company believes that its ability to monitor performance and collect payments owed from Non-Prime Borrowers is primarily a function of its collection approach and support systems. The Company believes that if payment problems are identified early and the Company's collection staff works closely with borrowers to address these problems, it is possible to correct many of them before they deteriorate further. To this end, the Company utilizes pro-active collection procedures, which include making early and frequent contact with delinquent borrowers; educating borrowers as to the importance of maintaining good credit; and employing a consultative and customer service approach to assist the borrower in meeting his or her obligations, which includes attempting to identify the underlying causes of delinquency and cure them whenever possible. In support of its collection activities, the Company maintains a computerized collection system specifically designed to service automobile installment sale contracts with Non-Prime Borrowers. The Company typically attempts to make telephonic contact with delinquent borrowers on the first day after their monthly payment due date. Upon making contact with the borrower at his home or workplace the collector then inquires of the borrower the reason for the delinquency and when the Company can expect to receive the payment. The collector will attempt to get the borrower to make a promise for the delinquent payment for a time generally not to exceed one week from the date of the call. If the borrower makes such a promise, the account is placed on a pending status and is not contacted until the outcome of the promise is known. If the payment is made by the promise date and the account is no longer delinquent, the account is routed out of the collection system. If the payment is not made, or if the payment is made, but the account remains delinquent, the account is returned to the collector for subsequent contacts. If a borrower fails to make or keep promises for payments, or if the borrower is uncooperative or attempts to evade contact or hide the vehicle, a supervisor will review the collection activity relating to the account to determine if repossession of the vehicle is warranted. Generally, a decision will occur between the 45th and 60th day past the borrower's payment due date, but could occur sooner or later, depending on the specific circumstances. If a decision to repossess is made by a supervisor, such assignment is given to one of many licensed, bonded repossession agents used by the Company. When the vehicle is recovered, the repossession agent delivers it to a wholesale auto auction where it is kept until it is liquidated, usually within 30 days of the repossession. Liquidation proceeds are applied to the borrower's outstanding obligation under the Contract and the borrower is advised of his obligation to pay 6 any deficiency balance that remains. The Company uses all practical means available to collect deficiency balances, including filing for judgments against borrowers where applicable. Management Information Systems The Company maintains sophisticated data processing support and management information systems. Finance Manager, the Company's custom designed proprietary software managment system, is updated and maintained by the Company's MIS Department based in Norfolk, Virginia. Financing Activity Warehouse Facilities. The Company uses warehouse facilities with financial institutions to finance its purchase of loans on a short-term basis pending securitization. At December 31, 1996, the Company had an aggregate borrowing capacity of $100 million under a warehouse facility, of which $82 million was available. The facility provides for borrowing at the LIBOR rate plus 300 basis points. Amounts outstanding under the warehouse facility are secured by the automobile loans pledged to the lender as collateral for borrowings under the facility. Securitization of Loans. The Company pursues a strategy of securitizing loans through the sale of asset-backed securities. Securitization is used by companies as a cost-competitive source of capital compared to traditional corporate debt financing alternatives. The Company utilizes the net proceeds from securitizations to purchase additional automobile loans and to pay down outstanding warehouse facilities. The Company securitized approximately $40 million in automobile loans during 1996. In a securitization, the Company (through its special purpose wholly-owned subsidiary, AutoInfo Receivables Company, a Delaware corporation ("ARC")), transfers automobile loans to newly-formed securitization trusts, which issue one or more classes of asset-backed securities. The asset-backed securities are simultaneously sold to investors (except for certain subordinated classes of securities which may be retained by the Company). Each month, collections of principal and interest on the automobile loans are used by the trustee to pay the holders of the related asset-backed securities, to fund spread accounts as a source of cash to cover shortfalls in collections, if any, and to pay expenses. The Company continues to act as the servicer of the automobile loans held by the trust in return for a monthly fee. To improve the cost effectiveness of its securitization program, the Company arranges for credit enhancement to achieve a desired credit rating on the asset-backed securities issued. The credit enhancement for securitizations generally take the form of financial guaranty insurance policies issued by MBIA (the "Credit Enhancer"), which insures payments of principal and interest due on the asset-backed securities. The spread account for any securitization is generally funded with the interest collected on the loans that exceeds the sum of the interest payable to holders of asset-backed securities, the monthly servicing fee and certain other amounts. Funds are withdrawn from the spread account to cover any shortfalls in amounts payable on insured asset-backed securities or to reimburse the Credit Enhancer for draws on its financial guaranty insurance policy. In addition, the funds on deposit in any spread account for a securitization may be withdrawn to cover shortfalls in collections or to reimburse the Credit Enhancer for draws on policies issued in other securitizations. ARC is entitled to receive amounts from the spread accounts to the extent the amounts deposited exceed predetermined required minimum levels. The spread accounts cannot be accessed by the Company or ARC until such levels have been reached or with the consent of the Credit Enhancer. After such levels are reached, excess cash is will be distributed to ARC and then transferred to the Company. 7 Sales and Marketing The Company markets its dealer financing programs through a staff of 15 trained field sales representatives. The main duties of a field representative are to solicit and enroll new dealers into the program, train the dealers regarding the specific aspect of the Company's loan acquisition program, encourage additional contract volume and provide a direct hands on customer contact on a regular basis. Presently, the Company concentrates its marketing efforts in the MidAtlantic and Northeast regions. Competition The non-prime automotive consumer finance market is both highly competitive and fragmented. As such, the Company encounters competition in both the MidAtlantic and Northeastern markets from other local, regional and national consumer finance companies, many of whom have raised significant capital through equity offerings, securitization of their loan portfolio and warehouse lines of credit during the past several years. Other more traditional finance sources, such as banks and captive automobile finance companies, have not generally serviced the non-prime segment of the market. Within the last year, several large companies, including Ford Motor Company, have announced their entry into the non-prime marketplace. The major competitive factors leading to the dealer's choice of financing source are the consistency of the application of underwriting guidelines, the competitiveness of financing terms and dealer fees, the timeliness of application approval and funding and the financial stability of the source. The Company believes that it competes favorably on these factors. Regulation The Company's business is subject to regulations and licensing under various federal, state and local statutes and regulations. The Company maintains all licenses necessary for the lawful conduct of its business and operations. The Company is not licensed to make loans directly to borrowers. Several federal and state consumer protection laws, including the Federal Truth-In-Lending Act, the Federal Equal Credit Opportunity Act, the Federal Fair Debt Collection Practices Act and the Federal Trade Commission Act, regulate the extension of credit in consumer credit transactions. These laws mandate certain disclosures with respect to finance charges on Contracts and impose certain other restrictions on Dealers. In addition, laws in a number of states impose limitations on the amount of finance charges that may be charged by Dealers on credit sales. The so called Lemon Laws enacted by the federal government and various states provide certain rights to purchasers with respect to motor vehicles that fail to satisfy express warrantees. The application of Lemon Laws or violation of such other federal and state laws may give rise to a claim or defense of a borrower against a Dealer and its assignees, including the Company and purchasers of Contracts from the Company. The Dealer Agreement contains representations by the Dealer that, as of the date of assignment of Contracts, no such claims or defenses have been asserted or threatened with respect to the Contracts and that all requirements of such federal and state laws have been complied with in all material respects. Although a Dealer would be obligated to repurchase Contracts that involve a breach of such warranty, there can be no assurance that the Dealer will have the financial resources to satisfy its repurchase obligations to the Company. Certain of these laws also regulate the Company's loan servicing activities, including its methods of collection. Although the Company believes that it is currently in compliance with applicable statutes and regulations, there can be no assurance that the Company will be able to maintain such compliance. The failure to comply with such statutes and regulations could have a material adverse effect upon the Company. Furthermore, the adoption of additional statutes and regulations, changes in the interpretation and enforcement of current statutes and regulations or the expansion of the Company's business into jurisdictions that have adopted more stringent regulatory requirements than those in which the Company currently conducts business could have a material adverse effect upon the Company. 8 Upon the purchase of Contracts by the Company, the original Contracts and related title documents for the financed vehicles are delivered by the selling Dealers to the Company. The Dealer Agreement and related assignment contain representations and warrantees by the Dealer that an application for state registration of each financed vehicle, naming the Company as secured party with respect to the vehicle, was effected at the date of sale of the related Contract to the Company, and that all necessary steps have been taken to obtain a perfected first priority security interest in each financed vehicle in favor of the Company under the laws of the state in which the financed vehicle is registered. If a Dealer or the Company, because of clerical error or otherwise, has failed to take such action in a timely manner, or to maintain such interest with respect to a financed vehicle, neither the Company nor any purchaser of the related Contract from the Company would have a perfected security interest in the financed vehicle and its security interest may be subordinate to the interest of, among others, subsequent purchasers of the financed vehicle, holders of perfected security interests and a trustee in bankruptcy of the borrower. The security interest of the Company or the purchaser of a Contract may also be subordinate to the interests of third parties if the interest is not perfected due to administrative error by state recording officials. Moreover, fraud or forgery by the borrower could render a Contract unenforceable against third parties. In such events, the Company could be required by the purchaser to repurchase the Contract. In the event the Company is required to repurchase a Contract, it will generally have recourse against the Dealer from which it purchased the Contract. This recourse will be unsecured except for a lien on the vehicle covered by the Contract, and there can be no assurance that any Dealer will have the financial resources to satisfy its repurchase obligations to the Company. Subject to any recourse against Dealers, the Company will bear any loss on repossession and resale of vehicles financed under Contracts repurchased by it from investors. Under the laws of many states, liens for storage and repairs performed on a vehicle and for unpaid taxes take priority over a perfected security interest in the vehicle. Pursuant to its securitization purchase commitments, the Company generally warrants that, to the best of the Company's knowledge, no such liens or claims are pending or threatened with respect to a financed vehicle, which may be or become prior to or equal with the lien of the related Contracts. In the event that any of the Company's representations or warranties proves to be incorrect, the trust or the investor would be entitled to require the Company to repurchase the Contract relating to such financed vehicle. The Company, on behalf of purchasers of Contracts, may take action to enforce the security interest in financed vehicles with respect to any related Contracts in default by repossession and resale of the financed vehicles. The UCC and other state laws regulate repossession sales by requiring that the secured party provide the borrower with reasonable notice of the date, time and place of any public sale of the collateral, the date after which any private sale of the collateral may be held and of the borrower's right to redeem the financed vehicle prior to any such sale and by providing that any such sale be conducted in a commercially reasonable manner. Financed vehicles repossessed generally are resold by the Company through unaffiliated wholesale automobile networks or auctions, which are attended principally by used car dealers. In the event of a repossession and resale of a financed vehicle, after payment of outstanding liens for storage, repairs and unpaid taxes, to the extent those liens take priority over the Company's security interest, and after payment of the reasonable costs of retaking, holding and selling the vehicle, the secured party would be entitled to be paid the full outstanding balance of the Contract out of the sale proceeds before payments are made to the holders of junior security interests in the financed vehicles, to 9 unsecured creditors of the borrower, or, thereafter, to the borrower. Under the UCC and other laws applicable in most states, a creditor is entitled to obtain a deficiency judgment from a borrower for any deficiency on repossession and resale of the motor vehicle securing the unpaid balance of such borrower's motor vehicle loan. However, some states impose prohibitions or limitations on deficiency judgments. If a deficiency judgment were granted, the judgment would be a personal judgment against the borrower for the shortfall, and a defaulting borrower may often have very little capital or few sources of income available following repossession. Therefore, in many cases, it may not be useful to seek a deficiency judgment against a borrower or, if one is obtained, it may be settled at a significant discount. Patents, Trademarks and Copyrights "AUTOINFO" is a registered trademark and service mark of the Company. Employees The Company currently has 125 full-time employees. None of the Company's employees are represented by a labor union. The Company considers its relationship with its employees to be good. Item 2: PROPERTIES The Company's MidAtlantic Regional Center leases approximately 8,000 square feet of space at 863 Glenrock Road, Norfolk, Virginia. The lease runs through April 2001 and provides for an annual rent of $96,000. The Company's Northeast Regional Center leases approximately 10,000 square feet of space at 444 Westport Avenue, Norwalk, Connecticut. The lease runs through May 2001 and provides for an annual rental of $107,500. The Company maintains an operational facility of approximately 800 square feet at 6818 Grover Street, Omaha, Nebraska. The lease for such facility runs through June 1997 at an annual rent of $10,000. The Company rents approximately 2,900 square feet of space at 1600 Route 208, Fair Lawn, New Jersey where it maintains its executive offices. The lease runs through November 1997 at an annual rental of approximately $44,000, subject to certain rent escalation provisions. The Company believes that its present facilities are suitable and adequate for its reasonably foreseeable growth. Item 3. LEGAL PROCEEDINGS The Company is not party to any material legal proceedings. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 10 Part II Item 5. PRICE RANGE OF COMMON STOCK The Company's Common Stock is traded in the over-the-counter market and is quoted through the National Association of Securities Dealers Automated Quotation System ("NASDAQ") on the National Market System under the symbol AUTO. The following table sets forth, for the periods indicated, the high and low closing bid quotations per share for the Company's Common Stock as reported by NASDAQ. High Low -------- -------- Year ended December 31, 1995 - -------------------------------------- First quarter 3 59/64 2 3/8 Second quarter 3 13/16 3 1/16 Third quarter 3 1/2 3 1/16 Fourth quarter 3 1/2 3 High Low -------- -------- Year Ended December 31, 1996 - -------------------------------------- First quarter 3 1/2 3 Second quarter 3 7/16 3 1/16 Third quarter 3 2 Fourth quarter 3 7/8 2 3/4 As of March 24, 1997, the closing bid price per share for the Company's Common Stock, as reported by NASDAQ was $2.375. As of March 24, 1997, the Company had approximately 400 stockholders of record. Dividend Policy The Company has never declared or paid a cash dividend on its Common Stock. It has been the policy of the Company's Board of Directors to retain all available funds to finance the development and growth of the Company's business. The payment of cash dividends in the future will be dependent upon the earnings and financial requirements of the Company and other factors deemed relevant by the Board of Directors. 11 Item 6. SELECTED CONSOLIDATED FINANCIAL DATA The following is a summary of selected consolidated financial data relating to the Company. This summary has been restated to present the businesses sold as discontinued operations.
Seven months Year ended ended December December Year ended 31, 31, May 31, ------------------------------ 1996 1995 1995 1994 1993 -------- -------- -------- -------- -------- Statement of Operations Data: Revenue $ 13,185 $ 2,232 $ 1,599 $ 2,075 $ 1,903 Operating Expenses (12,092) (1,847) (4,009) (2,283) (2,241) Provision for credit losses (5,251) -- -- -- -- Unusual item - impairment of long- lived assets and additional credit losses on acquired automobile receivables (19,293) -- -- -- - -------- -------- -------- -------- -------- Income (loss) from continuing operations before income tax benefit (23,451) 385 (2,410) (208) (338) Benefit from income taxes (4,352) (176) (332) (65) (121) -------- -------- -------- -------- -------- Income (loss) from continuing operations (19,099) 561 (2,078) (143) (217) Income (loss) from discontinued operations -- (28) 1,519 2,164 1,953 Gain on sale of discontinued operations -- 296 8,885 -- -- -------- -------- -------- -------- -------- Net income (loss) $(19,099) $829 $ 8,326 $ 2,021 $ 1,736 -------- -------- -------- -------- -------- Net income (loss) per share: From continuing operations $ (2.41) $ .07 $ (.28) $ (.02) $ (.03) From discontinued operations -- -- .21 .29 .27 From gain on sale of discontinued operations -- .04 1.19 -- -- -------- -------- -------- -------- -------- Net income (loss) per share $ (2.41) $ .11 $ 1.12 $ .27 $ .24 -------- -------- -------- -------- -------- Balance Sheet Data: Net automobile receivables after allowance for credit losses $ 45,814 $ 25,074 $ -- $ -- $ -- Cash and short term investments 9,199 24,871 8,836 7,509 3,473
12 Total assets 74,451 65,795 42,357 26,387 19,975 Total debt 60,405 32,746 4,161 4,784 216 Retained earnings (deficit) (5,071) 14,029 13,199 4,873 2,852 Stockholders' equity 12,327 31,018 30,121 20,857 18,625
13 Item #7: Management's Discussion and Analysis of Financial Condition and Results of Operations The Company, since December 1995, is a specialized consumer finance company that acquires and services automobile receivables from automobile dealers selling new and used vehicles to non-prime customers. Results of Operations On April 1, 1995, the Company consummated the sale of certain assets, net of certain liabilities, constituting the operating assets of the Orion Network, Compass Network, Checkmate Computer Systems, and Insurance Parts Locator businesses. On July 20, 1995, the Company consummated the sale of the operating assets of its insurance inspection services business. The Results of Operations of these businesses have been classified as discontinued operations. On December 6, 1995, the Company, through a wholly owned subsidiary, acquired the operating assets of FALK Finance Company (FFC), a Norfolk, Virginia based specialized financial services company. As a result of this acquisition, the Company's primary business is to purchase non-prime automobile receivables from new and used automobile dealers. The Company services these dealers by providing specialized financing programs for buyers who typically have impaired credit histories and are unable to access traditional sources of available consumer credit. On February 28, 1996, the Company made an election to change its fiscal year-end from May 31 to December 31. The Company believes this change provides shareholders with information on a basis more comparable to other public entities in the specialized automobile finance industry. The Company's continuing operations consist of its non-prime automobile finance business and its long distance telephone services business. Except as otherwise noted, the following discussion of the results of operations is with respect to the Company's continuing operations. For the Year Ended December 31, 1996 The Company entered the non-prime automobile finance business in December 1995. The results of operations for the short year (seven months) ended December 31, 1995 include the operation of the Company's non-prime business for only one month. Certain information for the full year ended December 31, 1996 is not comparable to the prior year. Revenues Revenues for the year ended December 31, 1996 were derived from the non-prime automobile finance business ($11,789,000), the long distance telephone service business ($512,000) and investment income ($884,000), respectively. Net Interest Income on Automobile Receivables The Company's principal revenue source is the net interest income, or net spread, earned on its automobile receivables. This net spread is the differential between interest income received on loans receivable and the interest expense on related loans payable. The following table summarizes the pertinent data on the Company's automobile receivables portfolio as of and for the year ended December 31, 1996 and the seven months ended December 31, 1995: 14 1996 1995(2) ----------- ----------- Average loans receivable $45,394,000 $31,618,000 ----------- ----------- Average debt 37,629,000 30,906,000 ----------- ----------- Interest revenue $11,167,000 $ 741,000 Interest expense 3,839,000 284,000 ----------- ----------- Net interest income $ 7,328,000 $ 457,000 ----------- ----------- Yield on loans 24.6% 28.1% Cost of funds 10.2% 11.0% ----------- ----------- Net interest spread 14.4% 17.1% ----------- ----------- Net interest margin (1) 16.3% 17.3% ----------- ----------- (1) Net interest margin is net interest income divided by average loans outstanding. (2) Average amounts are for the period from December 6, 1995 through December 31, 1995. Costs and Expenses Interest expense for the year ended December 31, 1996 of $3,990,000 was related to the non-prime automobile financing business and the debt outstanding under the Company's senior credit facilities ($18.1 million as of December 31, 1996), securitized notes ($31.6 million as of December 31, 1996) and subordinated debt ($10.2 million as of December 31, 1996). Operating expenses for the year ended December 31, 1996 of $6,913,000 were attributable to the Company's non-prime automobile financing business ($5.5 million), the long distance telephone service business ($.4 million) and corporate expenses ($1.0 million). Depreciation and amortization expense for the year ended December 31, 1996 of $1,189,000 was primarily attributable to the amortization of goodwill and other intangible assets associated with the acquisition of FFC in December 1995. Approximately $784,000 of this amortization was related to the goodwill and other intangibles written off as of December 31, 1996. Provisions for Credit Losses and Impairment of Long-Lived Assets The acquisition of FFC in December 1995 included a portfolio of non-prime automobile receivables of approximately $31 million of which approximately 80% had been acquired by FFC from Charlie Falk's Auto Wholesalers, Incorporated (CFAW"). In addition to the tangible assets acquired, the Company entered into a Non-Compete Agreement and a 10 year Purchase Agreement with CFAW which, among other provisions, provided for the continued purchase of automobile receivables based upon established underwriting criteria at the sole discretion and option of the Company. During the year ended December 31, 1996, the quality of the automobile receivables acquired from CFAW, both prior to the acquisition date and subsequent thereto, as evidenced by the number of repossessions and the charge-off losses incurred, came into question. The Company determined to cease acquiring automobile receivables from CFAW and accordingly, effective December 31, 1996, the Company entered into a Modification and Termination Agreement with CFAW. As a result of this action and other factors, the Company has deemed a significant portion of the goodwill associated with the acquisition of FFC as well as the Non-Compete and Purchase Agreements are of no 15 continuing value and, accordingly, has taken a charge against operations as of December 31, 1996 of $11,193,000. Furthermore, the Company recorded additional credit losses of $8,100,000 on the acquired automobile receivables and has determined that an additional provision for losses of $5,251,000 is necessary to provide for the anticipated credit losses associated with automobile receivables purchased from CFAW and other dealers during 1996, respectively. These are non-cash charges to income which do not have a direct adverse effect on the Company's liquidity. Loss from Continuing Operations and Income Tax Benefit The loss from continuing operations before income tax benefit of $23,452,000 is primarily attributable to the write-off of goodwill and other intangible assets ($11.2 million), the provision for credit losses on the acquired portfolio ($8.1 million), the current provision for credit losses ($5.3 million) and the costs associated with the start-up of the Company's Northeast regional center ($.8 million). For the fiscal years ended May 31, 1995, 1994 and 1993, the Company incurred and paid federal tax liabilities of $7,005,000, $873,000 and $783,000, respectively. As a result of losses incurred, the Company has recorded an income tax benefit of $4,352,000 related to anticipated carryback claims for tax years ended December 31, 1996 and prior. No additional benefit has been recorded for additional carryback available for tax losses anticipated subsequent to December 31, 1996 for which the provision for credit losses has been recognized for the year ended December 31, 1996. Automobile Receivables The following table provides information regarding the Company's allowance for credit losses as of December 31, 1996 and 1995: 1996 1995 --------------- --------------- Allowance for credit losses $ 15,725,000 $ 6,818,000 Percentage of outstanding automobile 25.5% 21.3% receivables The following table summarizes the Company's delinquent accounts that were more than 60 days delinquent as of December 31, 1996 and 1995: 1996 1996 1995 1995 ------------- --------- ------------ ------- Amount % Amount % ------------- --------- ------------ ------- 60 to 89 days delinquent $3,290,000 4.1% $2,071,000 4.7% 90 days or more delinquent 1,739,000 2.2% 1,387,000 3.1% Total delinquent loans $5,029,000 6.3% $3,458,000 7.8% For the Seven Months Ended December 31, 1995 On February 28, 1996, the Company elected to change its fiscal year end to December 31. This decision is directly related to the acquisition of FFC and the entry by the Company into the non-prime automobile finance industry. It is the belief of management that the ability to compare the performance of the Company against numerous other publicly traded non-prime automobile finance companies which report the results of operations on a calendar year will provide for more meaningful dissemination of financial information and is in the best interest of the public and the Company's shareholders. 16 Operations for the seven months ended December 31, 1995 include the operating results of the Company's non-prime auto finance business since December 6, 1995, the acquisition date. Revenues Revenues of $2,232,000 for the seven month period ended December 31, 1995 were derived from the non-prime auto finance business for the month of December ($772,000), the Company's long distance telephone services business ($440,000) and investment income ($1,020,000). Costs and Expenses Interest expense for the seven month period ended December 31, 1995 was $416,000 and relates to the debt assumed relating to the acquisition of FFC in December 1995 of approximately $34,000,000 and to the $4,000,000 subordinated notes issued by the Company in January 1994 and notes payable issued in connection with an acquisition in January 1994. In September, 1995, the Company elected to prepay $2,000,000 of the subordinated notes. Operating expenses for the seven month period ended December 31, 1995 were $1,346,000 and consisted primarily of corporate office costs and the operating expenses of the non-prime auto finance business acquired in December 1995. Depreciation and amortization expense for the seven month period ended December 31, 1995 was $85,000 and consisted primarily of the amortization of goodwill and other intangible assets associated with the acquisition of FFC in December 1995. Income from Continuing Operations and Income Tax Benefit Income from continuing operations before taxes for the seven month period ended December 31, 1995 was $385,000. The income tax benefit for the seven month period ended December 31, 1995 was $176,000. The Company recorded a tax benefit as a result of a substantial portion of its investment income being derived from instruments exempt from federal taxation. Loss from Discontinued Operations Loss from discontinued operations for the seven month period ended December 31, 1995 was $28,000 and was related solely to the operations of the Company's insurance inspection services business sold in July 1995. Gain on Sale of Discontinued Operations The gain on sale of discontinued operations for the period ended December 31, 1995 was $297,000 and was related solely to the sale of the Company's insurance inspection services business in July 1995. 17 For the Year Ended May 31, 1995 Revenue For the year ended May 31, 1995 the Company's revenues were derived from the sale of long distance telephone services ($1,030,000) and investment income ($568,000). Total revenues for the year ended May 31, 1995 were $1,599,000, a decrease of 23% or $477,000 compared with total revenues of $2,076,000 for the prior year. The Company's telephone reseller division experienced a decline in revenue of $771,000 due primarily to reduced network usage levels and volume rebates from A T & T ($200,000) received in the prior fiscal year in connection with the achievement of certain network usage levels. Investment income increased by $294,000 as a direct result of the investment of the proceeds in April 1995 from the sale of the assets of the Orion Network, Compass Network, Checkmate Computer Systems, and Insurance Parts Locator businesses. Costs and Expenses Interest expense was $316,000, an increase of $185,000 over $131,000 for the prior year. This was directly related to the $4,000,000 subordinated notes issued by the Company in January 1994 and notes payable in connection with an acquisition in January 1994. Operating expenses for the year ended May 31, 1995 decreased by 12% to $1,864,000 from $2,118,000 for the prior year. The decrease was primarily related to the reduction in direct costs associated with providing the Company's long distance telephone services and was directly related to the decline in revenues. Depreciation and amortization expense for the year ended May 31, 1995 decreased by 25% to $25,000 from $34,000 for the prior year. Preferred stock investment write-off for the year ended May 31, 1995 was $1,804,000. As a result of the sale of the Company's businesses providing computerization and communication services to the automotive industry, the lack of synergistic business opportunity and the inability to remit management fees and preferred stock dividends as they became due, the Company has written off its preferred stock investment in ComputerLogic, Inc. (See Note 6 to the Consolidated Financial Statements) Loss from Continuing Operations and Income Tax Benefit Loss from continuing operations before taxes for the year ended May 31, 1995 was $2,410,000 compared to $207,000 in the prior year, an increase of $2,203,000. This increase is attributable to the write-off of the Company's Preferred Stock investment in ComputerLogic, Inc. ($1,804,000) and the impact of the decline in revenue in the Company's Telephone Reseller Division. The income tax benefit for the year ended May 31, 1995 was $332,000, or14% of the loss before income taxes compared to $64,000 or 31% in the prior year. The decrease in percentage was the result of the write-off of the company's Preferred Stock investment with no current tax benefit. The net loss from continuing operations was $2,078,000 for the year ended May 31, 1995 an increase of $1,935,000 as compared to $143,000 in the prior year. 18 Income from Discontinued Operations Income from discontinued operations for the year ended May 31, 1995 was $1,519,000 as compared to $2,164,000 in the prior year, a decrease of $645,000. The income for fiscal year 1995 reflects the ten month period up to the date of sale. In addition, the decrease was caused by lower margins on the sale of computer systems ($200,000) and the impact of reduced revenues from the sale of automotive supplies ($60,000). Gain on Sale of Discontinued Operations The gain on the sale of discontinued operations for the year ended May 31, 1995 relates solely to the sale of the operating assets of the Company's Orion Network, Compass Network, Checkmate Computer Systems and Insurance Parts Locator businesses on April 1, 1995 to ADP Claims Solutions Group, Inc. The gross proceeds of $30,350,000 in cash resulted in a gain of $8,886,000 after applicable taxes of $7,659,000. Trends and Uncertainties During the year ended May 31, 1995, increased competition had an adverse impact on the sale of computer systems and the results of operations. Liquidity and Capital Resources Since its entry into the Non-Prime Automobile industry in December 1995, the Company has funded its operations with payments received from automobile receivables, borrowings under senior credit facilities and the issuance of asset backed secured notes. In October 1996, the Company issued $36.3 million of securitized notes backed by $40.3 million of automobile receivables to a group of institutional investors in a private placement transaction. These notes were issued in two classes, $ 34.3 million of 6.53% Class "A" notes rated "AAA" by Standard & Poor's Rating Group and "Aaa" by Moody's Investors Service and $ 2.0 million of 11.31% Class "B" notes rated "BB" by Standard & Poor's Rating Group. The Class "A" notes were credit enhanced with an insurance policy issued by MBIA Insurance Corporation. The proceeds from the securitization were used to fund Cash Reserve accounts ($5.6 million) and the balance was used to reduce the amount outstanding under the Company's Senior Credit facility. Among other provisions, the notes require the maintenance of certain performance standards with respect to the portfolio of loan contracts securitized and certain overall financial consideration of the Company as a whole, including not realizing a net loss from operations in any two consecutive quarters and maintenance of minimum tangible net worth, as defined, of $7 million. At December 31, 1996, the Company had approximately $7.7 million of tangible net worth and was in compliance with all other covenants. The Company expects to maintain compliance with these covenants through 1997 and beyond. In December 1996, the Company entered into a financing agreement with a lender which provides for a $100 million line of credit to be used for the funding of the acquisition of non-prime automobile receivables. This facility provides for borrowings at LIBOR plus 300 basis points and replaced the Company's existing $42 million facility. Among other provisions, this facility requires the Company to maintain tangible net worth, as defined, of $10 million and is cancelable in the event of a material adverse change in the Company's business. At December 31, 1996, the Company had approximately $10.3 million of tangible net worth and was in compliance with all other covenants. The Company expects to maintain compliance with these covenants through 1997 and beyond. The Company has outstanding $10.2 million of subordinated debt. Of this amount, $8.2 million of 12% notes was included with the liabilities assumed with the acquisition of Falk Finance Company, Inc. ("FFC") in December 1995 and $2.0 million of 7.55% notes issued by the Company in 1994. The Company's liquid assets amounted to $9.2 million as of December 31, 1996. In addition, the Company has $6.4 million in Restricted Cash Reserve accounts established pursuant to the Indenture Agreement executed in conjunction with the issuance of Securitized Notes issued pursuant to the Private Placement Memorandum dated October 11, 1996. 19 The total amount of debt outstanding as of December 31, 1996 and 1995 was $60.4 million and $32.7 million, respectively. This following table presents the Company's debt instruments and weighted average interest rates on such instruments as of December 31, 1996 and 1995, respectively: 1996 1995 ---- ---- Weighted Weighted Average Average Balance Rate Balance Rate ------- ---- ------- ---- Revolving lines of $18.1 8.75% $20.7 9.75% credit Automobile receivable $31.6 6.75% - - backed notes Subordinated debt $10.2 11.75% $12.0 12.05% The Company's ability to continue to acquire automobile receivables as well as plan for future expansion is directly related to its ability to secure required capital. The Company has demonstrated the ability to secure warehouse lines of credit, issue receivable secured notes and obtain subordinated debt. The Company plans to continue to meet its capital needs through the cash flow generated from the payment of principal and interest on its outstanding automobile portfolio, the utilization of its senior credit facility, the issuance of receivable backed notes and the issuance of subordinated debt instruments. As of December 31, 1996, $81.9 million is available under the Company's senior credit facility. The Company believes that it has sufficient liquid assets and available lines of credit to meet its short and long-term capital requirements. The Company is primarily engaged in the acquisition of automobile receivables. It finances this acquisition program through the utilization of available lines of credit and other forms of debt. Accordingly, an increase in the cost of borrowing could adversely impact the results of operations by impacting the spread between interest earned on existing automobile receivables and the cost of borrowings which, to some degree, are variable. Inflation and changing prices had no material impact on revenues or the results of operations for the year ended December 31, 1996. Item 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is submitted as a separate section of this Report beginning on page F-1. Item 9: DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 20 Part III Item 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Item 11: EXECUTIVE COMPENSATION Item 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Item 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pursuant to General Instruction G, the information required by Part III shall be incorporated by reference from the Registrant's definitive proxy statement for the fiscal year ended December 31, 1996 which is to be filed with the Commission on or before April 30, 1997. Part IV Item 14: EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K Financial Statements The financial statements listed in the accompanying index to financial statements on Page F-1 are filed as part of this report. Exhibits -------- No. 2A Agreement and Plan of Merger between AutoInfo, Inc. (New York) and AutoInfo, Inc. (Delaware), January 20, 1987 (2) No. 3A Certificate of Incorporation of the Company. (3) No. 3B Amended and restated By-Laws of the Company. (11) No. 4A Specimen Stock Certificate. (4) No. 4B Rights Agreement, dated as of March 30, 1995 between AutoInfo, Inc. and American Stock Transfer & Trust Company, as Rights Agent. (5) No. 9A Settlement Agreement, dated June 22, 1995, between AutoInfo, Inc. and Ryback Management Corporation, et al. (12) No. 10A 1985 Stock Option Plan. (1) No. 10B 1986 Stock Option Plan. (3) No. 10C 1989 Stock Option Plan. (7) No. 10D 1992 Stock Option Plan. (10) No. 10E Employment Agreement between AutoInfo, Inc. and Scott Zecher dated January 1, 1994, as amended by Agreement dated April 10, 1995. (12) 21 No. 10F Supplemental Employment Agreement between AutoInfo, Inc. and Scott Zecher dated as of April 10, 1995. (12) No. 10G Employment Agreement between AutoInfo, Inc. and William Wunderlich dated as of April 10, 1995. (12) No. 10H Supplemental Employment Agreement between AutoInfo, Inc. and William Wunderlich as of April 10, 1995. (12) No. 10I Form of AutoInfo, Inc. Employee Protection Trust Agreement dated August 17, 1995. (12) No. 10J Form of Restricted Stock Grant Agreement between AutoInfo, Inc. and certain officers, directors and consultants. (4) No. 10K Note Agreement dated January 10, 1994 between AutoInfo, Inc. and certain investors with respect to issuance of 7.55% Subordinated Notes due January 9, 2000 and Common Stock Purchase Warrants. (6) No. 10L Asset Purchase Agreement dated January 31, 1995 between ADP Claims Solutions Group, Inc. and AutoInfo, Inc. (9) No. 10M Promissory Note and Security and Pledge Agreement dated April 28, 1995 between AutoInfo, Inc. and Scott Zecher. (12) No. 10N Asset Purchase Agreement dated December 6, 1995 between AutoInfo, Inc. and Falk Finance Company, Inc., et. al. (13) No. 10O Purchase Agreement dated December 6, 1995 between AutoInfo Finance of Virginia, Inc. and Charlie Falk's Auto Wholesaler, Incorporated. (13) No. 10P Loan Sale Agreement dated October 1, 1996 between AutoInfo Finance of Virginia, Inc. and AutoInfo Receivables Company. * No. 10Q Indenture dated October 1, 1996 among AutoInfo Receivables Company, as Issuer, Crestar Bank, as Custodian, and Bankers Trust Company, as Indenture Trustee. * No. 10R Servicing Agreement dated as of October 1, 1996 by and among AutoInfo Finance of Virginia, Inc., Servicer, AutoInfo Receivables Company, Issuer, Bankers Trust, Indenture Trustee and Back-Up Servicer and Crestar Bank, Custodian. * No. 10S Common Stock Purchase Warrant Agreement and Registration Rights Agreement, each dated October 11, 1996, between AutoInfo, Inc. and SunAmerica Life Insurance Company. * No. 10T Loan Security and Servicing Agreement, dated as of December 9, 1996, among AutoInfo Finance of Virginia, Inc., as Borrower and as Servicer, CarLoanCo., 22 Inc., as Borrower and as Servicer, and CS First Boston Mortgage Capital Corp., as Lender. * No. 10U Custody Agreement, dated as of December 9, 1996, by and among CS First Boston Mortgage Capital Corp., Lender, AutoInfo Finance of Virginia, Inc., Borrower and Servicer, CarLoanCo., Inc., Borrower and Servicer, and Crestar Bank, Custodian. * No. 10V Common Stock Purchase Warrant Agreement and Registration Rights Agreement, each dated as of December 10, 1996, between AutoInfo, Inc. and CS First Boston Mortgage Capital Corp. * No. 11A Calculation of earnings per share. * No. 21 Subsidiaries of the Registrant. * No. 24A Consent of Arthur Andersen LLP, independent public accountants. * No. 27 Financial Data Schedule. * ----------------------- *Filed as an Exhibit hereto. (1) This Exhibit was filed as an Exhibit to the Company's Registration Statement on Form S-18 (File No. 33-3526-NY) and is incorporated herein by reference. (2) This Exhibit was filed as an Exhibit to the Company's Current Report on Form 8-K dated January 6, 1987 and is incorporated herein by reference. (3) These Exhibits were filed as Exhibits to the Company's definitive proxy statement dated October 20, 1986 and incorporated herein by reference. (4) These Exhibits were filed as Exhibits to the Company's Registration Statement on Form S-1 (File No. 33-15465) and are incorporated herein by reference. (5) This Exhibit was filed as an Exhibit to the Company's Registration Statement on Form 8-A filed April 13, 1995, and is incorporated herein by reference. (6) This Exhibit was filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended May 31, 1994 and is incorporated herein by reference. (7) This Exhibit was filed as an Exhibit to the Company's definitive proxy statement dated September 25, 1989 and is incorporated herein by reference. (8) These Exhibits were filed as Exhibits to the Company's Current Report on Form 8-K dated December 19, 1991 and are incorporated herein by reference. (9) This Exhibit was filed as an Exhibit to the Company's definitive proxy statement dated March 1, 1995 and is incorporated herein by reference. (10) This Exhibit was filed as an Exhibit to the Company's definitive proxy statement dated October 2, 1992 and is incorporated herein by reference. (11) This Exhibit was filed as an Exhibit to the Company's Current Report on Form 8-K dated March 30, 1995 and is incorporated herein by reference. (12) This Exhibit was filed as an Exhibit to the Company's Annual Report on Form 10-K dated May 31, 1995 and is incorporated herein by reference. (13) This Exhibit was filed as an Exhibit to the Company's Current Report on Form 8-K dated December 6, 1995 and is incorporated herein by reference. 23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d), the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on March 25, 1997 on its behalf by the undersigned, thereunto duly authorized. AutoInfo, Inc. By: /s/ Scott Zecher --------------------------------- Scott Zecher, President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated. /s/ Andrew Gaspar ------------------------ Andrew Gaspar Director and Chairman March 25, 1997 /s/ Scott Zecher ------------------------ Scott Zecher Director, President, Chief Executive Officer March 25, 1997 /s/ William Wunderlich ------------------------ William Wunderlich Chief Financial Officer, Secretary and Treasurer March 25, 1997 (Principal Financial & Accounting Officer) /s/ Jason Bacher ------------------------ Jason Bacher Director March 25, 1997 /s/ Robert Fagenson ------------------------ Robert Fagenson Director March 25, 1997 /s/ Howard Nusbaum ------------------------ Howard Nusbaum Director March 25, 1997 /s/ Jerome Stengel ------------------------ Jerome Stengel Director March 25, 1997 24 AUTOINFO, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Public Accountants F-2 Consolidated Balance Sheets as of December 31, 1996 and 1995 F-3 Consolidated Statements of Operations for the Year Ended December 31, 1996, the Seven Months Ended December 31, 1995 and the Year Ended May 31, 1995 F-4 Consolidated Statements of Stockholders' Equity for the Year Ended December 31, 1996, the Seven Months Ended December 31, 1995 and the Year Ended May 31, 1995 F-5 Consolidated Statements of Cash Flows for the Year Ended December 31, 1996, the Seven Months Ended December 31, 1995 and the Year Ended May 31, 1995 F-6 Notes to Consolidated Financial Statements F-7 Information required by schedules called for under Regulation S-X is either not applicable or is included in the Consolidated Financial Statements or Notes thereto. F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To AutoInfo, Inc.: We have audited the accompanying consolidated balance sheets of AutoInfo, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for the year ended December 31, 1996, the seven month period ended December 31, 1995 and the year ended May 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of AutoInfo, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for the year ended December 31, 1996, the seven month period ended December 31, 1995 and the year ended May 31, 1995, in conformity with generally accepted accounting principles. New York, New York March 24, 1997 F-2 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1996 AND 1995 ASSETS
1996 1995 ------------ ------------ Gross automobile receivables $ 81,406,679 $ 44,070,860 Unearned interest (19,867,745) (12,178,807) ------------ ------------ Net automobile receivables 61,538,934 31,892,053 Allowance for credit losses (Note 6) (15,725,390) (6,818,195) ------------ ------------ Net automobile receivables after allowance for credit losses 45,813,544 25,073,858 Cash 4,307,038 964,842 Restricted cash (Note 8) 6,380,437 -- Short-term investments (Note 5) 4,892,199 23,906,459 Fixed assets, net 1,725,774 256,269 Goodwill and other intangibles, net (Note 12) 2,906,587 14,302,274 Other assets 4,073,502 1,291,674 Income tax refund receivable (Note 9) 4,352,000 -- ------------ ------------ $ 74,451,081 $ 65,795,376 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Revolving lines of credit (Note 8) $ 18,082,472 $ 20,679,024 Automobile receivables backed notes (Note 8) 31,611,989 -- Subordinated notes and other debt (Note 8) 10,710,330 12,067,166 Accounts payable and accrued liabilities 1,718,901 2,030,833 ------------ ------------ Total liabilities 62,123,692 34,777,023 ------------ ------------ Commitments and contingencies (Note 10) Stockholders' equity Common Stock - authorized 20,000,000 shares $.01 par value; issued and outstanding 7,954,752 at December 31, 1996 and 7,777,752 at December 31,1995 79,548 77,778 Additional paid-in capital 18,171,282 17,782,677 Officer note receivable (Note 11) (466,797) (466,797) Deferred compensation under stock bonus plan (Note 11) (385,930) (404,092) Retained earnings (deficit) (5,070,714) 14,028,787 ------------ ------------ Total stockholders' equity 12,327,389 31,018,353 ------------ ------------ $ 74,451,081 $ 65,795,376 ============ ============
See Accompanying Notes to Consolidated Financial Statements F-3 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996, THE SEVEN MONTHS ENDED DECEMBER 31, 1995 AND THE YEAR ENDED MAY 31, 1995.
Seven Months Year Ended Ended Year Ended December 31, December 31, May 31, REVENUES 1996 1995 1995 ------------ ----------- ----------- Interest and other finance revenue $ 11,789,130 $ 771,502 $ -- Investment income 884,459 1,020,382 568,267 Long distance telephone services 511,534 439,839 1,030,428 ------------ ----------- ----------- Total revenues 13,185,123 2,231,723 1,598,695 ------------ ----------- ----------- COSTS AND EXPENSES Interest expense 3,989,912 415,904 315,908 Operating expenses 6,913,086 1,346,218 1,863,779 Depreciation and amortization 1,189,298 84,889 25,158 Provision for credit losses (Note 6) 5,251,000 -- -- Preferred stock investment write-off -- -- 1,804,256 ------------ ----------- ----------- 17,343,296 1,847,011 4,009,101 Unusual item - impairment of long-lived assets and additional credit losses on acquired automobile receivables (Note 12) 19,293,328 -- -- ------------ ----------- ----------- Total costs and expenses 36,636,624 1,847,011 4,009,101 ------------ ----------- ----------- Income (loss) from continuing operations before income tax benefit (23,451,501) 384,712 (2,410,406) Income tax benefit (4,352,000) (175,960) (332,280) ------------ ----------- ----------- Income (loss) from continuing operations $(19,099,501) 560,672 (2,078,126) Income (loss) from discontinued operations net of income tax benefit (Note 4) -- (28,163) 1,518,659 Gain on sale of discontinued operations, net of income taxes (Note 4) -- 296,839 8,885,688 ------------ ----------- ----------- Net income (loss) $(19,099,501) $ 829,348 $ 8,326,221 ============ =========== =========== Per share data: Income (loss) from continuing operations ($ 2.41) $ .07 ($ .28) Income from discontinued operations -- -- .21 Gain on sale of discontinued operations -- .04 1.19 ------------ ----------- ----------- Net income per share ($ 2.41) $ .11 $ 1.12 ============ =========== =========== Weighted average number of common and common equivalent shares 7,920,515 7,770,917 7,410,548 ------------ ----------- -----------
See Accompanying Notes to Consolidated Financial Statements F-4 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1996, THE SEVEN MONTHS ENDED DECEMBER 31, 1995 AND THE YEAR ENDED MAY 31, 1995
Shares of Deferred Common Additional Officer Compensation Stock Common Paid - In Note Under Stock Retained Outstanding Stock Capital Receivable Bonus Plan Earnings ---------- ------- ----------- ---------- ------------ ------------ Balance June 1, 1994 7,253,286 $72,533 $16,344,194 $ -- $(432,847) $ 4,873,218 Exercise of stock options 502,966 5,030 1,234,365 -- -- -- Amortization of deferred compensation -- -- -- -- 18,161 -- Acceleration of vesting rights of employee stock options -- -- 146,708 -- -- -- Loan to officer for the exercise of stock options -- -- -- (466,797) -- -- Net income -- -- -- -- -- 8,326,221 ---------- ------- ----------- --------- --------- ------------ Balance May 31, 1995 7,756,252 77,563 17,725,267 (466,797) (414,686) 13,199,439 Exercise of stock options 21,500 215 57,410 -- -- -- Amortization of deferred compensation -- -- -- -- 10,594 -- Net income -- -- -- -- -- 829,348 ---------- ------- ----------- --------- --------- ------------ Balance December 31, 1995 7,777,752 77,778 17,782,677 (466,797) (404,092) 14,028,787 Common shares issued 177,000 1,770 388,605 -- -- -- Amortization of deferred compensation -- -- -- -- 18,162 -- Net (loss) -- -- -- -- -- (19,099,501) ---------- ------- ----------- --------- --------- ------------ Balance, December 31, 1996 7,954,752 79,548 $18,171,282 $(466,797) $(385,930) $ (5,070,714) ========== ======= =========== ========= ========= ============
See Accompanying Notes to Consolidated Financial Statements F-5 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1996, THE SEVEN MONTHS ENDED DECEMBER 31, 1995 AND YEAR ENDED MAY 31, 1995
Seven Year Ended Months Ended Year ended December 31, December 31, May 31, 1996 1995 1995 ------------ ------------- ------------ Cash flows from operating activities: Net income (loss) $(19,099,501) $ 829,348 $ 8,326,221 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization expenses 1,189,298 84,889 413,926 Amortization of deferred compensation 18,162 10,594 18,161 Gain on sale of discontinued operations -- (449,756) (16,544,329) Preferred stock investment write-off -- -- 1,637,199 Provision for credit losses 5,251,000 -- -- Unusual item-impairment of long-lived assets and additional credit losses on acquired automobile receivables 19,293,328 -- -- Changes in assets and liabilities: Automobile receivables, net (34,290,686) (986,632) -- Other assets (3,081,728) (573,645) 194,760 Income tax refund, receivable (4,352,000) -- -- Accounts payable and accrued liabilities (311,933) (6,625,804) 7,329,083 ------------ ------------- ------------ Net cash provided by (used for) continuing operations (35,384,060) (7,711,006) 1,375,021 ------------ ------------- ------------ Net cash (used for) discontinued operations -- (105,141) (205,480) ------------ ------------- ------------ Cash flows from investing activities: Sale of discontinued operations -- 3,750,000 30,350,000 Officer note receivable -- -- (466,797) Acquisitions -- (4,912,333) -- Capital expenditures (1,797,168) (497,661) (341,861) Redemption of short-term investments 43,941,466 103,294,353 23,644,168 Purchases of short term investments (24,927,206) (88,886,323) (54,894,966) ------------ ------------- ------------ Net cash provided by (used for) investing activities 17,217,092 12,748,036 (1,709,456) ------------ ------------- ------------ Cash Flows from Financing Activities: Issuance of notes 36,789,873 -- -- Reduction of borrowings (8,900,272) (4,546,540) (623,096) Increase in restricted cash (6,380,437) -- -- Exercise of stock options -- 57,625 1,239,395 ------------ ------------- ------------ Net cash provided by (used for) financing activities 21,509,164 (4,488,915) 616,299 ------------ ------------- ------------ Net increase in cash 3,342,196 442,974 76,384 Cash at beginning of year 964,842 521,868 445,484 ------------ ------------- ------------ Cash at end of year $ 4,307,038 $ 964,842 $ 521,868 ============ ============= ============
See Accompanying Notes to Consolidated Financial Statements F-6 AUTOINFO, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996, SEVEN MONTHS ENDED DECEMBER 31, 1995 AND YEAR ENDED MAY 31, 1995 Note 1 - Business and Summary of Significant Accounting Policies Business On December 6, 1995, AutoInfo, Inc. (the "Company"), through a newly formed wholly owned subsidiary, acquired the operating assets of Falk Finance Company ("FFC"), a Norfolk, Virginia based non-prime automobile consumer finance company, for $5,125,000 in cash and the assumption of liabilities and debt approximating $34,000,000. As a result of this acquisition, the Company's primary business is to purchase non-prime automobile retail installment contracts from independent and franchised used vehicle dealers. The Company services these dealers by providing specialized financing programs for buyers who typically have impaired credit histories and are unable to access traditional sources of available consumer credit. In conjunction with the acquisition of FFC, the Company entered into a ten year agreement with Charlie Falk Auto Wholesale, Incorporated ("CFAW"). This agreement provided and established the basis for conducting business and the criteria under which the Company purchased contracts from CFAW. Effective December 31, 1996, the Company and CFAW mutually agreed to and entered into a termination agreement which, among other provisions, provides for the Company to continue to purchase contracts which meet established underwriting criteria only through March 1997 (see Note 12). In 1996, approximately 38% of all contracts funded by the Company were purchased from CFAW. In July 1996, the Company commenced operations of its Northeast Regional Center in Norwalk, Connecticut to provide its complete range of services to dealers in the Northeast. This center is presently servicing dealers in Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, Rhode Island and Vermont. Prior to December 1995, the Company operated in different business lines. During the fiscal year ended May 31, 1995 and on July 20, 1995, the Company sold substantially all of its operating assets for $34,100,000 in cash in two separate transactions. As a result, the Company's sole operating business which remained provides long distance telephone communications services. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation. Automobile Receivables Automobile receivables represent retail installment sales contracts purchased from automobile dealers at discounts ranging up to 20%. Allowance for Credit Losses The Company established an allowance for credit losses in the FFC acquired portfolio as of the date of acquisition based upon an evaluation of a number of factors including prior loss experience, contractual delinquencies, the value of underlying collateral and other factors. At the time of the purchase of installment contracts from dealers an allowance for credit losses is established based on an analysis of similar factors. The allowance is periodically evaluated for adequacy based upon a review of credit loss experience, delinquency trends, static pool loss analysis and an estimate of future losses inherent in the existing finance receivable portfolio. Subsequent to the purchase of loans, a provision for losses, if any, is charged to income in order to maintain the allowance at an adequate level. The Company charges the allowance for loss account at the time a customer receivable is deemed uncollectable. Any reduction in the required allowance will be amortized to income prospectively as an adjustment in the yield on the related loans. The estimate of the allowance for credit losses requires a high degree of judgement based upon, among other things, the inherent risk associated with the portfolio of loans being purchased from dealers. Changes in estimates and additional losses on portfolios could develop in the future based on changes in economic factors and other circumstances and such changes could be significant. The Company estimates and records losses as they become apparent, estimatable and probable. Concentration of Credit Risks The Company's primary credit risk relates to lending to individuals who cannot obtain traditional forms of financing. The Company is currently acquiring automobile receivables in 13 states and, accordingly, does not believe that its business is subject to credit risk with respect to geographic concentration. Repossessed Vehicles Held for Sale The Company repossesses the collateral when a determination is made that collection efforts are unlikely to be successful. The value of a repossessed vehicle is based upon an estimate of the net realizable amount upon liquidation. As of December 31, 1996, there were 304 repossessed vehicles held for resale with an aggregate value of approximately $804,000. F-7 Revenue Recognition The Company recognizes interest income from automobile receivables on the interest method. The accrual of interest income is suspended when a loan is ninety days contractually delinquent. All discounts on the purchase of installment contracts from dealers are held in reserve and are considered to cover future anticipated credit losses. Short-Term Investments Short-term investments include common stock and bond funds, money market instruments and municipal bonds. Investments are carried at cost which approximates market value (See Note 5). Fixed Assets Depreciation of fixed assets is provided on the straight-line method over the estimated useful lives of the related assets which range from three to five years. Goodwill and Other Intangibles The excess of cost over the fair value of net assets acquired is allocated to goodwill and other intangibles and is being amortized using the straight-line method over periods of up to twenty years. In March 1995, the Financial Accounting Standards Board issued SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets to Be Disposed Of." The pronouncement is effective for fiscal years beginning after December 16, 1995. This statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company currently uses methods that are consistent with SFAS No.121 to evaluate the carrying amount of goodwill and other intangibles including comparing estimated future cash flows identified with each long-lived asset group. For purposes of such comparison, portions of unallocated excess of cost over net assets acquired were attributed to related long-lived assets and identifiable intangible assets based upon the relative fair values of such assets at acquisition. In the fourth quarter of 1996, the Company determined that certain components of goodwill and other intangible assets were impaired resulting in a charge to operations (see Note 12). Net Income (Loss) Per Share Net income (loss) per share of common stock is based on the weighted average number of shares of common stock and common stock equivalents outstanding during the period. The net income (loss) per share and the weighted average number of common and common equivalent shares represent primary earnings per share data. Fully diluted earnings per share is not presented since its effect is not significant. Use of Estimates The preparation of these financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Management estimates that are particularly sensitive to change relate to the determination of the adequacy of the allowance for credit losses on automobile receivables. The Company believes that all such F-8 assumptions are reasonable and that all estimates are adequate, however, actual results could differ from those estimates. Income Taxes Deferred income taxes are recorded in accordance with Statement of Financial Standard No. 109 "Accounting for Income taxes," by applying enacted statutory tax rates to temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. At December 31, 1996, the Company has net deferred tax assets of approximately $3.2 million, primarily resulting from the differences between financial reporting and tax bases of goodwill and automobile receivables, which are offset by valuation allowances due to the uncertainty of their future realizability. Stock-Based Compensation The Company accounts for stock-based compensation issued to employees in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". The Company did not adopt the financial reporting requirements of Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," for stock based compensation granted to employees in accordance with the provisions of SFAS 123 and accordingly, the Company has disclosed in the notes to the financial statements the pro forma net loss for the periods presented as if the fair value based method was used. (See Note 11). Note 2 - Change in Fiscal Year On February 28, 1996, the Company changed its fiscal year-end to December 31 from May 31. The Company believes that this change will provide shareholders with information on a basis more comparable to other public entities in the specialized automobile finance industry. Accordingly, the accompanying financial statements reflect the Company's financial position and results of operations as of and for the seven month period ended December 31, 1995. Following is selected financial data for the seven month periods ended December 31, 1995 and 1994: 1994 1995 (Unaudited) ------------- ------------- Revenues $2,231,723 $641,227 ------------- ------------- Income (loss) from continuing 560,672 (186,225) operations Income (loss) from discontinued (28,163) 1,072,913 operations Gain on sale of discontinued 296,839 - operations ------------- ------------- Net income $829,348 $886,688 ------------- ------------- Per share data: From continuing operations $.07 $(.03) From discontinued operations - .15 From gain on sale .04 - ------------- ------------- Net income $.11 $.12 ------------- ------------- F-9 Note 3 - Business Acquisitions On December 6, 1995, the Company, through a newly formed wholly owned subsidiary, acquired the operating assets of Falk Finance Company (FFC), a Norfolk, Virginia based specialized financial services company, for $5,125,000 in cash and the assumption of liabilities and debt approximating $34,000,000. The results of operations of this business have been consolidated with the Company since December 6, 1995. The following unaudited pro-forma results of operations for the seven month period ended December 31, 1995 and for the year ended May 31, 1995 is presented as though the Company's business acquisition during the seven month period ended December 31, 1995 had occurred at the beginning of the prior fiscal year ended May 31, 1995: For the seven months ended For the year December 31, ended May 31, 1995 1995 ---------- ---------- Revenues $5,957,662 $8,141,980 Net income $ 601,400 $6,840,548 Net income per share $ .08 $ .92 Note 4 - Discontinued Operations On July 20, 1995, the Company sold the assets relating to its Insurance Inspection Services business for $3,750,000 in cash. The gain on the sale was $296,839 after applicable taxes of $152,917. On April 1, 1995, the Company sold the assets relating to its Orion Network, Compass Network, Checkmate Computer Systems, and Insurance Parts Locator businesses to ADP Claims Solutions Group, Inc., for $30,350,000 in cash. The gain of the sale was $8,885,688 after applicable taxes of $7,658,641. Prior years have been restated to present the businesses sold as discontinued operations. Summarized results of operations of the discontinued operations were as follows: For the seven For the year months ended ended December 31, May 31, 1995 1995 ------------- ----------- Revenues $ 533,318 $17,490,757 ========= =========== Income (loss) before income taxes (42,685) 2,021,194 Income taxes (benefit) (14,522) 502,535 --------- ----------- Net income (loss) from discontinued operations $ (28,163) $ 1,518,659 ========= =========== Gain on sale $ 449,756 $16,544,329 Income Taxes 152,917 7,658,641 --------- ----------- Net income from sale of discontinued operations $ 296,839 $ 8,885,688 ========= =========== F-10 Note 5 - Short-Term Investments Debt and equity securities used as part of the Company's investment management that may be sold in response to cash needs, changes in interest rates, and other factors have been classified as securities available for sale. Such securities are reported at cost which approximates fair value and have maturities of less than one year and included: December 31, December 31, 1996 1995 ----------- ----------- Common stock and bond funds $ 2,883,524 $ 3,613,394 Money market instruments 665,619 4,585,558 Municipal bonds 1,343,056 15,707,507 ----------- ----------- $ 4,892,199 $23,906,459 ----------- ----------- Gains and losses on disposition of securities are recognized on the specific identification method in the period in which they occur. Unrealized gains and losses, if material, would be excluded from earnings and reported as a separate component of stockholders' equity on an after-tax basis. During the year ended December 31, 1996, the seven month period ended December 31, 1995 and the fiscal year ended May 31, 1995, gains and losses arising from the disposition of marketable securities as well as unrealized gains and losses were not material. F-11 Note 6 - Credit Losses A rollforward of allowance for credit losses by significant component is as follows: Portfolio Acquired from Other FFC Portfolios Total ------------ ------------ ------------ Balance at December 31, 1995 $ 6,122,000 $ 696,000 $ 6,818,000 Purchase discounts -- 11,181,000 11,181,000 Charge offs (10,469,000) (5,156,000) (15,625,000) Additions to reserve (Note 12) 8,100,000 5,251,000 13,351,000 ------------ ------------ ------------ Balance at December 31, 1996 $ 3,753,000 $ 11,972,000 $ 15,725,000 ------------ ------------ ------------ Provision For Credit Losses During 1996, the Company purchased automobile receivables from CFAW pursuant to a ten-year purchase agreement related to the acquisition of assets from FFC in December 1995, in addition to purchases from other dealers. In 1996, the determination was made by the Company to terminate this relationship. Due to the poor performance of this portfolio, in addition to additional credit losses provided on the portfolio acquired from FFC, the Company has provided for additional credit losses relating to automobile receivables purchased from CFAW during 1996 included in the $5,251,000 noted above. Note 7 - Investment In December 1991, the Company acquired a Preferred Stock Investment (3,293 shares of $500 par value, 7% cumulative convertible preferred stock) in ComputerLogic, Inc., a Georgia corporation ("ComputerLogic"), which offers computer based products to the automobile parts and repair industries. The Preferred Stock elects not less than 40% of the ComputerLogic board of directors. The Company's Preferred Stock Investment is convertible into 38% of the outstanding capital stock of ComputerLogic. The Company also has the option to increase its investment for additional consideration as described in the purchase agreement. The purchase price consisted of cash of $1,250,000 and 101,667 shares of the Company's Common Stock. The investment was being carried at the lower of cost or net realizable value. As a result of the sale of the Company's businesses providing computerization and communications services to the automotive industry and the resulting lack of synergistic business opportunities, the Company does not plan to exercise its option to increase its investment in ComputerLogic. The Company therefore as of May 31, 1995 wrote off its preferred stock investments totaling $1,804,256 which included unpaid management fees and unpaid preferred stock dividends of $155,460 as of May 31, 1995 and determined that any future fees and dividend received would be recorded as income when received. During the year ended December 31, 1996 the Company received $280,000 in fees and dividends from ComputerLogic. F-12 Note 8 - Debt Revolving Lines of Credit In December 1996, the Company entered into a revolving credit agreement with CS First Boston Mortgage Capital Corp. ("CSFB"), which provides for borrowings of up to $100 million collateralized by installment automobile loan contracts. Among other provisions, this facility requires the Company to maintain tangible net worth, as defined, of $10 million and is cancelable in the event of a material adverse change in the Company's business. At December 31, 1996, the Company had approximately $10.3 million of tangible net worth and was in compliance with all other covenants. The Company expects to maintain compliance with these covenants through 1997 and beyond. The note matures December 1999 and is renewable each year at the option of the lender. Interest is payable monthly at the LIBOR rate ( 5.55% as of December 31, 1996) plus 3%. Advances outstanding as of December 31, 1996 were $3,243,000 and the weighted average interest rate for the month of December 1996 was 8.6%. In conjunction with the acquisition of FFC on December 6, 1995, the Company entered into a revolving credit facility with Finova Capital Corporation ("Finova") which provided for borrowings of up to $42 million. Interest is payable monthly at the prime rate (8.25% at December 31, 1996) plus 1.75%. Advances outstanding as of December 31, 1996 were $14,839,000 and the weighted average interest rate for the month of December 1996 was 10.0%. This revolving credit facility was terminated and repaid through the utilization of the CSFB revolving credit facility in January 1997. The total amount available under these lines at December 31, 1996 was approximately $82 million. F-13 Automobile Receivables Backed Notes In October 1996, AutoInfo Receivables Company, a wholly-owned special purpose subsidiary of the Company, sold, in a private placement, $34,281,119 of 6.53% Class A Auto Loan Backed Notes and $2,016,536 of 11.31% Class B Auto Loan Backed Notes with a stated maturity date of January 2002. These Notes are repaid from the collection of payments of principal and interest and are collateralized by approximately $40,330,000 of automobile receivables and a Reserve Account in the amount of approximately $5,600,000. In addition, the repayment of principal of the Class A Notes is guaranteed by insurance issued by MBIA Insurance Corporation, a nationally recognized insurance company. The Class A Notes were rated AAA by Standard & Poors's Rating Group and Aaa by Moody's Investor Service. The Class B Notes were rated BB by Standard & Poors's Rating Group. The Company acts as servicer and, as such, performs collection and servicing activities on these receivables. An Indenture and Servicing Agreement requires, among other provisions, the maintenance of certain performance standards with respect to the portfolio of loan contracts securitized and certain overall financial considerations of the Company as a whole, including not realizing a net loss from operations in any two consecutive quarters and maintenance of minimum tangible net worth, as defined, of $7 million. At December 31, 1996, the Company had approximately $7.7 million of tangible net worth and was in compliance with all other covenants. The Company expects to maintain compliance with these covenants through 1997 and beyond. The proceeds from the issuance of these notes were used to reduce the borrowings under the Company's senior credit facility as well as to fund the Reserve Account. The assets of AutoInfo Receivables Company are not available to pay general creditors of the Company. As of December 31, 1996, the balance of the Class A and Class B Notes, the underlying loan contracts receivable backing these Notes and the Reserve Account balances were as follows: Underlying Reserve Note Receivables Account Balance Balance Balance ----------- ----------- ---------- Class A Notes $29,595,453 $34,303,344 $6,178,783 Class B Notes 2,016,536 (a) 201,654 ----------- ---------- $31,611,989 $6,380,437 ----------- ---------- (a) The Class B Notes are collateralized by the loan contracts only after the Class A noteholders are paid in full. F-14 Subordinated Notes and Other Debt Subordinated notes and other debt consist of the following:
1996 1995 ----------- ----------- Subordinated notes (a) $ 8,200,000 $ 9,800,000 Subordinated notes due January 2000 payable in equal annual installments in January 1998, 1999 and 2000 with interest at 7.55% paid semi-annually 2,000,000 2,000,000 Other notes payable due in monthly installments through 2001 with interest at prime to 12.4% 510,330 267,166 ----------- ----------- Total other notes $10,710,330 $12,067,166 ----------- -----------
(a) On December 6, 1995 as part of the acquisition of FFC, the Company assumed unsecured subordinated notes in the amount of $9,800,000. In 1996, the Company redeemed $1,600,000 of the Series B Notes. These notes bear interest at the rate of 12% per annum, payable monthly. The Series A Notes ($4,900,000) mature on May 1, 1999 and the Series B Notes ($3,300,000) mature on December 31, 2000. The Company paid interest of approximately $3,938,000 for the year ended December 31, 1996, $231,000 for the seven month period ended December 31, 1995 and $308,000 during the fiscal year ended May 31, 1995, respectively. Note 9 - Income Taxes For the year ended December 31, 1996, the seven months ended December 31, 1995 and for the year ended May 31, 1995, the provision (benefit) for income taxes consisted of the following: Seven Months Year ended Ended Year ended December 31, December 31, May 31, 1996 1995 1995 ----------- ----------- ----------- Federal $(4,352,000) $ (184,882) $ (320,331) State -- 8,922 (11,949) ----------- ----------- ----------- Income tax benefit on loss from continuing operations $(4,352,000) $ (175,960) $ (332,280) ----------- ----------- ----------- Income tax on income from discontinued operations: Federal -- $ (14,522) $ 593,093 State -- -- (90,558) ----------- ----------- ----------- $ -- $ (14,522) $ 502,535 ----------- ----------- ----------- Income taxes on gain on sale of discontinued operations: Federal -- $ 152,917 $ 7,148,753 State -- -- 509,888 ----------- ----------- ----------- $ -- $ 152,917 $ 7,658,641 ----------- ----------- ----------- F-15 The following table reconciles the Company's effective income tax rate on income (loss) from continuing operations to the Federal Statutory Rate for the year ended December 31, 1996, the seven month period ended December 31, 1995 and for the year ended May 31, 1995: Seven Months Year ended Ended Year Ended December 31, December 31, May 31, 1996 1995 1995 ------ ------ ------ Federal Statutory Rate (34.0)% 34.0% (34.0)% Effect of: State and local taxes, net of federal benefit -- (.8) (.2) Benefit from tax exempt income (.8) (81.4) (7.0) Preferred stock investment write-off -- -- 23.1 Valuation allowance against deferred tax assets 15.3 -- -- Other, net -- 2.5 4.3 -------- -------- -------- (19.5)% (45.7)% (13.8)% ======== ======== ======== The Company paid income taxes of approximately $0, $6,632,000 and $884,000, for the year ended December 31, 1996, the seven month period ended December 31, 1995 and for the fiscal year ended May 31, 1995, respectively. Note 10 - Commitments and Contingencies Leases The Company is obligated under noncancellable operating leases for premises and equipment expiring at various dates through 1999. Future minimum lease payments are $313,000, $204,000, $167,000, $142,000 and $53,000 for each of the five year periods ended December 31, 2001. Lease expense for the year ended December 31, 1996, the seven month period ended December 31, 1995 and the year ended May 31, 1995 was approximately $ 227,000, $68,000 and $384,000, respectively. 401(k) Plan The Company is obligated under its 401(k) Plan to match fifty percent of employee contributions up to a maximum of three percent of eligible compensation. 401(k) Plan expense for the year ended December 31, 1996, the seven month period ended December 31, 1995 and the year ended May 31, 1995 was approximately $38,000, $ 3,000 and $72,000, respectively. Other Agreements The Company has employment agreements with two officers of the Company, one of whom is also a stockholder. The agreements expire through 1998 and provide for aggregate annual compensation of approximately $400,000. In addition, the Company has an employment agreement with a non-officer employee. This agreement expires in April 2000 and provides for an aggregate minimum annual compensation of $140,000 plus a bonus equal to one-tenth of one percent (1/10%) of the outstanding net performing installment contract receivable portfolio of the Company's non-prime auto finance business generated in the Northeast Region. An employment agreement with another non-officer employee was terminated in January 1997. In accordance with this F-16 termination, the Company is obligated for compensation at an annual rate of $140,000 through October 1997. The Company has entered into supplemental employment agreements (the "Supplemental Employment Agreements") with Messrs. Zecher and Wunderlich (the "Covered Executives"), which provide that if there is a Change in Control of the Company (as defined therein) during the Protected Period (described below), the terms of the Supplemental Employment Agreements will supersede the Covered Executives' existing employment agreements and will govern the terms of the Covered Executives' employment following the Change in Control for a three-year term, in the case of Mr. Zecher, and a two-year term, in the case of Mr. Wunderlich (the "Employment Term"). The Supplemental Employment Agreements provide that during the Employment Term, the Covered Executives will remain employed in their capacities with the Company as of the Change in Control and will continue to receive an annual salary (the "Base Salary") and benefits at least equal to that which they received prior to the Change in Control and an annual bonus at least equal to the Covered Executive's average annual bonus during the three years prior to the Change in Control. The Supplemental Employment Agreements provide that if, during the Employment Term, the Covered Executive's employment is terminated by the Company other than for Cause or Disability or by the Executive either for Good Reason or during the 60-day Window Period commencing on the anniversary of the Change in Control (as each of the foregoing terms are defined in the applicable Supplemental Employment Agreement), the Covered Executive would receive a severance payment equal to the sum of his Base Salary and the higher of his annual bonus for the then most recent year or his average annual bonus during the three years preceding the Change in Control (the "Highest Annual Bonus") multiplied by two, in the case of Mr. Zecher, and one and one-half, in the case of Mr. Wunderlich. In addition, the restrictions on any stock-related incentive awards held by the Covered Executive would lapse and he would be entitled to continued coverage under the Company's life, health and disability benefits for two years following termination of his employment (three years in the case of Mr. Zecher) or until he receives similar benefits from a new employer. Mr. Zecher's Supplemental Employment Agreement also provides that if he is subject to excise taxes under Section 4999 of the Internal Revenue Code on any payments or benefits triggered by a Change in Control, he will be entitled to receive an additional amount such that after the payment of all applicable taxes, he will retain an amount equal to that which he would have retained absent the excise taxes. In connection with the Supplemental Employment Agreements, the Company also approved the creation of an Employment Protection Trust Agreement which is a form of a grantor trust under which the assets of the trust remain subject to the satisfaction of the general claims of the Company's creditors, to provide for the payment of all benefits payable under the Supplemental Employment Agreements. Note 11 - Stockholders' Equity Stock Bonus Plan The Company has issued 425,000 shares of Common Stock pursuant to a restricted stock bonus plan to key executives, directors and consultants. These shares will vest ratably every two years over a period of 30 years. The unvested portion is subject, upon the occurrence of certain events, to either forfeiture or accelerated vesting. Such shares are recorded at their estimated fair market value as determined by the Board of Directors and are charged as compensation expense ratably over the vesting period. As of December 31, 1996 110,333 of such shares had vested and 314,667 remained, subject to forfeiture. F-17 Warrants In connection with the $4,000,000 7.55% subordinated long-term notes issued in January 1994, the Company issued to the noteholders six year warrants to purchase 533,333 shares of Common Stock at a per share price of $4.00. In September 1995, the Company prepaid $2,000,000 of the notes. In conjunction with the prepayment, 196,296 of these warrants were canceled. The Company has reserved 337,037 shares of Common Stock for issuance upon the exercise of the remaining warrants. No such warrants have been exercised to date. In connection with a May 1986 public offering of Common Stock, the Company issued warrants to the underwriter for the purchase of 96,000 shares of its Common Stock at a per share price of $4.80. During fiscal 1992, 66,750 warrants to purchase shares of the Company's Common Stock expired. The remaining 29,250 warrants are exercisable through May 1998. The Company has reserved 29,250 shares of Common Stock for issuance upon the exercise of these warrants. In connection with the $2,016,536 Class B Notes issued in October 1996, the Company issued 3 year warrants to purchase 159,095 shares of Common Stock at a per share price of $2.70. The Company has reserved 159,095 shares of Common Stock for issuance upon exercise of these warrants. In connection with the $100 million credit facility provided by CSFB in December 1996, the Company issued 3 year warrants to purchase 125,000 shares of Common Stock at a per share price of $3.70. The Company has reserved 125,000 shares of Common Stock for issuance upon exercise of these warrants. Stock Option Plans The Company has four stock option plans, The 1985 Plan, The 1986 Plan, The 1989 Plan and The 1992 Plan ("the Plans"). The Company accounts for these Plans under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for these Plans been determined consistent with FASB Statement No. 123, the Company's net income (loss) and earnings (loss) per share would have been reduced to the following pro forma amounts: 1996 1995 -------------- -------------- Net income (loss): As reported $ (19,099,501) $ 829,348 Pro forma $ (19,206,821) $ 806,178 Earnings (loss) per share: As reported ($2.41) $.11 Pro forma ($2.43) $.10 The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. SFAS No. 123 does not apply to awards prior to 1995, and additional awards in future years are anticipated. Pursuant to the Plans, a total of 1,287,500 shares of Common Stock were made available for grant of stock options. Under the Plans, options have been granted to key personnel for terms of up to ten years at not less than fair value of the shares at the dates of grant and are exercisable in whole or in part at stated times commencing one year after the date of grant. No further grant will be issued under the 1986 Plan. At December 31, 1996, options to purchase 275,000 shares of Common Stock were exercisable with respect to the Plans. F-18 Option activity for the year ended December 31, 1996, the seven months ended December 31, 1995 and the fiscal year ended May 31, 1995 was as follows: Number of Weighted Average Shares Exercise Price --------- ---------------- Outstanding at June 1, 1994 697,799 $2.94 Granted during the year 270,000 3.41 Exercised during the year (502,966) 2.47 Forfeited during the year (30,000) 2.96 -------- ----- Outstanding at May 31, 1995 434,833 3.75 Exercised during the period (21,500) 2.68 -------- ----- Outstanding at December 31, 1995 413,333 3.70 Granted during the year 241,000 2.96 -------- ----- Outstanding at December 31, 1996 654,333 $3.43 -------- ----- Weighted average fair value of options granted: 1996 $ .96 1995 $ 1.14 The fair value of each option grant is estimated on the date of grant using the Black-Shoals option pricing model with the following weighted assumptions used for grants in 1996 and 1995, respectively: risk-free interest rates of 6.20 and 6.36 percent; expected lives of 3 years for all options granted; expected volatility of 26.2 and 29.1 percent. On April 10, 1995, an officer of the Company exercised options to acquire 216,799 shares. In connection with this exercise, the Company received a full recourse, non-interest bearing note due in November 1997, secured by a pledge of the acquired shares in the amount of $466,797. Other Options In April 1996, the Company issued non-qualified options to purchase 400,000 shares of the Company's Common Stock at an exercise price of $3.125 per share to a new employee. These shares will vest over a four year period based upon, in part the performance of the Company's non-prime auto finance business in the Northeast region. An option issued upon the commencement of employment to another non-officer employee in December 1995 to purchase an aggregate of 375,000 shares of the Company's Common Stock was canceled in conjunction with the termination of the related employment agreement. Note 12 - Unusual Item - Impairment of Long-Lived Assets on Acquired Business and Additional Credit Losses on Acquired Automobile Receivables The acquisition of FFC in December 1995 included a portfolio of non-prime automobile receivables of approximately $31 million of which approximately 80% had been acquired by FFC from CFAW. In addition to the tangible assets acquired, the Company entered into a Non-Compete Agreement and a 10 year Purchase Agreement with CFAW which, among other provisions, provided for the continued purchase of automobile receivables based upon established underwriting criteria at the sole discretion and option of the Company. During the year ended December 31, 1996, the quality of the automobile receivables acquired from CFAW, both prior to the acquisition date and subsequent thereto, as evidenced by the number of repossessions and the charge-off incurred, came into question. The Company determined to cease acquiring automobile receivables from CFAW and accordingly, effective December 31, 1996, the Company entered into a Modification and Termination Agreement with CFAW. As a result of this action and other factors, the Company has deemed that a significant portion of the goodwill associated with the acquisition of FFC as well as the Non-Compete and Purchase Agreements are of no continuing value and, accordingly, has taken a charge against operations as of December 31, 1996 of $11,193,000 based on its evaluation of the realizable value of such assets in accordance with SFAS No. 121. Furthermore, the Company recorded additional credit losses of $8,100,000 on the acquired automobile receivables. F-19 EX-11 2 CALCULATION OF EARNINGS PER SHARE Exhibit 11 AUTOINFO, INC. AND SUBSIDIARIES Calculation of Earnings Per Share
Year ended Seven Months Year Ended December 31, Ended December 31, May 31, 1996 1995 1995 ------------ ----------- ----------- Primary and fully diluted earnings (loss): Income (loss) from continuing operations $(19,099,501) $ 560,672 $(2,078,126) Income (loss) from discontinued operations -- (28,163) 1,518,659 Gain on sale of discontinued operations -- 296,839 8,885,688 ------------ ----------- ----------- Earnings (loss) from operations applicable to common stock $(19,099,501) $ 829,348 $ 8,326,221 ------------ ----------- ----------- Shares: Weighted average number of common shares outstanding 7,920,515 7,765,261 7,307,657 Added shares issuable from assumed exercise of options -- 5,656 102,891 ------------ ----------- ----------- Weighted average number of common shares as adjusted 7,920,515 7,770,917 7,410,548 ------------ ----------- ----------- Primary and fully diluted earnings (loss): From continuing operations $ (2.41) $ .07 $ (.28) From discontinued operations -- -- .21 From gain on sale of discontinued operations -- .04 1.19 ------------ ----------- ----------- Earnings (loss) per common share $ (2.41) $ .11 $ 1.12 ============ =========== ===========
EX-21 3 SUBSIDIARIES OF THE REGISTRANT Exhibit 21 Subsidiaries of AutoInfo, Inc. CarLoanCo, Inc. (Virginia) CarLoanCo, Inc. (Connecticut) AutoInfo Receivables Company CarBucks, Inc. EX-24 4 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into AutoInfo, Inc.'s previously filed Registration Statement, File No. 33-34442. ARTHUR ANDERSEN LLP New York, New York March 28, 1997 EX-27 5 FINANCIAL DATA SCHEDULE
5 1 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 10,687,475 4,892,199 61,638,934 (15,725,390) 0 69,818,720 2,077,919 (352,145) 74,451,081 1,718,901 60,404,791 0 0 79,458 12,247,841 74,451,081 13,185,123 13,185,123 0 8,102,384 11,193,328 13,351,000 3,989,912 (23,451,501) (4,352,000) (19,099,501) 0 0 0 (19,099,501) (2,410) (2,410)
EX-10.P 6 LOAN SALE AGREEMENT - -------------------------------------------------------------------------------- LOAN SALE AGREEMENT between AUTOINFO FINANCE OF VIRGINIA, INC. (Company) and AUTOINFO RECEIVABLES COMPANY (Issuer) - -------------------------------------------------------------------------------- Dated as of October 1, 1996 This LOAN SALE AGREEMENT, dated as of October 1, 1996, is by and between AutoInfo Finance of Virginia, Inc. (the "Company") and AutoInfo Receivables Company (the "Issuer"). RECITALS The Issuer has entered into an Indenture, dated as of October 1, 1996, (the "Indenture"), with Bankers Trust Company (the "Indenture Trustee") and Crestar Bank (the "Custodian") pursuant to which the Issuer intends to issue Class A Notes and Class B Notes (the "Notes"). In furtherance thereof, the Issuer and Company have entered into this Loan Sale Agreement to provide for, among other things, the acquisition by the Issuer of all of the right, title and interest in and to certain Loan Assets, which the Issuer is and will be pledging to the Indenture Trustee and in which the Issuer is and will be Granting to the Indenture Trustee a security interest, as security for the Notes. As a precondition to the effectiveness of this Loan Sale Agreement, the Issuer, the Indenture Trustee, AutoInfo Finance of Virginia, Inc., as servicer (the "Servicer") and Bankers Trust Company, in its capacity as Back-Up Servicer (the "Back-up Servicer") and the Custodian will enter into the Servicing Agreement to provide for the servicing of the Loan Assets. In order to further secure the Notes, the Issuer is Granting to the Indenture Trustee a security interest in, among other things, the Issuer's rights derived under this Loan Sale Agreement and the Servicing Agreement, and the Company agrees that all covenants and agreements made by it in this Loan Sale Agreement with respect to the Loan Assets shall also be for the benefit and security of the Indenture Trustee, MBIA and all Holders from time to time of the Notes. In consideration of the mutual agreements herein contained, and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Defined Terms. For purposes of this Loan Sale Agreement, the following terms shall have the meanings specified herein. Capitalized terms used herein but not otherwise defined shall have the respective meanings assigned to such terms in the Indenture. "CFAW Purchase Agreement": shall mean the form of purchase agreement set forth on Exhibit D hereto. "Closing Date": October 11, 1996. "Common Stock": shall mean all of the issued and outstanding shares of common stock of the Issuer, which consists of 1,000 shares having a par value of $.01 per share. "Company Address": shall mean 863 Glenrock Road, Suite 201, Norfolk, Virginia, 23502, or at any other address furnished in writing to the Indenture Trustee, the Custodian, MBIA and the Issuer. "Computer Tape": shall mean the diskette, or other computer readable medium, prepared by the Servicer, containing descriptions and payment information on each Loan Contract on the Loan Schedule. "Cut-off Date": shall mean the close of business on August 31, 1996 "Dealer": shall mean any dealer of new or used automobiles, light trucks or motorcycles, with is either a Third Party Dealer or the Falk Dealer. "Dealer Agreement" shall mean an agreement between the Company and a Dealer relating to the sale of Loan Contracts to the Company in substantially the form of Exhibit C hereto. "Dollars": shall mean the lawful currency of the United States. "Eligible Loan Contract:" shall mean a Loan Contract that satisfies the selection criteria set forth in Section 3.01(a) hereof. "Falk Dealer": shall mean Charlie Falk Auto Wholesalers, Inc. "Issuer Address": shall mean 863 Glenrock Road, Norfolk, Virginia, 23502, or at any other address furnished in writing to the Indenture Trustee and MBIA. 2 "Issuer State of Incorporation": shall mean the State of Delaware. "Lien": shall mean any security interest, lien, charge, pledge, equity or encumbrance of any kind other than liens for taxes due and payable after the Cut-Off Date, mechanic's liens filed after the Cut-Off Date and any liens that attach after the Cut-Off Date by operation of law. "Loan Sale Agreement": shall mean this Loan Sale Agreement, as amended from time to time in accordance with the terms hereof. "Loan Assets": shall mean all right, title and interest in and to (a) the Loan Contracts and all rights with respect thereto, including all guaranties and other agreements or arrangements of whatever character from time to time supporting or securing payment of any Loan Contract, and all rights with respect to any agreement or arrangements with the vendors, dealers or manufacturers of the Vehicles to the extent specifically related to any Loan Contract, (b) all payments received on or with respect to the Loan Contracts due on or after the Cut-Off Date, including without limitation, all periodic payments due from the Obligors thereunder, all amounts paid by guarantors under the Loan Contracts, all Insurance Proceeds received on or with respect to the Loan Contracts, all payments received on Defaulted Loan Contracts and, with respect to liquidation, all late payment charges paid by Obligors and any other incidental charges or fees received from an Obligor, including but not limited to, late fees, collection fees and bounced check charges, (c) the Loan Contract Files, the original Loan Contracts, original Certificates of Title and Applications for Certificates of Title relating to the Loan Contracts, (d) a security interest in the Vehicles securing the Loan Contracts, and (e) all income and proceeds of the foregoing or relating thereto. "Loan Contracts": the sub-prime retail installment contracts, and such other motor vehicle loan contracts (and all rights with respect thereto, including all guaranties and other agreements or arrangements of whatever character from time to time supporting or securing payment of any Loan Contract and all rights with respect to any agreements or arrangements with the vendors, dealers or manufacturers of the Vehicles to the extent specifically related to any Loan Contract) which are identified on the Loan Schedule; provided that, from and after the date on which a Loan Contract is purchased by the Company at the Purchase Price in accordance with the terms hereof, such repurchased Loan Contract shall no longer constitute a Loan Contract for purposes of the Transaction Documents. "Loan Schedule": shall mean the list of Loan Contracts attached as Schedule I hereto, which shall include in respect to each Loan Contract: (a) a number identifying the Loan Contract, (b) the Loan Balance as of the Cut-off Date, (c) the Obligor, (d) the Obligor's billing address, (e) the original and remaining months to maturity of the Loan Contract, (f) the Scheduled Payment, (g) the annual percentage rate, (h) the dates of the first and last Scheduled Payment, (i) the original amount financed, and (j) the vehicle identification numbers of the related Vehicles. 3 "Purchase Price": An amount equal to the sum of (i) the Loan Balance of the purchased Loan Contract and (ii) any interest accrued through the date of such repurchase. "Third Party Dealer": shall mean a franchised or other third party retail auto, motorcycle and light truck dealer which originates and sells Loan Contracts to the Company or through another finance company approved by MBIA. "Transfer Taxes": As defined in Section 3.01(a)(xix) hereof. "Vehicle": A new or used automobile, light truck or motorcycle and all accessories thereto. 4 ARTICLE II ACQUISITION OF LOAN ASSETS Section 2.01. Conveyance of Loan Assets. (a) In consideration of the Issuer's delivery to or upon the order of the Company of the net proceeds from the sale of the Notes, the Company does hereby sell, transfer, contribute, assign, set over and otherwise convey to the Issuer, without recourse (except as provided in Sections 2.06 and 3.03 hereof) all of the Company's right, title and interest now existing or hereafter arising in and to the Loan Assets related to the Loan Contracts listed on the Loan Schedule. The Company agrees that all Loan Contracts sold, contributed, transferred and conveyed to the Issuer hereunder shall be Eligible Loan Contracts and that all Loan Assets acquired by the Issuer shall conform with all of the requirements hereof. The Company hereby acknowledges that its transfer of the Loan Assets to the Issuer is absolute and irrevocable, without reservation, retention of any interest, or recourse to the Company, except as provided in Sections 2.06 and 3.03 hereof. (b) To the extent that the Company shall retain any files or documentation pertaining to the Loan Assets it shall hold such documents as Servicer and in trust for the benefit of the Indenture Trustee, the Noteholders, MBIA and the Issuer as the owner thereof. The possession of any documents or files pertaining to the Loan Assets by the Servicer is at the will of the Issuer for the sole purpose of servicing such Loan Assets, and such retention and possession by the Servicer is in a custodial capacity only. The documents and files retained by the Servicer relating to the Loan Assets shall be segregated from the books and records of the Company and shall be marked conspicuously to reflect clearly the sale of the related Loan Assets to the Issuer and the Indenture Trustee's security interest therein. Section 2.02. Use of Proceeds. On the Closing Date, the Company shall use the cash proceeds received pursuant to Section 2.01 towards the purchase price for the Loan Assets, to remove any liens encumbering the Loan Assets as of such date, and for general corporate purposes. Section 2.03. Delivery of Loan Contracts; Filing of Financing Statements. (a) In connection with the Issuer's acquisition of the Loan Assets, the Company, on behalf of the Issuer, shall deliver to the Custodian the Custodial Files, shall deliver to the Servicer all documents necessary to assist the Servicer in its servicing obligations and shall deliver to the Indenture Trustee a power of attorney to permit the Indenture Trustee to submit for retitling any Certificate of Title in accordance with the terms of the Transaction Documents. If the original Certificate of Title is not available on the Closing Date, the Company shall deliver the Application for Certificate of Title to the Custodian on the Closing Date; provided, however, that the Company shall deliver to the Custodian the original Certificate of Title relating to each 5 Vehicle within 120 days of the Closing Date. In addition, the Company agrees to record and file prior to the Closing Date or within the time period set forth in the Indenture, at its own expense, financing statements (and thereafter timely continuation statements with respect to such financing statements) with respect to the Loan Assets, meeting the requirements of the Transaction Documents. (b) In connection with such acquisition, the Company shall promptly, at its own expense, cause its books and records, including any electronic ledger maintained by it or the Servicer, to be marked to show the sale of the related Loan Assets to the Issuer and the Indenture Trustee's security interest therein. Section 2.04. Servicing of Loan Contracts and Vehicles. The Company acknowledges and agrees that its obligations hereunder are independent of any obligations it may have as Servicer under the Transaction Documents and that its obligations under this Loan Sale Agreement will continue in full force and effect, whether or not it is acting as Servicer. Section 2.05. Review of Loan Contracts. If the Company discovers or is notified by the Custodian, Indenture Trustee, MBIA or the Noteholders that any Loan Contracts, Certificates of Title or Applications for Certificate of Title, as applicable, are missing or defective (that is, mutilated, damaged, defaced, incomplete, improperly dated, clearly forged or otherwise physically altered) in any material respect, the Company shall correct or cure such omission, defect or other irregularity within 60 days from the date the Company discovered, or is notified by the Custodian, Indenture Trustee, MBIA or the Noteholders of, such omission or defect. Otherwise, the Company shall repurchase such Loan Contract from the Issuer in accordance with Section 3.03 hereof. In addition, the Company shall repurchase Loan Contracts with respect to which the original Certificates of Title relating to the relevant Vehicle are not delivered within 120 days of the Closing Date. Section 2.06. Nature of Transfer. (a) It is the intention of the Company and the Issuer that the transfer and assignment of the Company's right, title and interest in and to the Loan Contracts and the Loan Assets shall constitute an absolute sale by the Company to the Issuer. In the event that the transfer of the Loan Assets from the Company to the Issuer is deemed to be a secured financing, the Company shall be deemed hereunder to have Granted to the Issuer, and the Company does hereby Grant to the Issuer, a first priority security interest in all of the Company's right, title and interest in, to and under the Loan Assets, whether now owned or hereafter acquired. For purposes of such Grant, this Loan Sale Agreement shall constitute a security agreement under applicable law. 6 (b) In the event that the transfer contemplated by this Loan Sale Agreement is deemed for any reason to be less than a transfer of complete legal title of all of the Company's right, title and interest in, to and under the Loan Assets, the parties hereto intend that this Loan Sale Agreement operate to transfer all of the Company's equitable interests in, to and under the Loan Assets to the Issuer. Section 2.07. Re-Liening Triggers. At the direction of MBIA upon the occurrence of a Re-Liening Trigger, the Company, at its own cost and expense shall promptly cause the Certificate of Title to be retitled to show the Indenture Trustee as the secured party thereon. If the Company fails to pay such expense within thirty days of the occurrence of such Re-Liening Trigger, such amount shall be paid in accordance with Section 12.02(d) of the Indenture. 7 ARTICLE III REPRESENTATIONS AND WARRANTIES Section 3.01. Representations and Warranties of the Company. (a) The Company hereby makes the following representations and warranties as to each Loan Contract to the Issuer and for the benefit of MBIA, the Indenture Trustee and the Noteholders, on which the Issuer relies in acquiring the Loan Assets and MBIA relies in issuing the Class A Note Insurance Policy. Such representations and warranties speak as of the Closing Date for the Loan Contracts and the related Vehicles but shall survive any subsequent transfer, assignment, contribution or conveyance of the Loan Contracts and related Vehicles: (i) The information set forth in the Loan Schedule is true and correct as of the related Cut-Off Date. (ii) The Loan Contract was originated in the United States of America by a Dealer approved by the Company under the Company's approved form of Loan Contract attached hereto as Exhibit B for the retail sale of a financed Vehicle in the ordinary course of such Dealer's business, and was purchased by the Company in the ordinary course of the Company's business. Each Loan Contract is fully and properly executed by the parties thereto, is a fully amortizing "Rule of 78's" Loan Contract motor vehicle loan and provides for level Scheduled Payments over the term of such Loan Contract. The rights with respect to each Loan Contract are assignable by the lender thereunder and its assignees without the consent of or notice to any Person. (iii) The Company has heretofore provided to the Custodian on behalf of the Indenture Trustee the sole original counterpart of each of the Loan Contracts as amended, and the related Certificate of Title or the Application for Certificate of Title, previously in the possession of the Company, and the Loan Contracts have not been amended, waived or modified. A Loan Contract File exists for each Loan Contract and such Loan Contract File contains, without limitation, (a) a fully executed original of each Loan Contract, endorsed, "Pay to the order of Bankers Trust Company as Indenture Trustee," (b) a certificate of insurance, application form for insurance signed by the Obligor, or signed representation letter from the Obligor named in the Loan Contract pursuant to which the Obligor has agreed to obtain physical damage insurance for the related Vehicle, (c) evidence that the Obligor took possession of the Vehicle and that the Vehicle was in good working order and acceptable to the Obligor at the time of receipt by the Obligor, (d) the original credit application executed by the Obligor and (e) the Certificate of Title or Application for Certificate of Title or relevant lien certificate. Each of such documents which is required to be signed by the Obligor has been signed by the Obligor in the appropriate spaces. All blanks on any form have been properly filled in and each form has otherwise been correctly prepared. Each Loan Contract fulfills the documentation 8 requirements contained in the Credit and Collection Policy as in effect on the Closing Date. (iv) There is only one original executed counterpart of the Loan Contract that constitutes "chattel paper" for purposes of section 9-105(1)(b) and 9-308 of the UCC which has been delivered to the Custodian and the Company's or the Servicer's electronic ledgers have been marked as provided in Section 2.03 hereof. (v) The Loan Contract was not originated in, nor is it subject to the laws of, any jurisdiction, the laws of which would make unlawful the sale, transfer or assignment of such document under any of the Transaction Documents, including any repurchase in accordance with the Transaction Documents. The Company has not entered into any agreement with any Obligor that prohibits, restricts, or conditions the assignment of the Loan Contracts. (vi) The Loan Contract is, and on the Closing Date will be, in full force and effect in accordance with its respective terms and neither the Company nor any Obligor has or will have suspended or reduced any payments or obligations due or to become due thereunder by reason of a default by the other party to such Loan Contract; as of the Cut-Off Date, none of the Obligors on the Loan Contracts are more than 30 days delinquent in making a Scheduled Payment (except that Obligors on Loan Contracts representing no more than 5% of the Initial Aggregate Loan Balance may be up to 60 days delinquent in making a Scheduled Payment); none of the Obligors are more than 30 days delinquent on any other obligations to the Company and there are no proceedings pending, or to the best of the Company's knowledge, threatened, asserting insolvency of an Obligor; there has been no previous default on the Loan Contract that resulted in repossession of the related Vehicle; and there are no proceedings pending, or to the best of the Company's knowledge, threatened, wherein the Obligor or any governmental agency has alleged that any such Loan Contract is illegal or unenforceable. No funds have been advanced by the Servicer, the Company, any Dealer, Falk or anyone acting on behalf of any of them in order to cause any Loan Contract to qualify under this clause. (vii) The Loan Contract is the valid, binding and legally enforceable obligation of the parties thereto, enforceable in accordance with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity regardless of whether enforcement is sought in a court of law or equity and all parties to each Loan Contract had full legal capacity to deliver such Loan Contract and all other documents related thereto and to grant the security interest purported to be granted thereby. (viii) All filings, notices (including Uniform Commercial Code filings and Department of Motor Vehicles filings and notices), transfers and recordings as required under the Indenture or applicable law to perfect the first priority security interests of the 9 Issuer and the Indenture Trustee in the Loan Assets being acquired hereunder, have been accomplished and are in full force and effect or will be accomplished within the time period specified in the Transaction Documents. Each Loan Contract is secured by a Vehicle, creates a valid, subsisting and enforceable first priority security interest in the Vehicle securing such Loan Contract in favor of the Company and such Loan Contract together with the related security interest has been duly assigned by the Company to the Issuer. All documents necessary to permit the Indenture Trustee to submit the Certificates of Title for each Vehicle to the applicable Department of Motor Vehicles for retitling in the name of the Indenture Trustee as secured party have been delivered to the Indenture Trustee. (ix) Each Loan Contract being acquired by the Issuer is substantially in one of the forms attached hereto as Exhibit B, which each of the Issuer and MBIA has had the opportunity to review prior to the Closing Date, except for immaterial modifications or deviations from the form loan contracts; any such modifications or deviations from the form loan contracts will not have a material adverse effect on the Issuer, the Noteholders or MBIA and will not reduce the Scheduled Payments or other payments due under the Loan Contracts. (x) Each Loan Contract was purchased by the Company from a Dealer pursuant to a form of dealer agreement attached hereto as Exhibit C or from the Falk Dealer pursuant to the CFAW Purchase Agreement. Each such dealer agreement (other than the CFAW Purchase Agreement) was "without recourse" to the related Dealers. (xi) The Loan Contract was originated by a Dealer and underwritten by the Company and the Dealer pursuant to, and each Loan Asset satisfies in all material respects, the underwriting guidelines and documentation standards of the Company. Such underwriting and origination criteria meet the Company's underwriting and origination criteria as set forth in the Credit and Collection Policy. The Credit and Collection Policy used by the Servicer with respect to each Loan Contract have been in all respects legal, proper, prudent and customary in the motor vehicle financing and servicing business. (xii) Each Loan Contract (A) has an original stated term of at least 9 months and no more than 60 months (except that one Loan Contract may have an original stated term of 64 months), (B) an interest rate of at least 9.81%, and the weighted average interest rate of the Loan Contracts as of the Closing Date is at least 25.16%, (C) is within its original term and has not had more than two one-month extensions as of the Cut-Off Date, (D) has a current Loan Balance of less than $25,000 (except that one Loan Contract may have a Current Loan Balance of $30,337.41) and (E) has had at least one Scheduled Payment made by the Obligor (except that Obligors on Loan Contracts representing no more than 20% of the Initial Aggregate Loan Balance may have made no Scheduled Payment). 10 (xiii) None of the Obligors is the United States of America or any state, or agency, department or instrumentality or political subdivision of the United States of America or any state. Each Loan Contract is payable in Dollars and the Obligor thereon is an individual who is a United States resident. (xiv) All requirements of applicable Federal, state and local laws, and regulations thereunder in respect of the Loan Assets have been complied with in all material respects, including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnusson-Moss Warranty Act, the Federal Reserve Board's Regulations B & Z, the applicable state Consumer Credit Code and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code, and any other applicable consumer credit, equal opportunity and disclosure laws if any, and each Loan Contract and the sale of any physical damage credit life and credit accident and health insurance and any extended service contracts complied in all material respects at the time it was originated or made and now complies in all material respects with all legal requirements of the jurisdiction in which it was originated. (xv) The Loan Contract is not as of the Closing Date subject to any right of rescission, set-off, counterclaim, claim or defense, including the defense of usury, whether arising out of transactions concerning the Loan Contract or otherwise, and the operation of any of the terms of the Loan Contract or the exercise by the Company or the Obligor of any right under the Loan Contract will not render the Loan Contract unenforceable, in whole or in part, nor subject to any right of rescission, set-off, counterclaim, claim or defense, including without limitation, the defense of usury, and no such right of rescission, set-off, counterclaim, claim or defense has been asserted with respect thereto, except that certain rights or defenses may exist under applicable law which, individually or in the aggregate, do not make the remedies available to the Company and its assignees with respect to such Loan Contract inadequate for the practical realization of the benefits provided thereby. (xvi) The Company has duly fulfilled all obligations to be fulfilled on the lender's part under or in connection with the origination, acquisition and assignment of the Loan Assets, including, without limitation, giving any notices or consents necessary to effect the acquisition of the Loan Assets by the Issuer, and none of the Servicer, the Dealer nor the Company has done anything to impair the rights of the Trust Estate, the Indenture Trustee, MBIA or the Noteholders in the Loan Contract or payments with respect thereto. The Company has obtained all necessary licenses, permits and charters required to be obtained by the Company, which failure to obtain would render any portion of the Transaction Documents unenforceable and would have a material adverse effect on the Issuer, MBIA or the Noteholders. 11 (xvii) The Loan Assets have not been sold, transferred, assigned or pledged by the Company to any Person other than the Issuer, and upon execution and delivery of this Loan Sale Agreement by the Company, the Issuer will have all of the right, title and interest in and to the Loan Assets, free and clear of all liens and encumbrances and any interest of the Company or its successors, except for the interests of the Obligor pursuant to the Loan Contract and the lien of the Indenture Trustee under the Indenture. None of the Servicer, the Dealer nor the Company has taken any action to convey any right to any Person that would result in such Person having a right to payments received under the related Insurance Policies, the related Dealer Agreements or dealer assignments or to payments due under such Loan Contracts. (xviii) Each Loan Contract requires that the Obligor obtain and maintain, and each Obligor has in effect, an Insurance Policy covering physical loss on and damage to the related Vehicle naming the Servicer as loss payee and each Loan Contract permits the holder thereof to obtain physical loss and damage insurance at the expense of the Obligor if the Obligor fails to do so. Insurance coverage required to be maintained by the Obligor under each Loan Contract is of a type, and insures the Vehicle for an amount, that is (A) customary to industry practice for the type and age of such Vehicle covered thereby and (B) consistent with the Company's historical requirements for such coverage. Each Insurance Policy is monitored in accordance with industry practice. At the time of origination of each Loan Contract, the related Vehicle was covered by a comprehensive and collision insurance policy (i) in an amount at least equal to the lesser of (a) the maximum insurable value of the Vehicle or (b) the principal amount due from the Obligor under the related Loan Contract, (ii) naming the Company as a loss payee and (iii) insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage. (xix) The sale to the Issuer of the Loan Assets does not violate the terms or provisions of any loan or any other agreement to which the Company is a party or by which it is bound. (xx) The sale, transfer, assignment and conveyance of the Loan Assets by the Company pursuant to this Loan Sale Agreement is not subject to and will not result in any tax, fee or governmental charge payable by the Company to any Federal, state or local government ("Transfer Taxes") other than Transfer Taxes which have or will be paid by the Company as due. (xxi) Each Dealer that originated a Loan Contract for sale to the Company has been selected by the Company based on the Company's underwriting criteria, such Dealer's financial and operating history and record of compliance with requirements of applicable Federal and state law. Each Dealer from whom the Company purchases Loan Contracts directly, has entered into an agreement with the Company providing for the sale of motor vehicle loans from time to time by such Dealer to the Company and is 12 authorized to originate Loan Contracts for sale to the Company. No Dealer has engaged in any conduct constituting fraud or misrepresentation with respect to the Loan Assets. (xxii) As of the Closing Date, unless otherwise indicated, (a) no application has been filed with the Department of Motor Vehicles of the State of Virginia requesting assignment of a lien to or the issuance of a new certificate of title noting the lien of any party other than the Company or Falk and (b) except with respect to 35 Loan Contracts, the Company has not received prepayment in full on any Loan Contract from an Obligor. (xxiii) Each Loan Contract has a final scheduled payment date on or before six months prior to the Stated Maturity Date for the Class A Notes. (xxiv) The Company or Falk is named as secured party on the Certificate of Title or Application for Certificate of Title for each Vehicle. (xxv) No more than 2% of the Loan Contracts, based upon the Loan Balance as of the Closing Date, are loans to finance an Obligor's purchase of a motorcycle. (xxvi) At the time of origination of each Loan Contract, the proceeds of such Loan Contract were fully disbursed. There is no requirement for future advances thereunder, and all fees and expenses in connection with the origination of such Loan Contract have been paid. (xxvii) No Loan Contract is due from an Obligor who has defaulted or was more than 30 days delinquent under a previous or another contract with the Company. (xxviii) Each Loan Contract contains provisions requiring the Obligor to assume all risk of loss or malfunction of the related Vehicle and to maintain liability insurance with respect thereto, requiring the Obligor to pay all sales, use, property, excise and other similar taxes imposed on or with respect to the related Vehicle and making the Obligor liable for all payments required to be made thereunder, without any setoff, counterclaim or defense for any reason whatsoever, subject only to the Obligor's right of quiet enjoyment. (xxix) No Loan Contract provides for the substitution, exchange or addition of any Vehicle subject to such Loan Contract. (xxx) The Dealer that sold each Loan Contract had all necessary licenses and permits to originate the Loan Contracts in the state where such Dealer was located. The Loan Contract was purchased by the Company from such Dealer under an existing dealer agreement with the Company and was validly assigned by such Dealer to the Company. Each such dealer agreement is in full force and effect and is the legal, valid and binding 13 obligation of such Dealer and there have been no material defaults by such Dealer or by the Company under such dealer agreement. (xxxi) Each Vehicle was properly delivered to the related Obligor in good repair, without defects and in satisfactory order, and, to the best of the Company's knowledge, each Vehicle is in good operating condition and repair as of the Closing Date. Each Vehicle was accepted by the Obligor after reasonable opportunity to inspect and test same and no Obligor has informed the Company of any defect therein. (xxxii) To the best of the Company's knowledge, no Obligor is a Person involved in the business of leasing or selling equipment of a type similar to the Vehicles. (xxxiii) No Loan Contract constitutes a "consumer lease" under either (a) the UCC as in effect in the jurisdiction whose law governs the Loan Contract or (b) the Consumer Leasing Act, 15 USC 1667. (xxxiv) Each Loan Contract had at least one Loan Contract payment remaining as of the Cut-Off Date. (xxxv) No Loan Contract is assumable by another Person in a manner which would release the Obligor thereof from such Obligor's obligations with respect to such Loan Contract. (xxxvi) Each Obligor has paid the entire down payment called for by the Loan Contract. (xxxvii) Scheduled Payments under each Loan Contract are due monthly (or, in the case of the first Scheduled Payment, no later than the 45 days after the date of such Loan Contract) in substantially equal amounts to maturity, with the portion of the aggregate amount of such Scheduled Payments to be refunded or credited to the Obligor as unearned add-on interest upon prepayment in full or upon demand for payment upon acceleration being determined on the basis of the terms of such Loan Contract, and will be sufficient to fully amortize such Loan Contract at maturity. Such Scheduled Payments are applicable only to payment of principal and interest on the related Loan Contract and not to the payment of any insurance premiums (although the proceeds of the extension of credit on such Loan Contract may have been used to pay insurance premiums). (xxxviii) Each Loan Contract does not permit early termination or prepayment unless the amount to be paid by or on behalf of the Obligor in respect of such prepayment or termination is at all times equal to or in excess of a specified prepayment amount. (xxxix) No Loan Contract was purchased by the Company after August 31, 1996. (xl) Each Loan Contract was originated after September 1, 1992. 14 (xli) The Dealer that sold each Loan Contract to the Company has entered into a Dealer Agreement and such Dealer Agreement constitutes the entire agreement between the Company and the related Dealer with respect to the sale of such Loan Contract to the Company. Each such Dealer Agreement is in full force and effect and is the legal, valid and binding obligation of such Dealer; there have been no material defaults by such Dealer or by the Company under such Dealer Agreement; the Company has fully performed all of its obligations under such Dealer Agreement; the Company has not made any statements or representations to such Dealer (whether written or oral) inconsistent with any term of such Dealer Agreement; the purchase price (as specified in the applicable Dealer Agreement) for such Loan Contract has been paid in full by the Company; there is no other payment due to such Dealer from the Company for the purchase of such Loan Contract; such Dealer has no right, title or interest in or to any Loan Contract; there is no prior course of dealing between such Dealer and the Company which will affect the terms of such Dealer Agreement; any payment owed to such Dealer by the Company is a corporate obligation of the Company in the nature of a bonus for amounts collected by the Company in excess of the purchase price for a Loan Contract. (xlii) No more than 85% of the aggregate principal balance of the Loan Contracts as of the Closing Date is attributable to Loan Contracts with Obligors having a billing address in any single State. (xliii) Prior the sale to the Issuer, the Company had all right, title and interest in and to the Loan Assets, free and clear of all liens and encumbrances. (xliv) As of the Closing Date, the parties to each Loan Contract are the Company and Obligor. (xlv) As of the time of the assignment, transfer and contribution of the Loan Contracts pursuant to the terms of this Loan Sale Agreement, no Obligor will have been released, in whole or in part, from any of its obligations in respect of any Loan Contract; no Loan Contract will have been satisfied or subordinated, in whole or in part, or rescinded, and no Vehicle covered by such Loan Contract will have been released from such Loan Contract, in whole or in part, nor will any instrument have been executed that would effect any such satisfaction, release, cancellation, subordination, or rescission; except that after the Cut-Off Date and prior to the Closing Date, the Company has received prepayment on less than 1% (by Aggregate Loan Balance) of the Loan Contracts and such Loan Contracts have been satisfied and the related Vehicles released from such Loan Contracts. (b) The Company hereby makes, as of the Closing Date, the following representations and warranties to the Issuer, and for the benefit of MBIA, the Indenture Trustee and the Noteholders, on which the Issuer relies in acquiring the Loan Assets and selling the Notes and on which MBIA relies in issuing the Class A Note Insurance Policy. Such representations and warranties shall survive any subsequent transfer, assignment, contribution or conveyance of the Loan Contracts and related Vehicles. 15 (i) The Company used no selection procedures that identified the Loan Contracts being acquired on the Closing Date as being less desirable or valuable than other comparable motor vehicle loans originated or acquired by the Company. (ii) The Computer Tape from which the selection of the Loan Contracts being acquired on the Closing Date was made, as made available to the Issuer's accountants that are providing a comfort letter to MBIA, the Noteholders, or the Placement Agent in connection with any information contained in any Private Placement Memorandum applicable to such Notes was complete and accurate as of the Cut-Off Date and includes a description of the same Loan Contracts that are described in the related Loan Schedule and the payments due thereunder as of the Cut-Off Date. (iii) The Company has foreclosed on Vehicles and retitled Certificates of Titles using the power of attorney executed by the Falk Dealer and has the legal right to foreclose on all Vehicles and to retitle all related Certificates of Title or Applications for Certificates of Title. (c) The Company hereby makes the following representations and warranties to the Issuer and for the benefit of MBIA, the Indenture Trustee and the Noteholders, on which the Issuer relies in acquiring the Loan Assets and selling the Notes and on which MBIA relies in issuing the Class A Note Insurance Policy. Such representations and warranties speak as of the Closing Date but shall survive any subsequent transfer, assignment, contribution or conveyance of the Loan Contracts and related Vehicles: (i) The Company has been duly organized and is validly existing and in good standing as a corporation under the laws of its jurisdiction of incorporation with corporate power and authority to own its properties and to transact the business in which it is now engaged, and the Company is duly qualified to do business in and is in good standing under the laws of each State in which the nature of its business requires such qualification, except where failure to so qualify would not have a material adverse effect on the ability of the Company to perform its obligations under the Transaction Documents or any of the Loan Contracts. (ii) The performance of the obligations of the Company under this Loan Sale Agreement and the other Transaction Documents, and the consummation of the transactions herein and therein contemplated will not conflict with or result in any breach of any of the terms or provisions of, or constitute with or without notice, lapse of time or both, a default under the certificate of incorporation or by-laws of the Company, or any material indenture, agreement, mortgage, deed of trust or other instrument to which the Company is a party or by which it is bound, or result in the creation or imposition of any lien, charge or encumbrance (except the lien created by the Indenture) upon any of the property or assets of the Company pursuant to the terms of such indenture, mortgage, deed of trust, or other agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the Company's property or assets is 16 subject, nor will such action result in any violation of the provisions of the Company's certificate of incorporation or by-laws or any statute or any order, rule or regulation of any court or any regulatory authority or other governmental agency or body having jurisdiction over the Company or any of its properties; and no consent, approval, authorization, order, registration or qualification of or with or other action of any court, or any such regulatory authority or other governmental agency or body is required for consummation of the transactions contemplated by this Loan Sale Agreement and the other Transaction Documents, except such consents, approvals and authorizations that have been obtained or such registrations or qualifications that have been made. (iii) This Loan Sale Agreement has been duly authorized, executed and delivered by the Company by all necessary corporate action and such agreements are the valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject as to enforcement to applicable bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity regardless of whether enforcement is sought in a court of law or equity. (iv) The chief executive office, chief place of business and the office where the Company keeps its records concerning the Loan Contracts and the Vehicles is 863 Glenrock Road, Suite 201, Norfolk, Virginia 23502. (v) the Company does not believe, nor does it have any reasonable cause to believe, that it cannot perform each and every covenant contained in this Loan Sale Agreement. (vi) The transactions contemplated by the Transaction Documents are being consummated by the Company in furtherance of its ordinary business purposes, with no contemplation of insolvency and with no intent to hinder, delay or defraud any of its present or future creditors. (vii) The consideration received by the Company as set forth herein is fair consideration having value reasonably equivalent to or in excess of the value of the Loan Assets and the performance of the Company's obligations hereunder. (viii) Neither on the date of the transactions contemplated by the Transaction Documents or immediately before or after such transactions, nor as a result of the transactions, will the Company: (A) be insolvent such that the sum of its debts is greater than all of its respective property, at a fair valuation; (B) be engaged in or about to engage in, business or a transaction for which any property remaining with the Company will be an unreasonably small 17 capital or the remaining assets of the Company will be unreasonably small in relation to its respective business or the transaction; and (C) have intended to incur or believed it would incur, debts that would be beyond its ability to pay as such debts mature or become due. The Company's assets and cash flow enable it to meet its present obligations in the ordinary course of business as they become due. (ix) Both immediately before and after the transactions contemplated by the Transaction Documents (a) the present fair salable value of the Company's assets was or will be in excess of the amount that will be required to pay its probable liabilities as they then exist and as they become absolute and matured; and (b) the sum of the Company's assets was or will be greater than the sum of its debts, valuing its assets at a fair salable value. (x) The acquisition of the Loan Assets by the Issuer pursuant to this Loan Sale Agreement is not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction. (xi) There are no proceedings or investigations pending, or to the knowledge of the Company, threatened, against or affecting the Company in or before any court, governmental authority or agency or arbitration board or tribunal (including, but not limited to any such proceeding or investigation with respect to any environmental or other liability resulting from an interest in any of the Vehicles) which, individually or in the aggregate, if determined adversely to the Company, would materially and adversely affect the properties, business, prospects, profits or conditions (financial or otherwise) of the Company, or the ability of the Company to perform its obligations under, or the validity or enforceability of, this Loan Sale Agreement. The Company is not in default with respect to any order of any court, governmental authority or agency or arbitration board or tribunal. (xii) All tax returns or extensions required to be filed by the Company in any jurisdiction have in fact been filed, and all taxes, assessments, fees and other governmental charges upon the Company, or upon any of the respective properties, income or franchises of the Company, shown to be due and payable on such returns have been, or will be, paid when due. To the best of the Company's knowledge, all such tax returns are true and correct and the Company has no knowledge of any proposed additional tax assessment against it in any material amount nor of any basis therefor. The provisions for taxes on the books of the Company are in accordance with generally accepted accounting principles. (xiii) The Company (i) is not in violation of any laws, ordinances, governmental rules or regulations to which it is subject, (ii) has not failed to obtain any licenses, permits, franchises or other governmental authorizations necessary to the 18 ownership of its property or to the conduct of its business, and (iii) is not in violation in any material respect of any term of any agreement, charter instrument, bylaw or instrument to which it is a party or by which it may be bound which violation or failure to obtain would materially and adversely affect the ability of the Company to perform its obligations under, or the validity or enforceability of, this Loan Sale Agreement. (xiv) It is the intention of the Company that the Loan Assets be acquired by the Issuer and that the beneficial interest in and title to the Loan Assets not be part of the Company's property for any purpose under state or Federal law. (xv) Immediately prior to the acquisition of the Loan Contracts by the Issuer pursuant to this Loan Sale Agreement, the Company was the sole owner of the Loan Contracts and had a valid first perfected security interest in the related Vehicles and had good and marketable title thereto, free and clear of all liens, claims and encumbrances and the acquisition of the Loan Assets by the Issuer does not violate the terms or provisions of any Loan Contract. (xvi) The Company is treating the transfer of the Loan Contracts and the related Vehicles on the Closing Date as a sale to the Issuer for Federal, state and local income tax, reporting and accounting purposes. (xvii) The Private Placement Memorandum (except with respect to the section entitled "MBIA and the Class A Note Insurance Policy" and Appendices C, D and E thereto) does not contain any untrue statement of fact or omit to state any fact necessary to make the facts stated therein not materially misleading. (xviii) The Company and the Issuer are members of an affiliated group within the meaning of section 1504 of the Internal Revenue Code, which will file a consolidated Federal income tax return at all times until termination of the Transaction Documents. Notwithstanding that any representation or warranty set forth in this Section 3.01 is made to the best of the Company's knowledge (or to the best of the Issuer's knowledge as such representation or warranty is applied to the Issuer under the terms of the Indenture), in the event any such representation or warranty is found to be untrue or incorrect, the repurchase and substitution provisions of Sections 3.03 and 3.04 hereof shall apply as if such representation or warranty was not conditioned on the Company's (or the Issuer's) knowledge. Section 3.02. Representations and Warranties of the Issuer. The Issuer hereby makes the following representations and warranties to and agrees with the Company for the benefit of MBIA, the Indenture Trustee and the Noteholders, on which representations and warranties the Company relies in entering into this Loan Sale Agreement with the Issuer and MBIA relies in issuing the Class A Note Insurance Policy. The Company agrees that any breach by the Issuer of any such representations and warranties shall 19 not limit or excuse the full performance of the Company's obligations hereunder. Such representations and warranties speak as of the Closing Date, but shall survive any subsequent transfer, assignment, contribution or conveyance of the Loan Contracts and the security interest in the related Vehicles: (a) The Issuer has been duly organized and is validly existing in good standing as a corporation under the laws of the Issuer State of Incorporation, with corporate power and authority to own its properties, perform its obligations under the Transaction Documents and to transact the business in which it is now engaged or in which it proposes to engage; the Issuer is duly qualified to do business and is in good standing in each State in which the nature of its business requires it to be so qualified, except where failure to so qualify would not have a material adverse effect on the ability of the Issuer to perform its obligations under the Transaction Documents. (b) The Transaction Documents have been duly authorized, executed and delivered by the Issuer by all necessary corporate action and constitute valid and legally binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject as to enforcement to bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity regardless of whether enforcement is sought in a court of equity or law. (c) There are no proceedings or investigations to which the Issuer, or any of the Issuer's Affiliates, is a party pending or, to the knowledge of the Issuer, threatened, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (a) asserting the invalidity of this Loan Sale Agreement, (b) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Loan Sale Agreement, or (c) seeking any determination or ruling that would materially and adversely affect the performance by the Issuer of its obligations under, or the validity or enforceability of, this Loan Sale Agreement. (d) All approvals, authorizations, consents, orders or other actions of any Person or of any court, governmental agency or body or official, required in connection with the execution and delivery of this Loan Sale Agreement, have been or will be taken or obtained on or prior to the Closing Date. (e) The principal place of business and chief executive office of the Issuer is 863 Glenrock Road, Norfolk, Virginia 23502. (f) The Issuer will treat the Notes as debt of the Issuer for all Federal, state and local income tax purposes. 20 Section 3.03. Purchase of Loan Contracts. (a) If (i) the Company, the Issuer, the Indenture Trustee, the Servicer or MBIA discovers the breach of any representations or warranties set forth in Sections 3.01 or 3.02 hereof which materially and adversely affects the value of a Loan Contract or an interest in the related Vehicles, or the interests of the Noteholders or MBIA, or the breach of any of the representations and warranties set forth in Sections 3.01(a)(ii), 3.01(a)(v), 3.01(a)(vii) or 3.01(a)(xvi) hereof, or (ii) the Company or the Issuer discovers or is notified of the occurrence of any missing or defective document as specified in Section 2.05 hereof, or (iii) the Custodian shall fail to receive with respect to each Loan Contract an original Certificate of Title within the time required pursuant to Section 4.02(a) of the Indenture and 2.03(a) hereof, then the party discovering such breach or condition shall give prompt written notice to the other parties and MBIA and in the case of clause (i) above, the Company shall, within 30 days from the date the Company was notified of, or otherwise discovers, such breach, cure such breach, and in the case of clause (ii), the Company shall, within 60 days from the date the Company was notified of or otherwise discovers such breach, cure such breach. If the Company fails to cure such breach in the applicable time period or is unable to cure such circumstance or condition, the Company shall purchase such Loan Contract and the security interest in the related Vehicle from the Issuer at the Purchase Price. The Purchase Price for a repurchased Loan Contract and the security interest in the related Vehicle shall be paid by the Company in accordance with Section 3.04 hereof. It is understood and agreed that the obligation of the Company to cure or purchase any Loan Contract as to which such a breach has occurred shall constitute the sole remedy respecting such breach available to the Issuer, the Noteholders or the Indenture Trustee on behalf of such Noteholders (except for any indemnities provided under Section 4.01(j) hereof or under the Indenture) for any losses, claims, damages and liabilities arising from the Issuer's ownership of such Loan Contract or the inclusion of such Loan Contract in the Trust Estate. Section 3.04. Requirements for Purchase of Loan Contracts. (a) If the Company purchases any Loan Contracts under Section 3.03 hereof, or if the Issuer purchases any Loan Contract under Sections 4.03 or 11.03 of the Indenture or if the Servicer purchases any Loan Contract under Section 3.04 of the Servicing Agreement, such Loan Contract shall be purchased by the Company, the Servicer or the Issuer, as applicable, at the Purchase Price. All purchases and removals shall be accomplished at the times specified in subsection (b) below. (b) Any purchase of a Loan Contract by the Company, the Servicer or the Issuer in accordance with the terms of the Transaction Documents shall be made by remittance of the Purchase Price to the Servicer for deposit into the Collection Account in accordance with Section 3.03 of the Servicing Agreement on or prior to the Determination Date next following the expiration of the cure period set forth in Section 3.03 hereof. In addition, upon deposit into the Collection Account of the Purchase Price the Indenture Trustee shall release the related Loan Contract, the Certificate of Title and/or Application for Certificate of Title in accordance with 21 Section 4.04 of the Indenture, and the Custodian shall no longer hold the related Loan Contract File. 22 ARTICLE IV COVENANTS OF THE COMPANY Section 4.01. Company Covenants. The Company hereby covenants and agrees with the Issuer as follows: (a) Except as hereinafter provided, the Company will keep in full effect its existence, rights and franchises as a corporation, 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 this Loan Sale Agreement or any of the Loan Contracts and to perform its duties hereunder. Any person into which the Company may be merged or consolidated, or to whom the Company has sold substantially all of its assets, or any corporation resulting from any merger, conversion or consolidation to which the Company shall be a party, or any Person succeeding to the business of the Company shall be the successor of the Company hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, however, that (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 3.01(c) hereof shall have been breached and no Reserve Account Increase Event, Event of Default or Servicer Event of Default would occur as a result thereof, (ii) such successor executes an agreement or assumption, in form reasonably satisfactory to the Indenture Trustee and MBIA, to perform every obligation under this Loan Sale Agreement, (iii) such successor has a net worth that is sufficient to perform in accordance with the Transaction Documents and at least approximately equivalent to the net worth of the Company immediately prior to such sale, merger or consolidation, (iv) the Company shall have delivered prior written notice thereof to MBIA and to the Issuer and MBIA a certificate of an officer of the Company and an Opinion of Counsel each stating that such consolidation, merger, or succession and such agreement of assumption complies with this Section 4.01 and that all conditions precedent, if any, provided for in this Loan Sale Agreement relating to such transaction have been complied with, and (v) the Company shall have delivered to the Issuer, MBIA, and the Indenture Trustee an Opinion of Counsel stating either (1) in the opinion of such Counsel, all financing statements, continuation statements and amendments thereto have been executed and filed that are necessary fully to preserve and protect the interest of the Issuer and the Indenture Trustee in the Loan Contracts and reciting the details of such filings, or (2) in the opinion of such Counsel, no such action shall be necessary to preserve and protect such interest. (b) Neither the Company nor any of the directors, officers, employees or agents of the Company shall be under any liability to the Issuer, the Indenture Trustee or the Noteholders for any action taken or for refraining from the taking of any action in good faith pursuant to this Loan Sale Agreement, or for errors in judgment not involving recklessness or negligence; provided, however, that this provision shall not protect the Company against any breach of warranties or representations made herein, or failure to perform its obligations in strict compliance with this Loan Sale Agreement, or any liability which would otherwise be imposed 23 by reason of any breach of the terms and conditions of this Loan Sale Agreement. The Company, and any director, officer, employee or agent of the Company, may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Company shall not be under any obligation to appear in, prosecute, or defend any legal action that is not incidental to its obligations as the contributor of the Loan Assets under this Loan Sale Agreement and that in its opinion may involve it in any expense or liability. (c) The Company, from time to time, at its own expense, shall execute and file such additional financing statements (including continuation statements) as may be necessary to preserve the security interests and liens described in Section 3.01(a)(viii) hereof as may be reasonably requested by the Issuer, MBIA or the Indenture Trustee and are reasonably satisfactory in form and substance to the Indenture Trustee and MBIA. (d) The Company will not change its name, identity or corporate structure in any manner that would, could, or might make any financing statement or continuation statement misleading within the meaning of section 9-402(7) of the UCC, unless it shall have given the Issuer, MBIA and the Indenture Trustee at least 30 days' prior written notice thereof and shall have provided evidence of appropriate UCC filings. (e) The Company will give the Issuer, MBIA and the Indenture Trustee at least 30 days' prior written notice of any relocation of its principal executive office, and if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement, the Company shall provide evidence of appropriate UCC filings. (f) The Company will duly fulfill all obligations on its part to be fulfilled under or in connection with each Loan Contract, will not change or modify the terms of the Loan Contracts except as expressly permitted by the terms of the Transaction Documents and will do nothing to impair the rights of the Issuer, MBIA or the Indenture Trustee in the Loan Contract or the Vehicles. In the event that the rights of the Company under any Loan Contract, any guaranty of the related Obligor's obligations under any Loan Contract, or any Insurance Policy are not assignable or have in fact, not been assigned to the Issuer or to the Indenture Trustee, the Company will enforce such rights on behalf of the Issuer and the Indenture Trustee. (g) The Company will comply, in all material respects, with all acts, rules, regulations, orders, decrees and directions of any governmental authority applicable to the Loan Assets or any part thereof; provided, however, that the Company may contest any act, regulation, order, decree or direction in any reasonable manner which shall not materially and adversely affect the rights of the Issuer, MBIA or the Indenture Trustee in the Loan Assets. (h) The Company will advise the Issuer, MBIA and the Indenture Trustee promptly, in reasonable detail, of the occurrence of any breach by the Company following 24 discovery by the Company of such breach of any of its representations, warranties or covenants contained herein. (i) The Company will execute or endorse, acknowledge, and deliver to the Issuer, MBIA and the Indenture Trustee from time to time such schedules, confirmatory assignments, conveyances, powers of attorney, and other reassurances or instruments and take such further similar actions relating to the Loan Contracts, the related Vehicles, and the rights covered by the Transaction Documents, as the Issuer, MBIA or the Indenture Trustee may reasonably request to preserve and maintain the Issuer's right and title to the Loan Assets and the rights of the Indenture Trustee, MBIA and the Noteholders therein against the claims of all persons and parties. (j) The Company agrees to indemnify, defend and hold the Issuer, the Indenture Trustee and MBIA harmless from and against any and all loss, liability, damage, judgment, claim, deficiency or expense (including interest, penalties, reasonable attorney's fees and amounts paid in settlement) that is caused by (i) a breach at any time by the Company of its representations, warranties and covenants contained in Section 3.01 hereof or this Section 4.01 or (ii) any material information furnished by the Company which is set forth in any schedule delivered hereunder, being untrue in any respect when any such representation was made or schedule delivered, provided that the Company shall not have any liability with respect to a representation or warranty as to any specific Loan Contract or Vehicle other than to purchase such Loan Contract in accordance with Section 3.03 hereof unless such breach of representation or warranty is the result of the Company's fraud, negligence, bad faith or willful misconduct. The Company shall also indemnify the Issuer, the Indenture Trustee, the Servicer and MBIA for any cost or expenses incurred by them in the enforcement of this Loan Sale Agreement or as a result of the Company's failure to perform its obligations hereunder. The obligations of the Company under this Section 4.01(j) shall be considered to have been relied upon by the Issuer, the Indenture Trustee and MBIA and shall survive the execution, delivery and performance of this Loan Sale Agreement, regardless of any investigation made by or on behalf of the Issuer, until termination of the Indenture. If the Company has made any indemnity payments pursuant to this Section 4.01(j) and thereafter any Person recovers the amount of the related loss or any portion thereof from others, such Person will promptly repay the amount recovered to the Company, without interest. (k) The Company will do nothing to disturb or impair the acquisition hereunder by the Issuer of the Loan Contracts and the related Vehicles. (l) The Company (i) will (A) maintain its books and records separate from the books and records of the Issuer and (B) maintain bank accounts separate from those of the Issuer and (C) maintain two independent directors on the Issuer's board of directors, so long as the Company is a shareholder of the Issuer and (ii) will not (X) take any action that would cause the dissolution or liquidation of the Issuer, (Y) guarantee (directly or indirectly), endorse or otherwise become contingently liable (directly or indirectly) for the obligations of the Issuer, or (Z) institute against the Issuer, or join any other person in instituting against the Issuer, any case, proceeding 25 or other action under any existing or future bankruptcy, insolvency or similar laws. This subsection (l) shall survive termination of this Loan Sale Agreement. (m) The Company shall notify the Issuer, the Indenture Trustee and MBIA promptly after becoming aware of any Lien on any Loan Asset. (n) The annual financial statements of the Company will disclose the effects of the transactions contemplated by the Transaction Documents as a sale by the Company in accordance with generally accepted accounting principles. The financial statements of the Company and the Issuer will also disclose that the assets of the Issuer are not available to pay creditors of the Company. The resolutions, agreements and other instruments underlying the Transaction Documents will be continuously maintained by the Company as official records. (o) The Company, as Servicer, will, at its own cost and expense, (i) retain or cause to be retained the electronic ledger as a master record of the Loan Contracts and related Vehicles and the Loan Contract File as custodian for the Issuer, the Indenture Trustee, MBIA and other Persons, if any, with interests in the Loan Contracts and related Vehicles and (ii) mark the Electronic Ledger to the effect that the Loan Contracts and security interest in the Vehicles have been acquired by the Issuer and that they have been transferred and assigned to the Indenture Trustee pursuant to the Indenture. (p) The affiliated group of which the Company and the Issuer are members within the meaning of section 1504 of the Code shall treat the Loan Contracts as owned by the Issuer for Federal, state and local income tax purposes, shall include in the computation of the Issuer's gross income the income from the Loan Contracts, shall treat the Notes as debt of the Issuer, and shall cause the Issuer to deduct the interest paid or accrued with respect to the Notes in accordance with such group's applicable method of accounting. (q) In the event that the Issuer receives actual notice of any Transfer Taxes arising out of the transfer, assignment and conveyance of the Loan Assets, on written demand by the Issuer or the Indenture Trustee, or upon the Company otherwise being given notice thereof by the Issuer or the Indenture Trustee, the Company shall pay, and otherwise indemnify and hold the Issuer, the Indenture Trustee, MBIA and the Noteholders harmless, on an after-tax basis, from and against any and all such Transfer Taxes (it being understood that the Issuer, the Indenture Trustee, MBIA and the Noteholders shall have no obligation to pay such Transfer Taxes). (r) The Company shall deliver or cause to be delivered within 30 days of the Closing Date, by first class mail, postage prepaid, written notice to each Obligor substantially in the form of Exhibit E hereto indicating that the Obligor's related Loan Contract has been sold to the Issuer and that all payments with respect to such Loan Contract are required to be paid, on and after the date of receipt of such notice, to AutoInfo Finance of Virginia, Inc., as Servicer. The Company shall, on or before the thirty-fifth day following the Closing Date, deliver a written certificate to the Issuer and the Indenture Trustee certifying that the written notice described in the immediately preceding sentence was timely mailed to each Obligor. 26 Section 4.02. Issuer Covenants. The Issuer hereby covenants and agrees with the Company as follows: (a) If in any enforcement suit or legal proceeding it is held that the Company may not enforce a Loan Contract on the ground that it is not a real party in interest or holder entitled to enforce the Loan Contract, the Issuer shall, at the Issuer's expense, take such steps as the Issuer deems necessary to enforce the Loan Contract, including bringing suit in the Issuer's name. (b) The Issuer warrants that it will own and possess a first priority security interest in the Vehicles upon its acquisition thereof and that it will warrant and defend its interest in the Vehicles against all Persons, claims and demands whatsoever. The Issuer shall not assign, sell, pledge, or exchange, or in any encumber or otherwise dispose of its interest in the Vehicles, except as permitted under the Indenture. (c) The Issuer shall treat the Loan Contracts as owned by it for Federal, state and local income tax purposes, shall include in the computation of its gross income the income from the Loan Contracts, shall treat the Notes as its debt and shall deduct the interest paid or accrued with respect to the Notes in accordance with its applicable method of accounting for such purposes. Section 4.03. Assignment of Loan Assets. The Company understands that the Issuer will assign to and grant to the Indenture Trustee a security interest in all of its right, title and interest to this Loan Sale Agreement and the Loan Assets. The Company consents to such assignment and grants and further agrees that all representations, warranties, covenants and agreements the Company makes herein shall also be for the benefit of and inure to the Indenture Trustee, MBIA and all Noteholders from time to time of the Notes. The Company agrees to execute in favor of the Indenture Trustee a power of attorney and any other assignments and applications in form and substance sufficient to allow the Indenture Trustee to assert or protect its security interest in the Vehicles, including, as may be necessary to submit for retitling in the Indenture Trustee's name any Certificate of Title to the applicable Department of Motor Vehicles. Section 4.04. Limitation on Recourse to Dealers. (a) With respect to each Loan Contract acquired from a Falk Dealer by the Company, sold by the Company to the Issuer pursuant to the terms hereof and Granted to the Indenture Trustee by the Issuer pursuant to the terms of the Indenture, the Company and the Issuer shall not have the right to, and shall not, exercise or accept the benefits of any right of recourse the Company or the Issuer may have against such Falk Dealer that otherwise would permit the Company or the Issuer to cause such Falk Dealer to pay any amount with respect to such Loan Contract in the event it becomes a Defaulted Loan Contract, except that such recourse 27 may be exercised to the extent that all Recoveries in the aggregate paid by the Falk Dealer after the Cut-Off Date with respect to the related Loan Contracts as a result of the exercise of such recourse by the Company or the Issuer does not exceed an amount equal to 10% of the aggregate Loan Balance as of the Cut-Off Date of all Loan Contracts acquired from such Falk Dealer. (b) The form of UCC-1 financing statements filed pursuant to Section 2.03(a) hereof shall contain a statement to the effect that recourse to the Falk Dealer is limited as provided in Section 4.04(a) hereof. (c) The limitation on recourse provided in Section 4.04(a) hereof shall be for the benefit of, and shall be enforceable through specific performance or other remedies available at law or in equity by, the Falk Dealer, the Indenture Trustee or the Noteholders. Section 4.05. Termination of Obligations. The obligations hereunder shall continue in full force and effect until the later of (i) the termination of the Indenture or (ii) the final payment with respect to the last Loan Asset. 28 ARTICLE V CONDITIONS PRECEDENT Section 5.01. Conditions to the Issuer's Obligations. The obligations of the Issuer to provide the Company with the consideration provided for herein shall be subject to the satisfaction of the following conditions: (a) All representations and warranties of the Company and all information provided in any Loan Schedule shall be true and correct on the Closing Date; (b) On or prior to the Closing Date, the Company shall have delivered to the Custodian the original Loan Contracts, the Certificates of Title or the Applications for Certificates of Title and a power of attorney and such other documents that would be sufficient to permit the Indenture Trustee to submit for retitling in the Indenture Trustee's name any Certificate of Title, and there shall have been made all filings, recordings and/or registrations, and there shall have been given, or taken, any notice or any other similar action, as may be necessary in the opinion of the Issuer and MBIA, in order to establish and preserve the right, title and interest of the Issuer in the Loan Assets; (c) On or prior to the Closing, the Custodian shall have received the Custodial Files for each Loan Contract; (d) On or before the Closing Date, the Issuer, the Servicer, the Back-Up Servicer, the Custodian and the Indenture Trustee shall have entered into the Indenture and the Servicing Agreement, as applicable; (e) The Notes shall be issued and sold on the Closing Date and the Issuer shall receive the full consideration due it upon the issuance of such Notes; (f) The Company shall have delivered all other information theretofore required or reasonably requested by the Issuer to be delivered by the Company hereunder, duly certified by an officer of the Company, and the Company shall have substantially performed all other obligations required to be performed by the provisions of this Loan Sale Agreement; and (g) No Default, Event of Default, Reserve Account Increase Event, Re-Liening Trigger or Servicer Event of Default shall have occurred with respect to any of the Notes. Section 5.02. Conditions to the Company's Obligations. The obligations of the Company to enter into this Loan Sale Agreement on the Closing Date shall be subject to the satisfaction of the following conditions: 29 (a) The consideration set forth herein shall have been paid or delivered to the Company simultaneously with the execution of this Loan Sale Agreement. 30 ARTICLE VI RESERVED 31 ARTICLE VII MISCELLANEOUS Section 7.01. Amendments. This Loan Sale Agreement and the rights and obligations of the parties hereunder may not be changed orally but only by an instrument in writing signed by the party against which enforcement is sought together with the prior written consent of the Indenture Trustee and MBIA. Promptly after the execution of any amendment, the Issuer shall send to the Indenture Trustee, MBIA, the Custodian, each Noteholder, and each Rating Agency, a conformed copy of each such amendment. Section 7.02. Governing Law. This Loan Sale Agreement shall be construed in accordance with the internal laws of the State of New York, without regard to choice of law principles. Section 7.03. Notices. All demands, notices and communications hereunder shall be in writing and shall be delivered or mailed by registered or certified United States mail, postage prepaid, and addressed, in the case of the Company, to the Company Address, and in the case of the Issuer, to the Issuer Address. All notices and demands shall be deemed to have been given either at the time of the delivery thereof to any officer of the Person entitled to receive such notices and demands at the address of such Person for notices hereunder, or on the third day after the mailing thereof to such address, as the case may be. Any Person may change the address for notices hereunder by giving notice of such change to the other Person. Section 7.04. Separability Clause. Any provisions of this Loan Sale Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 7.05. Assignment. Except as provided in Section 4.01(a) hereof, this Loan Sale Agreement may not be assigned or delegated by the Company without the prior written consent of the Issuer, MBIA and the Indenture Trustee, and may not be assigned or delegated by the Issuer without the prior written consent of the Company, MBIA and the Indenture Trustee. 32 Section 7.06. Further Assurances. Each of the Company and the Issuer agrees to do such further acts and things and to execute and deliver to the Indenture Trustee and MBIA such additional assignments, agreements, powers and instruments as are required by the Indenture Trustee or MBIA to carry into effect the purposes of this Loan Sale Agreement or to better assure and confirm unto the Indenture Trustee, MBIA or the Noteholders their rights, powers or remedies hereunder. If any Obligor shall be in default under any Loan Contract, upon reasonable request from the Servicer, the Company will take all reasonable steps to assist in enforcing such Loan Contract and preserving and maintaining title to the Loan Assets and the rights of the Indenture Trustee, MBIA and the Noteholders therein against the claims of all persons and parties to the extent the Company is capable of performing such requested steps and the Servicer determines that the assistance of the Company is necessary to effect the intent and purposes hereof. Section 7.07. No Waivers; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Issuer or the Company, any right, remedy, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any right, remedy, or privilege hereunder preclude any other or further exercise hereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privilege provided by law. Section 7.08. Binding Effect; Third Party Beneficiaries. This Loan Sale Agreement will inure to the benefit of and be binding upon the parties hereto, and shall inure to the benefit of the Indenture Trustee, MBIA, the Noteholders, and their respective successors and permitted assigns as express third party beneficiaries. Section 7.09. Set-Off. (a) The Company hereby irrevocably and unconditionally waives all right of set-off that it may have under contract (including this Loan Sale Agreement), applicable law or otherwise with respect to any funds or monies of the Issuer at any time held by or in the possession of the Company. (b) The Issuer shall have the right to set-off against the Company any amounts to which the Company may be entitled and to apply such amounts to any claims the Issuer may have against the Company from time to time under this Loan Sale Agreement. Upon any such set-off the Issuer shall give notice of the amount thereof and the reasons therefor. 33 Section 7.10. MBIA Default. If (i) an MBIA Default occurs and continues unremedied or (ii) if the Class A Note Balance has been reduced to zero, the Insurance Agreement is terminated and all amounts due to MBIA have been paid in full, MBIA's right to consent hereunder and to direct the Indenture Trustee shall be suspended until remedied and, in such event, in all provisions of this Loan Sale Agreement wherein MBIA's consent or direction is required or permitted, the consent or direction of the Controlling Holders shall be required or permitted during such period of suspension. Section 7.11. No Petition. So long as the Indenture remains in effect, for 366 days after the Final Payment Date, the Company agrees that it shall not file an involuntary petition or otherwise institute any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceeding under any Federal or state bankruptcy similar law against the Issuer. 34 IN WITNESS WHEREOF, the Company and the Issuer have caused this Loan Sale Agreement to be duly executed by their respective officers thereunto duly authorized as of the date and year first above written. AUTOINFO FINANCE OF VIRGINIA, INC. By:__________________________________ Name: Title: AUTOINFO RECEIVABLES COMPANY By:__________________________________ Name: Title: EXHIBIT A Credit and Collection Policy EXHIBIT B Form of Loan Contract EXHIBIT C Form of Dealer Agreement EXHIBIT D Form of CFAW Purchase Agreement EXHIBIT E Form of Notice to Obligors Re: Loan Number _____________: Dear ____________: You are hereby notified that AutoInfo Finance of Virginia ("Seller") has sold, transferred and assigned its interest in the above-referenced loan (the "Loan") to AutoInfo Receivables Company (the "Purchaser"). AutoInfo Finance of Virginia, Inc., as servicer (the "Servicer") will continue to service this Loan on behalf of the Purchaser. Unless you are otherwise notified by the Purchaser or the Servicer, you should direct all payments to: [address] and you should continue to direct all inquiries to: [address] Date: ______________ AUTOINFO FINANCE OF VIRGINIA, INC. By:_________________________________ Name: Title: SCHEDULE I Loan Schedule See Tab 9 TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS............................. 2 Section 1.01. Defined Terms....................................... 2 ARTICLE II ACQUISITION OF LOAN ASSETS...................... 5 Section 2.01. Conveyance of Loan Assets........................... 5 Section 2.02. Use of Proceeds..................................... 5 Section 2.03. Delivery of Loan Contracts; Filing of Financing Statements ....................................... 5 Section 2.04. Servicing of Loan Contracts and Vehicles............ 6 Section 2.05. Review of Loan Contracts............................ 6 Section 2.06. Nature of Transfer.................................. 6 Section 2.07. Re-Liening Triggers................................. 7 ARTICLE III REPRESENTATIONS AND WARRANTIES.................... 8 Section 3.01. Representations and Warranties of the Company....... 8 Section 3.02. Representations and Warranties of the Issuer........ 19 Section 3.03. Purchase of Loan Contracts.......................... 21 Section 3.04. Requirements for Purchase of Loan Contracts......... 21 ARTICLE IV COVENANTS OF THE COMPANY....................... 23 Section 4.01. Company Covenants................................... 23 Section 4.02. Issuer Covenants.................................... 27 Section 4.03. Assignment of Loan Assets........................... 27 Section 4.04. Limitation on Recourse to Dealers................... 27 Section 4.05. Termination of Obligations.......................... 28 ARTICLE V CONDITIONS PRECEDENT............................ 29 Section 5.01. Conditions to the Issuer's Obligations.............. 29 Section 5.02. Conditions to the Company's Obligations............. 29 i Page ---- ARTICLE VI RESERVED............................... 31 ARTICLE VII MISCELLANEOUS............................ 32 Section 7.01. Amendments.......................................... 32 Section 7.02. Governing Law....................................... 32 Section 7.03. Notices............................................. 32 Section 7.04. Separability Clause................................. 32 Section 7.05. Assignment.......................................... 32 Section 7.06. Further Assurances.................................. 33 Section 7.07. No Waivers; Cumulative Remedies..................... 33 Section 7.08. Binding Effect; Third Party Beneficiaries........... 33 Section 7.09. Set-Off............................................. 33 Section 7.10. MBIA Default........................................ 34 Section 7.11. No Petition......................................... 34 Exhibit A Credit and Collection Policy Exhibit B Form of Loan Contract Exhibit C Form of Dealer Agreement Exhibit D Form of CFAW Purchase Agreement Exhibit E Form of Notice to Obligors Schedule I Loan Schedule ii EX-10.Q 7 INDENTURE ================================================================================ INDENTURE among AUTOINFO RECEIVABLES COMPANY as Issuer CRESTAR BANK as Custodian and BANKERS TRUST COMPANY as Indenture Trustee Dated as of October 1, 1996 ================================================================================ This Indenture, dated as of October 1, 1996, is made by and among AutoInfo Receivables Company (the "Issuer"), Crestar Bank (the "Custodian") and Bankers Trust Company, a New York banking corporation, as Indenture Trustee (in such capacity, the "Indenture Trustee"). PRELIMINARY STATEMENT The Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance of the Issuer's Notes issuable as provided in this Indenture. All covenants and agreements made by the Issuer and the Indenture Trustee herein are for the benefit and security of the Holders of the Notes and MBIA. The Issuer and the Indenture Trustee are entering into this Indenture, and the Indenture Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. All things necessary to make this Indenture a valid agreement of the Issuer, the Custodian and the Indenture Trustee in accordance with its terms have been done. GRANTING CLAUSE The Issuer does hereby Grant to the Indenture Trustee for the ratable benefit of the Noteholders and MBIA, as security for the Issuer's obligations hereunder and under the Notes, without recourse, all of the Issuer's rights, title and interest now or hereafter acquired in and to the following and any and all benefits accruing to the Issuer from: (a) the Loan Contracts and all rights with respect thereto, including all guaranties and other agreements or arrangements of whatever character from time to time supporting or securing payment of any such Loan Contract, and all rights with respect to any agreement or arrangements with the vendors, dealers or manufacturers of the Vehicles to the extent specifically related to any such Loan Contract; (b) all payments received on or with respect to the Loan Contracts due on or after the Cut-Off Date, including, without limitation, all periodic payments due from the Obligors thereunder, all amounts paid by guarantors under the Loan Contracts, all amounts received on Defaulted Loan Contracts and with respect to liquidation, and all late payment charges paid by Obligors and any other incidental charges or fees received from an Obligor, including, but not limited to, late fees, collection fees and bounced check charges; (c) a security interest in the Vehicles securing the Loan Contracts; (d) the Loan Sale Agreement, the Lockbox Agreement and the Servicing Agreement; (e) all amounts from time to time on deposit in the Trust Accounts; (f) the original Loan Contracts, the Certificates of Title and Applications for Certificates of Title related to the Loan Contracts and the Loan Contract Files; (g) the interest of the Issuer in any Insurance Policy related to the Loan Contracts and the Vehicles, including, but not limited to, any vendor's single-interest, fire, damage and credit life insurance policies; and (h) all proceeds of the foregoing (including, but not by way of limitation, all cash proceeds, accounts, receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind, and other forms of obligations and receivables which at any time constitute all or part or are included in the proceeds of any of the foregoing), in each case whether now owned or hereafter acquired; (all of the foregoing being hereinafter referred to as the "Trust Estate"). The foregoing Grant does not constitute and is not intended to result in a creation or an assumption by the Indenture Trustee, any Noteholder, the Custodian or MBIA of any obligation of the Issuer, the Company or any other Person in connection with the Trust Estate or under any agreement or instrument relating thereto. The Indenture Trustee acknowledges its acceptance on behalf of the Noteholders and MBIA of all right, title and interest previously held by the Issuer in and to the Trust Estate, and declares that it shall maintain such right, title and interest in accordance with the provisions hereof and agrees to perform the duties herein required to the best of its ability to the end that the interests of the Noteholders and MBIA may be adequately and effectively protected. In consideration of the mutual agreements herein contained, and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Except as otherwise expressly provided or unless the context otherwise requires, the following terms have the respective meanings set forth below for all purposes of this Indenture, and the definitions of such terms are equally applicable both to the singular and plural forms of such terms. "Act": With respect to any Noteholder, the meaning specified in Section 13.01. "Additional Class A Principal Distribution Amount": On any Payment Date, in the event that an Event of Default which has not been waived by MBIA has occurred, any remaining Available Funds then on deposit in the Collection Account with respect to such Payment Date after the payments First through Eighth of Section 12.02(d) hereof have been made as of such Payment Date, up to the outstanding Class A Note Balance. "Affiliate": With respect to any Person, any other person directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by 2 contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Aggregate Loan Balance": As of any date of determination, the sum of all Loan Balances with respect to all outstanding Loan Contracts. "Aggregate Note Balance": At any time, the sum of the Outstanding Class A Note Balance and the Outstanding Class B Note Balance. "Application for Certificate of Title": With regard to each Vehicle for which a Certificate of Title has not been issued naming the Company, Falk or the Indenture Trustee as secured party, evidence that an application for a Certificate of Title naming the Company or the Indenture Trustee as secured party has been submitted with the appropriate authority. "Authenticating Agent": Any entity appointed by the Indenture Trustee pursuant to Section 7.14 hereof. "AutoInfo": AutoInfo, Inc., a Delaware corporation. "Available Funds": With respect to any Payment Date, the sum of (i) Scheduled Payments, gross Recoveries, Guaranty Amounts, Insurance Proceeds and Servicing Charges received during the related Collection Period, (ii) Prepayments received during the related Collection Period, (iii) the Purchase Price of Loan Contracts repurchased by the Company, the Servicer or the Issuer during the related Collection Period and (iv) any amounts released from the Reserve Account on such Payment Date in the event the amount on deposit therein is in excess of the Required Reserve Account Amount in accordance with Section 12.02 (f)(ii) hereof. "Back-up Servicer": Initially, Bankers Trust Company, until a successor Person shall have become the Back-up Servicer pursuant to the applicable provisions of this Indenture and the Servicing Agreement, and thereafter "Back-up Servicer" shall mean such successor Person. "Back-up Servicer Fee": With respect to each Payment Date, one-twelfth of the product of (i) the Back-up Servicer Fee Rate and (ii) the Aggregate Loan Balance as of the first day of the related Collection Period; provided, however, that with respect to the Initial Payment Date, an amount equal to the product of (i)(A) a fraction, the numerator of which is the actual number of days in the related Collection Period and the denominator of which is 360, times (B) the Back-up Servicer Fee Rate and (ii) the Initial Aggregate Loan Balance. "Back-up Servicer Fee Rate": 0.0435% per annum. 3 "Back-up Servicer Officer": Any Responsible Officer of the Indenture Trustee. "Benefit Plan Investor": The meaning set forth in 29 Code of Federal Regulations ss. 2510.3-101. "Board Resolution": With respect to any Person, a resolution passed by the board of directors of such Person, in accordance with the required procedures as proscribed by the law of such Person's state of incorporation or organization and such Person's by-laws or other similar incorporation or charter documents. "Business Day": Any day other than a Saturday, a Sunday or a day on which banking institutions in the city in which the principal place of business of the Issuer, the Servicer, MBIA or the Corporate Trust Office of the Indenture Trustee is located are authorized or obligated by law or executive order to close. "Calculation Date": The last day of a Collection Period; provided, however, that with respect to any calculation of the Loan Balance of a Loan Contract as of the Closing Date, the Calculation Date shall mean the Cut-Off Date. "Certificate of Title": With regard to each Vehicle, either (a) the original title relating thereto, or (b) in States in which the department of motor vehicles delivers the original certificate of title to the Obligor, the "lien card," "notice of recorded lien" or similar document which is delivered to the secured party in lieu of the original certificate of title, in each case, which shall name the related Obligor as the owner of the Vehicle and the Company, Falk or the Indenture Trustee as secured party. "Class": Means (i) when used with reference to the "Class A Notes," their designation as Class A Notes and (ii) when used with reference to the "Class B Notes," their designation as Class B Notes. "Class A Interest Payment Amount": With respect to any Payment Date, interest accrued from the prior Payment Date to and including the day immediately preceding such Payment Date, calculated on the basis of a 360-day year consisting of twelve 30-day months, at the Class A Interest Rate on the Class A Note Balance as of the close of business on the day preceding such Payment Date; provided, however, that the Class A Interest Payment Amount for the first Payment Date shall be interest accrued from the Closing Date to but excluding the first Payment Date at the Class A Interest Rate on the Class A Note Balance as of the Closing Date. "Class A Interest Rate": 6.53% per annum, calculated on the basis of a 360-day year consisting of twelve 30-day months; provided, however, that so long as an Event of Default has not occurred, or has been waived by MBIA, continuing at any time the Outstanding Class A Note Balance of the Class A Notes is less than 10% of the Initial 4 Class A Note Balance, and such Class A Notes are not redeemed in full in accordance with Section 10.01 hereof, interest on the Class A Notes shall accrue at an interest rate of 7.03% per annum. "Class A Interest Shortfall Amount": For any Payment Date, the amount by which the Class A Interest Payment Amount due on such Payment Date exceeds the sum of (i) the amount of Available Funds for such Payment Date remaining following payment of "First" through "Fourth" in Section 12.02(d) hereof and (ii) the amount on deposit in the Reserve Account. "Class A Note": Any one of the Notes executed by the Issuer and authenticated by the Indenture Trustee in substantially the form set forth in Exhibit A hereto. "Class A Note Balance": With respect to any date of determination, the Initial Class A Note Balance less all amounts previously distributed to Class A Noteholders as Class A Principal Payment Amounts. "Class A Note Insurance Policy": The note guaranty insurance policy dated as of the Closing Date issued by MBIA insuring the Class A Notes, the form of which is attached hereto as Exhibit C. "Class A Percentage": 85%. "Class A Principal Payment Amount": With respect to any Payment Date, the Class A Percentage of the sum of: (i) the principal portion of all Scheduled Payments received by the Trustee during the related Collection Period, (ii) all Prepayments of principal received by the Trustee during the related Collection Period, (iii) the aggregate outstanding Loan Balance as of the beginning of the related Collection Period of all Loan Contracts repurchased by the Company pursuant to Section 3.03 of the Loan Sale Agreement or by the Issuer pursuant to Sections 4.03 or 11.03 hereof or by the Servicer pursuant to Section 3.04 of the Servicing Agreement during the related Collection Period to the extent actually received by the Trustee (without duplication of amounts referred to in clauses (i) and (ii) above) and (iv) the aggregate outstanding Loan Balance as of the beginning of the related Collection Period of all Loan Contracts that became Defaulted Loan Contracts during the related Collection Period (without duplication of amounts referred to in clauses (i), (ii) or (iii) above). "Class A Principal Shortfall Amount": For any Payment Date, the amount by which the Class A Principal Payment Amount for such Payment Date exceeds the sum of (i) the amount of Available Funds for such Payment Date remaining following payment of "First" through "Seventh" in Section 12.02(d) hereof; and (ii) the amount on deposit in the Reserve Account. 5 "Class B Interest Payment Amount": With respect to any Payment Date, interest accrued from the prior Payment Date to and including the day immediately preceding such Payment Date, calculated on the basis of a 360-day year consisting of twelve 30-day months, at the Class B Interest Rate on the Class B Note Balance as of the close of business on the day preceding such Payment Date; provided, however, that the Class B Interest Payment Amount for the first Payment Date shall be interest accrued from the Closing Date to but excluding the first Payment Date at the Class B Interest Rate on the Class B Note Balance as of the Closing Date. "Class B Interest Rate": 11.31% per annum, calculated on the basis of a 360-day year consisting of twelve 30-day months. "Class B Note": Any one of the Notes executed by the Issuer and authenticated by the Indenture Trustee in substantially the form set forth in Exhibit B hereto. "Class B Note Balance": With respect to any date of determination, the Initial Class B Note Balance less all amounts previously distributed to Class B Noteholders as Class B Principal Payment Amounts. "Class B Principal Payment Amount": With respect to any Payment Date prior to the Senior Liability Termination Date, the product of (i) Available Funds remaining after all payments and deposits described in clauses First through Twelfth of Section 12.02(d) hereof have been made, and (ii) 0.5; provided, however, that in the event that a Class B Trigger Event has occurred and is continuing, the Class B Principal Payment Amount shall be equal to the Available Funds remaining after all payments and deposits described in clauses First through Twelfth of Section 12.02(d) hereof have been made, up to the Outstanding Class B Note Balance; with respect to the Senior Liability Termination Date, the sum of (x) all amounts then remaining on deposit in the Reserve Account and the Class B Reserve Account and (y) all Available Funds remaining after all payments and deposits described on clauses First through Twelfth of Section 12.02(d) hereof have been made; with respect to each Payment Date after the Senior Liability Termination Date, all Available Funds remaining after all payments and deposits described in clauses First through Twelfth of Section 12.02(d) hereof have been made. "Class B Reserve Account": The Trust Account created and maintained pursuant to Section 12.02(b)(iii) hereof. "Class B Required Reserve Account Amount": For each Payment Date prior to the Senior Liability Termination Date, $201,654, and for each Payment Date thereafter, zero. "Class B Trigger Event": The occurrence of either of the following: 6 (x) as of any of the first nine Determination Dates, the average Delinquency Rate for the most current three months exceeds 14.00% or the average Delinquency Rate for the most current three months as of any Determination Date thereafter exceeds 13.50%; or (y) as of any of the first nine Determination Dates, the average Monthly Net Default Rate for the most current three months exceeds 2.50% or the average Monthly Net Default Rate for the most current three months as of any Determination Date thereafter exceeds 2.25%. "Closing Date": October 11, 1996. "Code": The Internal Revenue Code of 1986, as amended, or any successor statute thereto. "Collection Account": The Trust Account established and maintained pursuant to Section 12.02(a) hereof. "Collection Period": With respect to a Payment Date or a Determination Date, the calendar month immediately preceding the month in which such Payment Date or Determination Date occurs (such calendar month being referred to as the "related" Collection Period with respect to such Payment Date or Determination Date). With respect to a Record Date, the calendar month in which such Record Date occurs is referred to as the Collection Period "related" to such Record Date. "Commitment": The Commitment to Issue a Financial Guaranty Insurance Policy between MBIA and the Issuer dated as of October 3, 1996. "Company": AutoInfo Finance of Virginia, Inc., a Virginia corporation. "Controlling Holders": Holders of Class A Notes representing at least 50% of the Class A Note Balance, and after the Class A Note Balance has been reduced to zero, Holders of Class B Notes representing at least 50% of the Class B Note Balance. "Corporate Trust Administration Department": The principal corporate trust office of the Custodian at 919 East Main Street, 10th Floor, Richmond, Virginia 23219, or at such other address as the Custodian may designate from time to time by notice to the Noteholders, the Servicer, MBIA, the Indenture Trustee and the Issuer, or the principal corporate trust department of any successor Custodian. "Corporate Trust Office": The principal corporate trust office of the Indenture Trustee at Four Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency Group - Structured Finance, or at such other address as the Indenture Trustee may designate from time to time by notice to the Noteholders, the 7 Servicer, MBIA and the Issuer, or the principal corporate trust office of any successor Indenture Trustee. "Credit and Collection Policy": The credit extension policies and procedures maintained by the Servicer and the administration and collection practices maintained by the Servicer as in effect on the Closing Date, as set forth in Exhibit C to the Servicing Agreement. "Cumulative Net Default Table": The table attached hereto as Exhibit D. "Cumulative Net Default Rate": As of any Determination Date, the ratio of (i) the sum of the Loan Balances of Loan Contracts that have become Defaulted Loan Contracts for the period from the Closing Date through the end of the related Collection Period reduced by the amount of all Recoveries received by the Servicer during the period from the Closing Date through the end of the related Collection Period to (ii) the Initial Aggregate Loan Balance. "Custodial Files": The meaning specified in Section 11.01(a) hereof. "Custodian": Crestar Bank, Richmond, Virginia, and any successor Custodian acceptable to MBIA appointed in accordance with Section 11.09 hereof. "Cut-Off Date": The close of business on August 31, 1996. "Default": The meaning specified thereto in Section 3.02(n) hereof. "Defaulted Loan Contract": A Loan Contract with respect to which the earliest of the following has occurred: (i) any portion of the Scheduled Payments due thereon becomes 90 days or more delinquent; (ii) the Vehicle securing such Loan Contract is repossessed and sold by the Servicer, (iii) the Servicer determines in its sole discretion in accordance with its Credit and Collection Policy that the remaining Scheduled Payments due under such Loan Contract should be written off as uncollectible or (iv) proceeds have been received which, in the Servicer's good faith judgment, constitute the final amounts recoverable in respect of such Loan Contract. "Delinquency Rate": As of any Determination Date, the ratio of (i) the aggregate Loan Balance as of the related Calculation Date of Loan Contracts as of such Calculation Date as to which the Obligors are more than 30 days past due in making any portion of the Scheduled Payments, to (ii) the Aggregate Loan Balance as of such Calculation Date. "Delinquent Loan Contract": As of any Calculation Date, a Loan Contract (a) with respect to which an Obligor (or an insurance company on its behalf) has not made 8 a Scheduled Payment by the applicable Due Date, and (b) which is not a Defaulted Loan Contract. "Determination Date": The third Business Day preceding each Payment Date. "Due Date": The date on which a Scheduled Payment is due in accordance with the terms of the related Loan Contract. "Eligible Account": (i) A segregated account or accounts maintained with a depository institution or trust company whose long-term unsecured debt obligations are rated A+ by Standard & Poor's and Al by Moody's, or (ii) a segregated trust account or accounts maintained with a Federal or state chartered depository institution that is acceptable to MBIA subject to regulation regarding fiduciary funds on deposit substantially similar to 12 C.F.R. Section 9.10(b), or (iii) a trust account at the Indenture Trustee's Corporate Trust Office, provided that such Indenture Trustee is acceptable to MBIA. "Eligible Investments": Any and all of the following: (i) direct obligations of, and obligations fully guaranteed as to the full and timely payment by, the United States of America, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Federal Home Loan Banks or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America; (ii) (A) demand and time deposits in, certificates of deposit of, banker's acceptances issued by or federal funds sold by any depository institution or trust company (including the Indenture Trustee or its agent acting in their respective commercial capacities) incorporated under the laws of the United States of America or any State thereof and subject to supervision and examination by federal and/or state authorities, so long as at the time of such investment or contractual commitment providing for such investment, such depository institution or trust company has a short-term unsecured debt rating in one of the two highest available rating categories of S&P and the highest available rating category of Moody's and provided that each such investment has an original maturity of no more than 365 days, and (B) any other demand or time deposit or deposit which is fully insured by the Federal Deposit Insurance Corporation; (iii) repurchase obligations with a term not to exceed 30 days with respect to any security described in clause (i) above and entered into with a depository institution or trust company (acting as a principal) rated in the highest short-term rating category by S&P and by Moody's; provided, however, that collateral transferred pursuant to such repurchase obligation must be of the type 9 described in clause (i) above and must (A) be valued daily at current market price plus accrued interest, (B) pursuant to such valuation, equal, at all times, to 105% of the cash transferred by the Indenture Trustee in exchange for such collateral and (C) be delivered to the Indenture Trustee or, if the Indenture Trustee is supplying the collateral, an agent for the Indenture Trustee, in such a manner as to accomplish perfection of a security interest in the collateral by possession of certificated securities. (iv) commercial paper having an original maturity of less than 365 days and issued by an institution having a short-term unsecured debt rating in the highest available rating category of each of the Rating Agencies at the time of such investment; (v) a guaranteed investment contract approved by each of the Rating Agencies and MBIA and issued by an insurance company or other corporation having a long-term unsecured debt rating in the highest available rating category of each of the Rating Agencies at the time of such investment; (vi) money market funds having ratings in the highest available rating category of Moody's and one of the two highest available rating categories of S&P at the time of such investment which invest only in other Eligible Investments; any such money market funds which provide for demand withdrawals being conclusively deemed to satisfy any maturity requirement for Eligible Investments set forth herein (including, in either case, such funds in which the Indenture Trustee or any Affiliate thereof is investment manager or advisor); and (vii) any other investment approved in writing by MBIA and written evidence that any such investment will not result in a downgrading or withdrawal of the rating by each Rating Agency on the Class A Notes. The Indenture Trustee may purchase from or sell to itself or an Affiliate, as principal or agent, the Eligible Investments listed above. All Eligible Investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders and MBIA. "Eligible Loan Contract": The meaning set forth in the Loan Sale Agreement. "ERISA": The Employee Retirement Income Security Act of 1974, as amended, or any successor statute thereto. "Event of Default": The meaning set forth in Section 6.01 hereof. "Falk": Falk Finance Company. 10 "FASIT": Financial Asset Securitization Investment Trust. "Final Due Date": With respect to each Loan Contract, the final Due Date thereunder. "Final Payment Date": The actual date on which the last amounts are distributed with respect to any Notes, whether on the Stated Maturity Date or earlier pursuant to an optional redemption under Article Ten or otherwise. "GAAP": Generally accepted accounting principles, as in effect on June 30, 1996. "Grant": To grant, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm. A Grant of the security interest in the Vehicles, the Loan Contracts or of any other instrument shall include all rights, powers and options (but none of the obligations) of the Granting party thereunder, including, without limitation, the immediate and continuing right to claim, collect, receive and provide receipts for payments in respect of the Loan Contracts, or any other payment due thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring proceedings in the name of the Granting party or otherwise, and generally to do and receive anything which the Granting party is or may be entitled to do or receive thereunder or with respect thereto. "Guaranty Amounts": Any and all amounts paid by the individual guarantor indicated on the applicable Loan Contract. "Holder": For any date, the holder of a Note as specified in the Note Register as of the preceding Record Date. "Indebtedness": With respect to any Person, all recourse obligations, which in accordance with GAAP shall be classified upon such Person's balance sheet as a liability, and in any event shall include all (i) recourse obligations of such Person for borrowed money or which have been incurred in connection with the acquisition of property or assets, (ii) recourse obligations secured by any lien upon property or assets owned by such Person, even though the Person has not assumed or become liable for the payment of such obligations, (iii) recourse obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under such agreement in the event of default are limited to repossession or sale of property and (iv) recourse guaranties of the indebtedness of others. "Indenture": This Indenture, as amended from time to time in accordance with the terms hereof. 11 "Indenture Trustee": Bankers Trust Company, until a successor Person shall have become the Indenture Trustee pursuant to the applicable provisions of this Indenture, and thereafter "Indenture Trustee" shall mean such successor Person. "Indenture Trustee Fee": With respect to each Payment Date, one-twelfth of the Indenture Trustee Fee Rate provided, however, that with respect to the Initial Payment Date, an amount equal to the product of (i) a fraction, the numerator of which is the actual number of days in the related Collection Period and the denominator of which is 360, times (ii) the Indenture Trustee Fee Rate. "Indenture Trustee Fee Rate": $5,000.00 per annum. "Independent Accountants": Arthur Andersen & Co., or any other firm of independent certified public accountants of recognized national standing, or otherwise acceptable to MBIA. "Initial Aggregate Loan Balance": The Aggregate Loan Balance as of the Cut-Off Date, which is $40,330,728.75. "Initial Aggregate Note Balance": The sum of the Initial Class A Note Balance and the Initial Class B Note Balance. "Initial Class A Note Balance": $34,281,119.44. "Initial Class B Note Balance": $2,016,536.44. "Initial Payment Date": October 15, 1996. "Insolvency Event": With respect to a specified Person, (a) the commencement of an involuntary case against such Person under the Federal bankruptcy laws, as now or hereinafter in effect, or another present or future Federal or state bankruptcy, insolvency or similar law, and such case is not dismissed within 60 days; or (b) the filing of a decree or entry of an order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding up or liquidation of such Person's affairs; or (c) the commencement by such Person of a voluntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any 12 general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing. "Insolvency Laws": The United States Bankruptcy Code or any similar applicable state law. "Insurance Agreement": The Insurance and Indemnity Agreement, dated as of October 1, 1996, by and among MBIA, the Issuer, the Servicer, the Company, the Lockbox Bank, the Indenture Trustee, the Custodian and the Back-up Servicer. "Insurance Policy": With respect to a Vehicle and a Loan Contract, any insurance policy maintained by the Obligor pursuant to the related Loan Contract, which policy names the Company as loss payee. "Insurance Proceeds": With respect to a Vehicle and a Loan Contract, any amount received during the related Collection Period pursuant to an Insurance Policy issued with respect to such Vehicle and the related Loan Contract, net of any costs of collecting such amounts not otherwise reimbursed. "Interest Coverage Ratio": With respect to any Person, the ratio of (x) earnings from operations before interest, taxes, depreciation and amortization, divided by (y) interest expense. "Investment Letter": The meaning specified in Section 2.06(b) hereof, substantially in the form of Exhibit E attached hereto. "Issuer": AutoInfo Receivables Company and all successors thereto acceptable to MBIA. "Issuer Order": As defined in Section 12.02(c) hereof. "Issuer State of Incorporation": means the state of incorporation of the Issuer, which, as of the Closing Date, is the State of Delaware. "Lien": The meaning specified in the Loan Sale Agreement. "Loan Assets": The meaning specified in the Loan Sale Agreement. "Loan Balance": With respect to any Loan Contract, as of any date of determination, the principal amount of such Loan Contract as of the Cut-Off Date, minus the sum of (a) the portion of Scheduled Payments and Prepayments allocable to principal made by or on behalf of the related Obligor and (b) the portion of the Purchase Price with respect to any repurchased Loan Contract allocable to principal as of the close of business 13 on the last day of the Collection Period (or, prior to the end of the first Collection Period, calculated as of the close of business on the day immediately prior to the Cut-Off Date); provided, however, that the Loan Balance of a Defaulted Loan Contract shall be zero. The respective principal and interest portions of each Scheduled Payment shall be determined in accordance with the "Rule of 78's" method. "Loan Contracts": The retail installment contracts, installment sale contracts, and such other motor vehicle loan contracts (and all rights with respect thereto, including all guaranties and other agreements or arrangements of whatever character from time to time supporting or securing payment of any Loan Contract and all rights with respect to any agreements or arrangements with the vendors, dealers or manufacturers of the Vehicles to the extent specifically related to any Loan Contract) which are identified on the Loan Schedule delivered to the Indenture Trustee and MBIA on the Closing Date; provided that, except as otherwise provided herein, from and after the date on which a Loan Contract is purchased or removed from the Trust Estate by the Company, the Servicer or the Issuer in accordance with the terms hereof or the terms of the Loan Sale Agreement or of the Servicing Agreement, such repurchased, removed or replaced Loan Contract shall no longer constitute a Loan Contract for purposes of the Transaction Documents. "Loan Contract File": With respect to each Loan Contract, a file containing the following: (i) The original of each executed Loan Contract; (ii) Copies of any evidence of insurance and any other documents evidencing or related to any Insurance Policy; (iii) Copies of any evidence that the Obligor took possession of the Vehicle and that the Vehicle was in good working order and acceptable to the Obligor at the time of receipt by the Obligor; (iv) A copy of the original credit application executed by the Obligor; and (v) The original Certificate of Title or Application for Certificate of Title or relevant lien certificate. "Loan Sale Agreement": The Loan Sale Agreement dated as of October 1, 1996 entered into by and between the Company and the Issuer, as amended from time to time in accordance with the terms thereof. "Loan Schedule": The list of Loan Contracts attached hereto as Schedule 1, each of which shall include with respect to each Loan Contract: (a) a number 14 identifying the Loan Contract, (b) the Loan Balance as of the Cut-Off Date, (c) the Obligor, (d) the Obligor's billing address, (e) the original and remaining months to maturity of the Loan Contract, (f) the Scheduled Payment, (g) the annual percentage rate, (h) the dates of the first and last Scheduled Payment, (i) the original amount financed and (j) the vehicle identification numbers of the related Vehicles. "Lockbox Account": A Trust Account established by the Servicer and maintained on behalf of the Indenture Trustee pursuant to the Servicing Agreement. "Lockbox Agreement": The Lockbox Agreement dated as of October 1, 1996 by and among the Lockbox Bank and the Servicer, as amended, modified or supplemented, or any other agreement, in form and substance acceptable to the Issuer and MBIA. "Lockbox Bank": Crestar Bank, Richmond, Virginia or any other depository institution named by the Servicer and, so long as an MBIA Default shall not have occurred and be continuing, acceptable to the Issuer and MBIA. "MBIA": MBIA Insurance Corporation, the issuer of the Class A Note Insurance Policy. "MBIA Default": The occurrence and continuance of any of the following events: (a) the failure by MBIA to make a payment under the Class A Note Insurance Policy in accordance with its terms that continues unremedied for a period of five Business Days; or (b) the occurrence of an "Insurer Insolvency", as that term is defined in the Insurance Agreement, with respect to MBIA. "MBIA Premium": The meaning set forth in the Insurance Agreement. "MBIA Reimbursement Amounts": Any payments made by MBIA under the Class A Note Insurance Policy, and any unpaid MBIA Premiums due MBIA. MBIA Reimbursement Amounts shall be payable from the flow of funds in accordance with Section 12.02(d) hereof. MBIA Reimbursement Amounts shall be repaid with interest thereon calculated at the Prime Rate of interest set forth in the Wall Street Journal ("Prime") plus 200 basis points. Interest shall accrue on all MBIA Reimbursement Amounts on a monthly basis, as of each Payment Date at Prime plus 200 basis points assuming a 360-day year comprised of 12 months of 30 days each. "Monthly Net Default Rate": With respect to each Determination Date, the ratio of (i) (a) the sum of the Loan Balances of all Loan Contracts that have become 15 Defaulted Loan Contracts during the related Collection Period minus (b) the amount of Recoveries received during such Collection Period to (ii) the Aggregate Loan Balance as of the Calculation Date immediately preceding such Collection Period. "Monthly Servicer's Report": The report prepared by the Servicer pursuant to Section 4.01 of the Servicing Agreement. "Moody's": Moody's Investors Service, Inc., or any successor in interest thereto. "Note(s)": Any one of the Class A Notes or Class B Notes. "Note Interest Rate": The Class A Interest Rate or the Class B Interest Rate, as applicable. "Noteholder or Holder": The person in whose name a Note is registered in the Note Register. "Note Register": The register maintained pursuant to Section 2.05 hereof. "Note Register": The meaning set forth in Section 2.05 hereof. "Obligor": The purchaser of a Vehicle under each related Loan Contract, including any guarantor of such purchaser and their respective successors and assigns. "Officer's Certificate": A certificate signed by the Chairman of the Board, the Vice-Chairman of the Board, the President, a Vice President, the Treasurer or the Secretary of the Servicer. "Opinion of Counsel": A written opinion of counsel, who may be counsel employed by the Issuer, the Servicer or the Indenture Trustee, or other counsel, and which opinion shall, in each case, be reasonably acceptable to the Indenture Trustee and MBIA. "Outstanding": means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture except: (i) Notes theretofore cancelled by the Note Registrar or delivered to the Note Registrar for cancellation; (ii) Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Notes (provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture); and 16 (iii) Notes in exchange for or in lieu of other Notes that have been authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Notes are held by a bona fide purchaser; provided, however, that Notes which have been paid with proceeds of the Class A Note Insurance Policy shall continue to remain Outstanding for purposes of this Indenture until MBIA has been paid as subrogee hereunder or reimbursed pursuant to the Insurance Agreement as evidenced by a written notice from MBIA delivered to the Indenture Trustee, and MBIA shall be deemed to be the Holder thereof to the extent of any payments thereon made by MBIA; and provided, further, that in determining whether the Holders of the requisite Class A or Class B Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any Transaction Document, Notes owned by the Issuer, any other obligor upon the Notes, the Company or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that a Responsible Officer of the Indenture Trustee actually knows to be so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, the Company or any Affiliate of any of the foregoing Persons. "Paying Agent": means the Indenture Trustee or any other Person that meets the eligibility standards for the Indenture Trustee specified in Section 7.08 and, so long as no MBIA Default shall have occurred and be continuing, is consented to by MBIA and is authorized by the Issuer to make the payments to and distributions from the Collection Account, including payment of principal of or interest on the Notes on behalf of the Issuer. "Payment Date": The fifteenth day of each calendar month (or if such day is not a Business Day, the next succeeding Business Day) commencing on the Initial Payment Date. "Person": Any individual, corporation, partnership, association, limited liability company, joint-stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. "Placement Agents": Black Diamond Securities, LLC and Alex. Brown & Sons, Inc. "Pledged Asset Custodian": The meaning ascribed thereto in Section 11.01 hereof. 17 "Preference Amount": The meaning ascribed thereto in the Class A Note Insurance Policy. "Prepayment": Any full or partial payment of Scheduled Payments not yet due on a Loan Contract. "Prospective Holder": The meaning ascribed to such term in Section 2.06(a) hereof. "Purchase Price": With respect to any Loan Contract repurchased by the Company pursuant to Sections 2.05 or 3.03 of the Loan Sale Agreement or by the Issuer pursuant to Sections 4.03 or 11.03 hereof or by the Servicer pursuant to Section 3.04 of the Servicing Agreement, the sum of (i) the Loan Balance of the related Loan Contract on the Calculation Date on or immediately preceding the date when the Loan Contract is repurchased and (ii) any accrued interest at the interest rate specified in such Loan Contract through the date of repurchase. "Rating Agencies": Each of Moody's and Standard & Poor's, so long as such Persons maintain a rating on the Class A Notes; and if either Moody's or Standard & Poor's no longer maintains a rating on the Class A Notes, such other nationally recognized statistical rating organization selected by the Servicer and a majority in interest of the Noteholders and (so long as an MBIA Default shall not have occurred and be continuing) acceptable to MBIA. "Record Date": The close of business on the last day of the month preceding the applicable Payment Date, whether or not such day is a Business Day, except with respect to the Initial Payment Date, the Record Date shall be the Closing Date. "Recoveries": With respect to a Defaulted Loan Contract and for any Collection Period occurring after the date on which such Loan Contract becomes a Defaulted Loan Contract, all payments (including insurance proceeds) that the Servicer received from or on behalf of an Obligor regarding such Defaulted Loan Contract or from liquidation of the related Vehicle, net of any reasonably incurred out-of-pocket expenses incurred by the Servicer in enforcing such Defaulted Loan Contract. "Redemption Account": The Trust Account established and maintained pursuant to the Section 12.02(b)(ii) hereof. "Redemption Date": The Payment Date specified as such by the Servicer or MBIA in accordance with the terms of Section 10.02 hereof for the redemption of the Class A Notes or the Class B Notes after the Class A Note Balance or the Class B Note Balance, as applicable, is less than 10% of the Initial Class A Note Balance or the Initial Class B Note Balance, as applicable. 18 "Redemption Price": With respect to any Class of Notes being redeemed pursuant to Article Ten hereof, and as of the related Redemption Date, the Outstanding Class A Note Balance or Class B Note Balance as applicable, together with interest accrued and unpaid thereon to but excluding the related Redemption Date at the applicable Note Interest Rate (exclusive of installments of interest and principal maturing on or prior to such date, payment of which shall have been made or duly provided for to the Holder of such Note on the applicable date or as otherwise provided in this Indenture) plus any outstanding MBIA Reimbursement Amount. "Redemption Record Date": As defined in Section 10.01 hereof. "Registered Holder": For any date, the holder of a Note as specified in the Note Register as of the preceding Record Date. "Re-Liening Trigger": The occurrence of any one of the following events: (i) The stockholder's equity of AutoInfo, calculated in accordance with GAAP, as reflected in AutoInfo's most recent annual or quarterly consolidated financial statements is less than $23,750,000; (ii) An Insolvency Event with respect to the Company or the Issuer; (iii) One or more courts of competent jurisdiction have issued final, non-appealable orders to the effect that the Indenture Trustee is not the secured party with respect to Vehicles financed under Loan Contracts with an aggregate initial principal balance (i.e., as of ---- the date upon which such Loan Contracts were originated by the Company), equal to 5.0% or more of the Initial Aggregate Loan Balance; or (iv) The occurrence of an Event of Default. "Request for Release of Documents": As defined in the Servicing Agreement. "Required Reserve Account Amount" means, as of any Payment Date, the greater of (a) 18% of the Aggregate Loan Balance as of such Payment Date, and (b) 3% of the Initial Aggregate Loan Balance; provided, however, that, on and after the Payment Date on which the Class B Note Balance has been reduced to zero, and no accrued interest thereon remains unpaid, the Required Reserve Account Amount shall not exceed the Aggregate Loan Balances; provided, further, that in the event that a Reserve Account Increase Event has occurred and MBIA has not waived such Reserve Account 19 Increase Event, the Required Reserve Account Amount shall be the greater of (a) 24% of the Aggregate Loan Balance as of such Payment Date, and (b) 3% of the Initial Aggregate Loan Balance, with such increase being subject to a reduction to the previous level upon the cure of certain Reserve Account Increase Events. Upon the occurrence of an Event of Default, the Required Reserve Account Amount shall remain at the then current Required Reserve Account Amount until the Class A Notes and any MBIA Reimbursement Amounts have been repaid in full. The Required Reserve Account Amount shall in any event be zero after the Senior Liability Termination Date. "Responsible Officer": When used with respect to the Indenture Trustee or the Custodian, any officer assigned to the Corporate Trust Office or the Corporate Trust Administration Department, as the case may be (or any successor thereto), including any managing director, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Indenture Trustee or the Custodian, as applicable, customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Indenture, and also, with respect to a particular matter, any other officer, to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Reserve Account": The Trust Account created and maintained pursuant to Section 12.02(b)(i) hereof. "Reserve Account Increase Event": The occurrence of any one of the following events: (i) commencing on the third Determination Date, the average Monthly Net Default Rate for the most current three months exceeds 3%; provided, however, that such event shall no longer be deemed a Reserve Account Increase Event should the average Monthly Net Default Rate for the most current six months following the months in which the Reserve Account Income Event shall have occurred falls below 3%; (ii) commencing on the third Determination Date, the average Delinquency Rate for the most current three months exceeds 16.5%; provided, however, that such event shall no longer be deemed a Reserve Account Increase Event if the average Delinquency Rate for the most current three months following the months in which the Reserve Account Increase Event shall have occurred falls below 16.5%; or (iii) the Cumulative Net Default Rate on any Determination Date exceeds the level specified for such period in the Cumulative Net Default Table. 20 "Reserve Account Initial Deposit": 13.50% of the Initial Aggregate Loan Balance. "Rule of 78s Method": The method under which a portion of a payment allocated to earned interest and the portion allocable to principal is determined according to the sum of the month's digits or any equivalent method commonly referred to as the "Rule of 78s." "Scheduled Payments": With respect to a Loan Contract, the periodic payment set forth in such Loan Contract due from the Obligor on the related Due Date; the respective principal and interest portions of each such payment shall be determined in accordance with the "Rule of 78's" method. "Senior Liability Termination Date": The first Payment Date on which the Class A Note Balance is zero, no accrued interest on the Class A Notes remains unpaid, and no MBIA Reimbursement Amounts remain outstanding. "Servicer": AutoInfo Finance of Virginia, Inc., a Virginia corporation, and any successor Servicer appointed in accordance with the terms of the Servicing Agreement and acceptable to MBIA. "Servicer Default": The meaning given in the Servicing Agreement. "Servicer Event of Default": The meaning given in the Servicing Agreement. "Servicer Fee": An amount equal to the product of (i) one-twelfth of the Servicer Fee Rate and (ii) the Aggregate Loan Balance as of the first day of the related Collection Period; provided, however, that with respect to the Initial Payment Date, an amount equal to the product of (i)(A) a fraction, the numerator of which is the actual number of days in the related Collection Period and the denominator of which is 360, times (B) the Servicer Fee Rate and (ii) the Initial Aggregate Loan Balance. "Servicer Fee Rate": 3.0% per annum. "Servicer Termination Notice": The meaning given in the Servicing Agreement. "Servicing Agreement": The Servicing Agreement dated as of October 1, 1996 by and among the Indenture Trustee, the Back-up Servicer, the Servicer, the Custodian and the Issuer, as amended from time to time in accordance with the terms thereof. 21 "Servicing Charges": The sum of (i) all late payment charges paid by Obligors on Delinquent Loan Contracts after payment in full of any Scheduled Payments due in a prior Collection Period and Scheduled Payments for the related Collection Period and (ii) any other incidental charges or fees received from an Obligor, including, but not limited to, late fees, collection fees and bounced check charges. "Servicing Officer": As defined in the Servicing Agreement. "Stated Maturity Date": January 15, 2002. "Standard & Poor's" or "S&P": Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor thereto. "Sub-Servicer": Any sub-servicer appointed by the Servicer in accordance with the terms of the Servicing Agreement. "Transaction Documents": This Indenture, the Loan Sale Agreement, the Servicing Agreement, the Insurance Agreement and the Lockbox Agreement. "Trust Accounts": The Collection Account, the Lockbox Account, the Redemption Account, the Reserve Account and the Class B Reserve Account established pursuant to the terms of this Indenture; provided, however, that the Class B Noteholders shall, prior to the Senior Liability Termination Date, have no interest in the Reserve Account and provided, further, that the Class A Noteholders and MBIA shall have no interest in the Class B Reserve Account. "Trust Estate": As defined in the Granting Clause hereof. "Vehicle": A new or used automobile, light truck or motorcycle, and all accessories thereto. "Withdrawn Collateral": As defined in Section 5.01(b) hereof. 22 ARTICLE II THE NOTES SECTION 2.01. Form Generally. The Class A Notes, the Class B Notes and the certificates of authentication shall be in substantially the form set forth, respectively, in Exhibits A and B attached hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon, as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. The definitive Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any manner acceptable to the Indenture Trustee and the initial purchaser of the Notes, all as determined by the officers executing such Notes, as evidenced by their execution of such Notes. SECTION 2.02. Denomination. The aggregate principal amount of Class A Notes which may be authenticated and delivered hereunder is $34,281,119.44, and the aggregate principal amount of Class B Notes which may be authenticated and delivered hereunder is $2,016,536.44, except for Notes of such Class authenticated and delivered upon registration of transfer or in exchange for or in lieu of, other Notes of such Class pursuant to Sections 2.04, 2.05 or 2.07 hereof. The Notes shall be issuable only as registered Notes without coupons in denominations of at least $250,000 and integral multiples of $1,000 in excess thereof (except in the single case of one Note of each Class); provided, however, that, the foregoing shall not restrict or prevent the transfer in accordance with Sections 2.05 and 2.06 hereof of any Class A Note with a remaining principal balance of less than $250,000. SECTION 2.03. Execution, Authentication, Delivery and Dating. The Notes shall be executed on behalf of the Issuer by its President or one of its Vice Presidents. The signature of these officers on the Notes must be manual. Notes bearing the manual signatures of individuals who were at any time the proper officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication or delivery of such Notes or did not hold offices at the date of authentication or delivery of such Notes. 23 Each Note shall bear on its face the applicable delivery date and be dated as of the date of its authentication. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Indenture Trustee or by any Authenticating Agent by the manual signature of one of its authorized officers, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. SECTION 2.04. Temporary Notes. Pending the preparation of definitive Notes, the Issuer may execute, and upon Issuer Order, the Indenture Trustee shall authenticate and deliver, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, containing the same terms and representing the same rights as the definitive Notes in lieu of which they are issued. If temporary Notes are issued, the Issuer will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuer to be maintained as provided in Section 3.02(f) hereof, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor one or more definitive Notes of any authorized denominations and of a like initial aggregate principal amount, Class and Stated Maturity Date. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes. SECTION 2.05. Registration, Registration of Transfer and Exchange. (a) The Issuer shall cause to be kept at an office or agency to be maintained by the Issuer in accordance with Section 3.02(f) hereof a register (the "Note Register"), in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Notes and the registration of transfers of Notes. The Indenture Trustee is hereby appointed "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. The Indenture Trustee and MBIA shall have the right to examine the Note Register at all reasonable times and to rely conclusively upon a certificate of the Note Registrar as to the names and addresses of the Holders of the Notes and the principal amounts and numbers of such Notes as held. (b) Upon surrender for registration of transfer of any Note at the office or agency of the Issuer to be maintained as provided in Section 3.02(s) hereof and subject to 24 the conditions set forth in Section 2.06 hereof, the Issuer shall execute, and the Indenture Trustee or by any Authenticating Agent shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations, and of a like aggregate principal amount, Class and Stated Maturity Date. (c) At the option of the Holder, Notes may be exchanged for other Notes of any authorized denominations and of a like aggregate principal amount, Class and Stated Maturity Date, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Indenture Trustee or by any Authenticating Agent shall authenticate and deliver, the Notes which the Noteholder making the exchange is entitled to receive. (d) All Notes issued upon any registration of transfer or exchange of Notes pursuant to this Indenture shall be the valid obligations of the Issuer, evidencing the same debt and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of such transfer or exchange pursuant to this Indenture. Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any registration of transfer or exchange of Notes, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.04 or 9.05 hereof not involving any registration of transfer. Notwithstanding anything else to the contrary contained herein, the obligation of the Issuer to pay the principal of and interest on the Notes is not a general obligation of the Issuer, but is limited solely to the Trust Estate pledged hereunder and, with respect to the Class A Notes, the Class A Note Insurance Policy subject to the terms thereof. SECTION 2.06. Limitation on Transfer and Exchange. (a) Each prospective initial Noteholder acquiring a Note, each prospective transferee acquiring a Note and each prospective owner of a beneficial interest in a Note acquiring such beneficial interest (any prospective initial Noteholder, prospective transferee or prospective owner of a beneficial interest, a "Prospective Holder") shall either (i) represent and warrant in a written certification addressed to the Indenture Trustee, the Issuer and MBIA that it is not (a) an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a plan described in Section 4975(e)(i) of the Code or (c) any entity whose underlying assets include plan assets by 25 reason of a plan's investments in the entity, or (ii) provide a representation and warranty in a written certification addressed to the Indenture Trustee, MBIA and the Issuer that such acquisition and holding by the Prospective Holder is subject to a Department of Labor class exemption, provided that the foregoing shall not apply with respect to the initial sale of the Notes. (b) The Notes have not been registered or qualified under the Securities Act of 1933 (the "1933 Act") or the securities laws of any state. No transfer of any Note shall be made unless such transfer is made in a transaction which does not require registration under the 1933 Act and pursuant to an effective registration or qualification under any state securities or "blue sky" laws, or in a transaction which does not require such registration or qualification. In the event that a transfer, other than the initial sale of the Notes, is to be made without registration or qualification, such Holder's prospective transferee shall either (i) deliver to the Indenture Trustee an investment letter substantially in the form set forth on Exhibit E hereto, or other applicable document (the "Investment Letter") or (ii) deliver to the Indenture Trustee an Opinion of Counsel that the transfer is exempt from the 1933 Act. Neither the Issuer nor the Servicer nor the Indenture Trustee is obligated to register or qualify the Notes under the 1933 Act or any other securities law. Any such Holder desiring to effect a transfer other than in accordance with the foregoing procedures shall be liable to the Indenture Trustee, the Servicer, MBIA and the Issuer against any liability, cost or expense (including attorneys' fees) that may result if the transfer is not in accordance with the foregoing procedures. Neither the Issuer nor the Servicer nor the Indenture Trustee nor MBIA shall have any liability to any Holder arising from a transfer of any Note in reliance upon a certification described in this Section 2.06(b). The Indenture Trustee shall promptly, after receipt of such information as is set forth in the next succeeding sentence, furnish to any Holder, or any Prospective Holder designated by a Holder, the information required to be delivered to Holders and Prospective Holders of Notes in connection with resales of the Notes to permit compliance with said Rule 144A in connection with such resales. Such information shall be provided to the Indenture Trustee by the Servicer. No Note may be subdivided (including any assignment or transfer of a participation or beneficial interest therein) for resale or other transfer into a unit smaller than a unit the initial offering price of which would have been $250,000. SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Note. If (i) any mutilated Note is surrendered to the Note Registrar, or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Indenture Trustee and MBIA such security or indemnity (provided that an agreement of indemnity shall suffice from the initial Noteholders who maintain a claims paying ability of investment grade or better as determined by a nationally recognized rating organization) as may be required by the Indenture Trustee and MBIA to save the Issuer, the Indenture Trustee and MBIA or any director, officer, employee or agent of any of them harmless, then, in the absence of notice 26 to the Issuer or the Note Registrar that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and, upon its request, the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of the same tenor, initial principal balance, Class and Stated Maturity Date, bearing a number not contemporaneously outstanding. If after the delivery of such new Note, a bona fide purchaser of the original Note in lieu of which such new Note was issued presents for payment such original Note, MBIA, the Issuer and the Indenture Trustee shall be entitled to recover such new Note from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expenses incurred by MBIA, the Issuer or the Indenture Trustee or any agent of any of them in connection therewith. If any such mutilated, destroyed, lost or stolen Note shall have become or shall be about to become due and payable, or shall have become subject to redemption in full, instead of issuing a new Note, the Issuer may pay such Note without surrender thereof, except that any mutilated Note shall be surrendered. Upon the issuance of any new Note under this Section, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Indenture Trustee) connected therewith. Every new Note issued pursuant to this Section 2.07, in lieu of any destroyed, lost or stolen Note, shall constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits hereof equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 2.08. Payment of Principal and Interest; Principal and Interest Rights Preserved. (a) With respect to each Payment Date, interest on the Notes shall accrue from the prior Payment Date (or from the Closing Date in the case of the first Payment Date) to and including the day preceding such Payment Date on the Class A Note Balance or the Class B Note Balance, as applicable, as of the close of business on the day preceding such Payment Date at the related Note Interest Rate (calculated on the basis of a 360-day year consisting of 12 months of 30 days each) for such Notes, until the last day preceding the Final Payment Date and (to the extent that the payment of such interest shall be legally enforceable) on any overdue installment of interest from the date such interest became due and payable (giving effect to any applicable grace periods provided herein) 27 until fully paid. Interest shall be due and payable in arrears on each Payment Date, with each payment of interest calculated as described above on the Outstanding Aggregate Note Balance of the Notes immediately following the preceding Payment Date or on the Closing Date, if there has not been any preceding Payment Date; provided, that the payment of interest on the Class B Notes is subordinate to the payment of interest on the Class A Notes and to certain other payments in accordance with Section 12.02(d). In making any such interest payment, if the interest calculation with respect to a Note shall result in a portion of such payment being less than $.01, then such payment shall be decreased to the nearest whole cent, and no subsequent adjustment shall be made in respect thereof. (b) The principal of each Note shall be payable in installments ending no later than the applicable Stated Maturity Date thereof unless such Note becomes due and payable at an earlier date by call for redemption or otherwise. All reductions in the principal amount of a Note effected by payments of installments of principal made on any Payment Date shall be binding upon all future Holders of such Note and of any Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Note. Each installment of principal payable on the Class A Notes shall be in an amount equal to the sum of (i) the Class A Principal Payment Amount, if any, and (ii) the Additional Class A Principal Distribution Amount, if any, available to be paid in accordance with the priorities of Sections 12.02(d) hereof. Each installment of principal payable on the Class B Notes shall be in an amount equal to the Class B Principal Payment Amount; provided, that the payment of the Class B Principal Payment Amount shall be subordinate to the payments of principal of and interest on the Class A Notes and to certain other payments in accordance with Section 12.02(d) hereof. The principal payable on the Notes of any Class shall be paid on each Payment Date beginning on the applicable Initial Payment Date and ending on the applicable Final Payment Date, and with respect to all of the Notes of any Class, on a pro rata basis based upon the ratio that the Outstanding Note Balance of a Note bears to the Outstanding Note Balance of all Notes of such Class; provided, however, that if as a result of such proration a portion of such principal would be less than $.01, then such payment shall be increased to the nearest whole cent, and such portion shall be deducted from the next succeeding principal payment. (c) The principal of and interest on the Notes are payable by check mailed by first-class mail to the Person whose name appears as the Registered Holder of such Note on the Note Register at the address of such Person as it appears on the Note Register or by wire transfer in immediately available funds to the account specified in writing to the Indenture Trustee by such Registered Holder at least five Business Days prior to the Record Date for the Payment Date on which wire transfers will commence, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. Except as set forth in the final sentence of this Section 2.08(c), all payments on the Notes shall be paid without any requirement of presentment. The Issuer shall notify the Person in whose name a Note is registered at the close of business on the Record Date next preceding the Payment Date on which the Issuer 28 expects that the final installment of principal of such Note will be paid that the Issuer expects that such final installment will be paid on such Payment Date. Such notice shall be mailed no later then the tenth day prior to such Payment Date and shall specify the place where such Note may be surrendered. Funds representing any such checks returned undeliverable shall be held in accordance with Section 7.15 hereof. Each Noteholder shall surrender its Note to the Indenture Trustee prior to payment of the final installment of principal of such Note. (d) Each Noteholder, by acceptance of its Note, agrees that the Notes shall be limited recourse obligations of the Issuer payable solely from the Trust Estate. Each Holder of a Note, by acceptance of such Notes, agrees that during the term of this Indenture and for one year and one day after the termination hereof, such Holder and any Affiliate thereof will not file any involuntary petition or otherwise institute any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceeding under any federal or state bankruptcy or similar law against the Issuer. SECTION 2.09. Persons Deemed Owner. Prior to due presentment for registration of transfer of any Note, the Issuer, MBIA, the Indenture Trustee and any agent of the Issuer, MBIA or the Indenture Trustee shall treat the Person in whose name any Note is registered as the owner of such Note for the purpose of receiving payments of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and neither the Issuer, MBIA, the Indenture Trustee nor any agent of the Issuer, MBIA or the Indenture Trustee shall be affected by notice to the contrary. SECTION 2.10. Cancellation. All Notes surrendered to the Indenture Trustee for payment, registration of transfer or exchange (including Notes surrendered to any Person other than the Indenture Trustee which shall be delivered to the Indenture Trustee) shall be promptly canceled by the Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section 2.10, except as expressly permitted by this Indenture. All canceled Notes held by the Indenture Trustee shall be disposed of by the Indenture Trustee as is customary with its standard practice in effect from time to time. SECTION 2.11. Tax Treatment. The Issuer has structured this Indenture and the Notes with the intention that the Notes will qualify under applicable tax law as indebtedness of the Issuer, and the Issuer and each Noteholder, by acceptance of its Note, agree to treat the Notes as debt for all purposes unless and until otherwise required by an applicable taxing authority. 29 ARTICLE III ISSUER REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 3.01. Representations, Warranties and Covenants of the Issuer. The Issuer hereby makes the following representations and warranties to the Indenture Trustee and for the benefit of MBIA and the Noteholders. Such representations and warranties speak as of the Closing Date, but shall survive any subsequent transfer, assignment, contribution or conveyance of the Loan Assets. (a) Organization and Good Standing. The Issuer is a corporation duly organized, validly existing and in good standing under the law of the Issuer State of Incorporation and each other State where the nature of its business requires it to qualify, except to the extent that the failure to so qualify would not in the aggregate materially adversely affect the ability of the Issuer to perform its obligations under the Transaction Documents; (b) Authorization. The Issuer has the power, authority and legal right to execute, deliver and perform under the terms of the Transaction Documents and the execution, delivery and performance of the Transaction Documents have been duly authorized by the Issuer by all necessary corporate action; (c) Binding Obligation. Each of (i) this Indenture, assuming due authorization, execution and delivery by the Indenture Trustee, (ii) the Insurance Agreement, assuming due authorization, execution and delivery by MBIA, the Indenture Trustee and the Servicer, (iii) the Servicing Agreement, assuming due authorization, execution and delivery by the Indenture Trustee, the Back-Up Servicer, the Custodian and the Servicer and (iv) the Loan Sale Agreement, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms except that (A) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors' rights generally and (B) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, whether a proceeding at law or in equity; (d) No Violation. The consummation of the transactions contemplated by the fulfillment of the terms of the Transaction Documents will not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice, lapse of time or both) a default under the organizational documents or bylaws of the Issuer, or any material indenture, agreement, mortgage, deed of trust or other instrument to which the Issuer is a party or by which it is bound, or in the creation or imposition of any Lien upon any of its properties pursuant to the terms of such indenture, agreement, 30 mortgage, deed of trust or other such instrument, other than any Lien created or imposed pursuant to the terms of the Transaction Documents, or violate any law or any material order, rule or regulation applicable to the Issuer of any court or of any Federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Issuer or any of its properties. (e) No proceedings. There are no proceedings, or investigations to which the Issuer, or any of the Issuer's Affiliates, is a party pending, or, to the knowledge of the Issuer, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (A) asserting the invalidity of the Transaction Documents, (B) seeking to prevent the issuance of any of the Notes or the consummation of any of the transactions contemplated by the Transaction Documents or (C) seeking any determination or ruling that would materially and adversely affect the performance by the Issuer of its obligations under, or the validity or enforceability of, the Transaction Documents. (f) Approvals. All approvals, authorizations, consents, orders or other actions of any Person, or of any court, governmental agency or body or official, required in connection with the execution and delivery of the Transaction Documents and with the valid and proper authorization, issuance and sale of the Notes pursuant hereto (except approvals of State securities officials under the Blue Sky Laws), have been or will be taken or obtained on or prior to the Closing Date. (g) Place of Business. The Issuer's principal place of business and chief executive office is located at 863 Glenrock Road, Norfolk, Virginia 23502. (h) Transfer and Assignment. Upon the delivery to the Custodian, as agent of the Indenture Trustee, of the Loan Contracts, the related Certificates of Title and the Applications for Certificates of Title, the Indenture Trustee, for the benefit of the Noteholders and MBIA, shall have a first priority perfected security interest in such items, as well as the other items constituting the Trust Estate, except for Liens permitted under Section 3.02(a) and limited with respect to proceeds to the extent set forth in Section 9-306 of the UCC as in effect in the applicable jurisdiction. All filings (including, without limitation, UCC filings) and other actions as are necessary in any jurisdiction to perfect the interest of the Indenture Trustee in the Trust Estate, including the transfer of the Certificates of Title and the Applications for Certificates of Title, and the Loan Contracts, and the payment of any fees, have been made. (i) Parent of the Issuer. As of the Closing Date, the Company is the registered owner of all of the issued and outstanding common stock of the Issuer, all of which common stock has been validly issued, is fully paid and nonassessable. (j) Loan Sale Agreement. As of the Closing Date, the Issuer has entered into the Loan Sale Agreement with the Company relating to its acquisition of the Loan Contracts and its security interest in the Vehicles, and the representations and warranties 31 made by the Company relating to the Loan Contracts and the Vehicles have been validly assigned to and are for the benefit of the Issuer, the Indenture Trustee, MBIA and the Noteholders and such representations and warranties are true and correct in all material respects. (k) Bulk Transfer Laws. The transfer, assignment and conveyance of the Loan Contracts and security interest in the Vehicles by the Company to the Issuer pursuant to the Loan Sale Agreement and by the Issuer pursuant to this Indenture is not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction. (l) The Loan Contracts. The Issuer hereby restates and makes each of the representations and warranties with respect to the Loan Contracts and the Vehicles that are made by the Company in Section 3.01 of the Loan Sale Agreement. SECTION 3.02. Covenants. The Issuer hereby makes the following covenants for the benefit of the Indenture Trustee, MBIA and the Noteholders, on which the Indenture Trustee relies in accepting the Trust Estate in trust and in authenticating the Notes and MBIA relies in issuing the Class A Note Insurance Policy. Such covenants are made as of the Closing Date, but shall survive the transfer, grant and assignment of the Trust Estate to the Indenture Trustee: (a) No Liens. Except for the conveyances and grant of security interests hereunder, the Issuer will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on any part of Trust Estate now existing or hereafter created, or any interest therein prior to the termination of this Indenture pursuant to Section 5.01 hereof; the Issuer will notify the Indenture Trustee and MBIA of the existence of any Lien on any part of Trust Estate immediately upon discovery thereof; and the Issuer shall defend the right, title and interest of the Indenture Trustee in, to and under the Trust Estate now existing or hereafter created, against all claims of third parties claiming through or under the Issuer; provided, however, that nothing in this Section 3.02(a) shall prevent or be deemed to prohibit the Issuer from suffering to exist upon any of the Trust Estate any Liens for municipal or other local taxes and other governmental charges if such taxes or governmental charges shall not at the time be due and payable or if the Issuer shall currently be contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves with respect thereto. (b) Delivery of Collections. The Issuer agrees to hold in trust and promptly deposit into the Collection Account all amounts received by the Issuer in respect of the Trust Estate (other than amounts distributed to or for the benefit of the Issuer pursuant to Article Twelve hereof). 32 (c) Obligations with Respect to Loan Contracts. The Issuer will duly fulfill all obligations on its part to be fulfilled under or in connection with each Loan Contract and will do nothing to impair the rights of the Indenture Trustee (for the benefit of the Noteholders and MBIA) in the Loan Contracts, the Vehicles and any other part of the Trust Estate. (d) Compliance with Law. The Issuer will comply, in all material respects, with all acts, rules, regulations, orders, decrees and directions of any governmental authority applicable to the Loan Contracts or any part thereof; provided, however, that the Issuer may contest any act, regulation, order, decree or direction in any reasonable manner which shall not materially and adversely affect the rights of the Indenture Trustee (for the benefit of the Noteholders and MBIA) in the Loan Contracts and the Vehicles. The Issuer will comply, in all material respects, with all requirements of law applicable to the Issuer. (e) Preservation of Security Interest. The Issuer shall execute and file such continuation statements and any other documents which may be required by law to fully preserve and protect the interest of the Indenture Trustee (for the benefit of the Noteholders and MBIA) in the Trust Estate. If a Re-Liening Trigger occurs, the Issuer shall enforce its rights against the Company under the Loan Sale Agreement to have the Vehicles retitled noting the security interest of the Indenture Trustee hereunder. (f) Maintenance of Office, etc. The Issuer will not, without providing 30 days' prior written notice to the Indenture Trustee and MBIA and without filing such amendments to any previously filed financing statements as the Indenture Trustee or MBIA may require or as may be required in order to maintain the Indenture Trustee's perfected security interest in the Trust Estate, (a) change the location of its principal executive office, or (b) change its name, identity or corporate structure in any manner which would make any financing statement or continuation statement filed by the Issuer in accordance with the Servicing Agreement or this Indenture seriously misleading within the meaning of Article 9-402(7) of any applicable enactment of the UCC. (g) Further Assurances. The Issuer will make, execute or endorse, acknowledge, and file or deliver to MBIA, the Rating Agencies and the Indenture Trustee from time to time such schedules, confirmatory assignments, conveyances, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Trust Estate, as the Indenture Trustee or MBIA may reasonably request and reasonably require. (h) Notice of Liens. The Issuer shall notify the Indenture Trustee and MBIA promptly after becoming aware of any Lien on any part of the Trust Estate, except for any Liens for municipal or other local taxes if such taxes shall not at the time be due or payable without penalty or if the Issuer shall currently be contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves with respect thereto. 33 (i) Activities of the Issuer. The Issuer shall at all times abide by the restrictions on its activities as set forth in its certificate of incorporation and shall not amend such certificate of incorporation unless (x) the Issuer shall cause, prior to the taking of such action, an Opinion of Counsel experienced in federal bankruptcy matters, in substance satisfactory to MBIA and the Rating Agencies, to be delivered to the Indenture Trustee, MBIA and the Rating Agencies and (y) the Rating Agencies shall indicate in writing that the taking of such action will not affect the then current rating of any Notes or the shadow rating of this transaction. So long as the Notes remain Outstanding, the Issuer shall not amend its certificate of incorporation without the prior written consent of MBIA. (j) Directors. The Issuer agrees that at all times, at least two of the directors of the Issuer will not be a director, officer or employee of any direct or ultimate parent, or Affiliate of the parent or of the Issuer; provided, however, that such independent directors and officers may serve in similar capacities for other "special purpose corporations" formed by the Company and its Affiliates. The Issuer's Certificate of Incorporation shall at all times provide that such independent directors shall have a fiduciary duty to the Holders of the Notes. (k) Tax Treatment. Unless and to the extent otherwise required by an applicable taxing authority, the Issuer will treat the Notes as debt of the Issuer. (l) Notice of Reserve Account Increase Events; Re-Liening Triggers and Events of Default. Upon the Issuer's obtaining knowledge of the occurrence of any Reserve Account Increase Event, Re-Liening Trigger or Event of Default, the Issuer shall within one Business Day of obtaining such knowledge notify MBIA and the Indenture Trustee of such occurrence in writing. (m) Enforcement of this Indenture and Loan Sale Agreement. The Issuer will take all actions necessary, and diligently pursue all remedies available to it, to the extent commercially reasonable, to enforce the obligations of the Servicer under the Servicing Agreement and the Company under the Loan Sale Agreement and to secure its rights thereunder. (n) Issuer May Consolidate, etc., Only on Certain Terms. The Issuer shall not consolidate or merge with or into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person, unless: (i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger or which acquires by conveyance or transfer the properties and assets of the Issuer substantially as an entirety shall be a Person organized and existing as a corporation under the laws of the United States of America or any State thereof and shall have expressly assumed, by an agreement supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance 34 reasonably satisfactory to MBIA, the obligation and covenants of this Indenture and the Loan Sale Agreement on the part of the Issuer to be performed or observed; and (ii) immediately after giving effect to such transaction, no Event of Default or the occurrence of any circumstances which with notice or lapse of time would become an Event of Default (such event, occurrence or circumstance, a "Default") shall have occurred and be continuing; and (iii) the Issuer shall have delivered to the Indenture Trustee and MBIA an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with and an Opinion of Counsel, for the benefit of MBIA, the Indenture Trustee and the Noteholders confirming the enforceability of documents in connection with such consolidation, merger, conveyance or transfer; (iv) such consolidation, merger, conveyance or transfer shall be on such terms as shall fully preserve the lien and security of this Indenture, the perfection and priority thereof and the rights and powers of the Indenture Trustee, MBIA and the Noteholders; (v) the surviving corporation shall be a "special purpose corporation" having an organizational charter substantially similar to the certificate of incorporation of the Issuer including specific limitations on its business purposes, and provisions for independent directors; and (vi) MBIA shall have given its prior written consent, which consent shall not be unreasonably withheld or delayed. (o) Successor Substituted. Upon any consolidation or merger, or any conveyance or transfer of the properties and assets of the Issuer substantially or in entirety in accordance with this Indenture, the Person formed by or surviving such consolidation or merger (if other than the Issuer) or the Person to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein. In the event of any such conveyance or transfer, the Person named as the "Issuer" in the first paragraph of this Indenture or any successor which shall theretofore have become such in the manner prescribed in this Article shall be released from its liabilities and from its obligations under this Indenture and may be dissolved, wound-up and liquidated at any time thereafter. (p) Use of Proceeds. The proceeds from the sale of the Notes will be used by the Issuer (a) to pay the purchase price of the Loan Assets pursuant to the Loan Sale 35 Agreement and (i) to deposit into the Reserve Account the Reserve Account Initial Deposit and (ii) to deposit the Class B Reserve Account Deposit into the Class B Reserve Account, (b) to pay the expenses associated with this transaction, and (c) for general corporate purposes. None of the transactions contemplated in this Indenture or the Loan Sale Agreement (including the use of the proceeds from the sale of the Notes) will result in a violation of Section 7 of the Securities and Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including Regulations G, T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter 11. The Issuer does not own or intend to carry or purchase any "margin security" within the meaning of said Regulation G, including margin securities originally issued by it or any "margin stock" within the meaning of said Regulation U. (q) Consolidated Return. The Issuer and the Company are members of an affiliated group within the meaning of section 1504 of the Code which will file a consolidated return for federal income tax purposes at all times until the termination of this Indenture. (r) Taxable Income from the Loan Contracts. The Issuer shall treat the Notes issued by it as debt and shall treat the Loan Contracts as owned by it for Federal, state and local income tax purposes, and the affiliated group of which the Issuer is a member within the meaning of section 1504 of the Code shall treat the Notes issued by the Issuer as debt of the Issuer and shall treat the Loan Contracts as owned by the Issuer for Federal, state and local income tax purposes, and the Issuer and such affiliated group shall report and include in the computation of the Issuer's gross income for such tax purposes the income from the Loan Contracts, and shall deduct the interest paid or accrued with respect to the Notes in accordance with its applicable method of accounting for such purposes. (s) Maintenance of Office or Agency. The Issuer will maintain an office or agency within the United States of America where its Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demand to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer hereby initially appoints the Indenture Trustee as the Paying Agent and its Corporate Trust Office as the office for each of said purposes. The Issuer will give 30 days' prior written notice to the Indenture Trustee, MBIA and the Noteholders of any change in the identity of the Paying Agent or the location, of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Indenture Trustee, and the Issuer hereby appoints the Indenture Trustee its agent to receive all such presentations, surrenders, notices and demands. (t) Limited Waiver of Recourse to Dealers. With respect to each Loan Contract acquired from the Falk Dealer by the Company, sold by the Company to the 36 Issuer pursuant to the terms of the Loan Sale Agreement and Granted to the Indenture Trustee by the Issuer pursuant to the terms hereof, the Issuer shall not have the right to, and shall not, exercise or accept the benefits of any right of recourse the Issuer may have against the Falk Dealer that otherwise would permit the Issuer to cause such Dealer to pay any amount with respect to such Loan Contract in the event it becomes a Defaulted Loan Contract, except that, with respect to the CFAW Purchase Agreement, such recourse may be exercised to the extent that all Recoveries in the aggregate paid by the Falk Dealer after the Cut-Off Date with respect to the related Loan Contracts as a result of the exercise of such recourse by the Issuer do not exceed an amount equal to 10% of the aggregate Loan Balance as of the Cut-Off Date of all Loan Contracts acquired from such Dealer. The form of UCC-1 financing statements filed pursuant to Section 4.01(f) hereof shall contain a statement to the effect that recourse to the Falk Dealer is limited as provided in this paragraph. The limitation on recourse provided in this paragraph shall be for the benefit of, and shall be enforceable through specific performance or other remedies available at law or in equity by, the Falk Dealer, the Indenture Trustee or the Noteholders. SECTION 3.03. Representations and Warranties Regarding the Loan Assets. The Issuer hereby restates and makes each of the representations and warranties with respect to the Loan Contracts and the Vehicles that are made by the Company in the Loan Sale Agreement. Such representations and warranties shall survive any subsequent transfer, assignment, contribution, pledge or conveyance of the Loan Assets. SECTION 3.04. Limitation on Liability of Directors, Officers, or Employees of the Issuer. The directors, officers, or employees of the Issuer shall not be under any liability to MBIA, the Indenture Trustee, the Custodian, the Noteholders, the Company, the Servicer, the Back-up Servicer or any other Person hereunder or pursuant to any document delivered hereunder, it being expressly understood that all such liability is expressly waived and released as a condition of, and as consideration for, the execution of this Indenture and the issuance of the Notes. 37 ARTICLE IV ISSUANCE OF NOTES; REMOVAL OF COLLATERAL SECTION 4.01. Conditions to Issuance of Notes. The Notes to be issued on the Closing Date may be executed by the Issuer and delivered to the Indenture Trustee for authentication, and thereupon, the same shall be authenticated and delivered by the Indenture Trustee upon Issuer Order and upon receipt by the Indenture Trustee (or, in the case of the items listed in clause (b) below, the Custodian) of the following: (a) the Loan Sale Agreement with the related Loan Schedule attached thereto and the Servicing Agreement; (b) the original executed counterpart of each Loan Contract and each original Certificate of Title or the Application for Certificate of Title; (c) a Board Resolution of each of the Issuer, the Servicer and the Company authorizing, as applicable, the execution, delivery and performance of the Transaction Documents and the transactions contemplated hereby and by the other Transaction Documents, certified by the Secretary or an Assistant Secretary of the Issuer, the Servicer or the Company, as applicable; (d) a copy of an officially certified document, dated not more than (30) days prior to the Closing Date, evidencing the due organization and good standing of each of the Issuer, the Servicer and AutoInfo in their respective states of incorporation; (e) copies of the certificate of incorporation and By-Laws of each of the Issuer, the Servicer and AutoInfo, certified by the Secretary or an Assistant Secretary of the Issuer, the Servicer and AutoInfo, as applicable; (f) evidence of filing with the Secretary of State of the state (and with the relevant county, if required by the applicable state law) of the Company's chief executive office of UCC-1 financing statements executed by the Company, as debtor, and naming the Issuer as secured party, and the Loan Assets as collateral and the Indenture Trustee as assignee; (g) evidence of filing with the Secretary of State of the state (and with the relevant county, if required by the applicable state law) of the Issuer's chief executive office of UCC-1 financing statements executed by the Issuer, as debtor, and naming the Indenture Trustee for the benefit of the Noteholders and MBIA as secured party, and the Trust Estate as collateral; 38 (h) a certificate listing the Servicing Officers of the Servicer as of the Closing Date; (i) the Class A Note Insurance Policy for the Class A Notes; (j) evidence of the deposit by the Issuer into the Collection Account of any amounts paid on the Loan Contracts since the Cut-Off Date and evidence of the deposit of the Reserve Account Initial Deposit into the Reserve Account and the Class B Reserve Account Deposit into the Class B Reserve Account; and (k) such other documents as the Indenture Trustee or MBIA may reasonably require. SECTION 4.02. Security for Notes. (a) The Issuer and the Company shall file UCC-1 financing statements described in Section 4.01(f) and (g) hereof. From time to time, the Servicer shall, in accordance with the Servicing Agreement, take or cause to be taken such actions and execute such documents as are necessary to perfect and protect the Indenture Trustee's and MBIA's respective interests in the Loan Contracts and the security interest in the related Vehicles against all other Persons, including, without limitation, the filing of financing statements, amendments thereto and continuation statements, the execution of transfer instruments and the making of notations on or taking possession of all records or documents of title. If the original Certificate of Title is not available on the Closing Date, the Company shall deliver the Application for Certificate of Title to the Custodian on behalf of the Indenture Trustee on the Closing Date; provided, however, that the Company shall deliver to the Custodian on behalf of the Indenture Trustee the original Certificate of Title relating to each Vehicle within 120 days of the delivery of the Application for Certificate of Title. (b) If any change in either the Company's or the Issuer's name, identity, structure or the location of its principal place of business or chief executive office occurs, then the Issuer shall, or the Issuer shall cause the Company, to deliver 30 days' prior written notice of such change or relocation to the Servicer, MBIA and the Indenture Trustee and no later than the effective date of such change or relocation, the Servicer shall file such amendments or statements as may be required to preserve and protect the Indenture Trustee's and MBIA's respective interests in the Trust Estate in accordance with the Servicing Agreement. (c) During the term of this Indenture, the Issuer will maintain its chief executive office and principal place of business in one of the States of the United States. (d) The Servicer agrees to pay all reasonable costs and disbursements in connection with the perfection and the maintenance of perfection, as against all third 39 parties, of the Indenture Trustee's and MBIA's respective right, title and interest in and to the Trust Estate. (e) So long as an MBIA Default shall not have occurred and be continuing, upon the occurrence of a Re-Liening Trigger, MBIA may instruct the Indenture Trustee, the Issuer and the Servicer to take or cause to be taken such action as may, in the opinion of counsel to MBIA, be necessary or desirable to perfect or reperfect the security interests in the Vehicles securing the Trust Estate in the name of the Indenture Trustee by amending the title documents of such Vehicles or by such other reasonable means as may, in the opinion of counsel to the MBIA, be necessary or prudent. The Issuer hereby grants to the Indenture Trustee a power of attorney to effect such re-perfection. The Issuer hereby agrees to pay all expenses related to such perfection or re-perfection (and to reimburse the Indenture Trustee for all costs and expenses related therewith) and to take all action necessary therefor. SECTION 4.03. Removals of Loan Contracts. (a) If at any time the Issuer, the Custodian, MBIA or the Indenture Trustee obtains knowledge (within the meaning of 7.01(e) hereof), discovers or is notified by the Servicer or MBIA that any of the representations and warranties of the Company in the Loan Sale Agreement were incorrect at the time as of which such representations and warranties were made, then the Person discovering such defect, omission, or circumstance shall promptly notify MBIA and the other parties to this Indenture. (b) In the event that the Issuer receives notice that any representation or warranty of the Company in the Loan Sale Agreement is incorrect and materially and adversely affects the interests of MBIA or the Holders of the Notes, or of any breach of any of the representations and warranties set forth in Sections 3.01(a)(ii), 3.01(a)(v), 3.01(a)(vii), 3.01(a)(xiv) or 3.01(a)(xvi) of the Loan Sale Agreement or if the Custodian discovers that any Loan Contract File is defective as provided in Section 11.03(b) hereof and in Section 3.09(b) of the Servicing Agreement, the Issuer shall require the Company pursuant to the Loan Sale Agreement to eliminate or otherwise cure the circumstance or condition which has caused such representation or warranty to be incorrect or such defect, as the case may be, within 30 days of discovery or notice thereof. If the Company fails or the Company or the Back-up Servicer is unable to cure such circumstance or condition in accordance with the Loan Sale Agreement, then the Issuer shall require the Company to purchase pursuant to the Loan Sale Agreement any Loan Asset as to which such representation or warranty is incorrect within the time specified in Section 3.03 of the Loan Sale Agreement. The proceeds of such purchase shall be promptly remitted by the Issuer to the Servicer for deposit by the Servicer in the Collection Account pursuant to Section 3.03 of the Servicing Agreement. (c) If the Issuer fails to enforce the purchase obligation of the Company under the Loan Sale Agreement or of the Servicer under the Servicing Agreement, the 40 Indenture Trustee is hereby appointed attorney-in-fact to act on behalf of and in the name of the Issuer to require such purchase. SECTION 4.04. Releases. (a) The Issuer shall be entitled to obtain a release from the Indenture Trustee for any Loan Contract and the related Vehicle at any time (x)(i) after a payment by the Company, the Servicer or the Issuer of the Purchase Price of the Loan Contract, (ii) after liquidation of the Loan Contract in accordance with Section 3.01(b) of the Servicing Agreement and the deposit of all gross Recoveries thereon in the Collection Account or (iii) upon the termination of a Loan Contract (due to among other causes, prepayment in full of the Loan Contract and sale or other disposition of the related Vehicle), or (y)(i) on the Redemption Date, provided that all of the Notes have been redeemed or (ii) upon the termination of this Indenture, if the Issuer delivers to the Indenture Trustee, the Custodian and MBIA an Officer's Certificate (A) identifying the Loan Contract and Vehicle to be released, (B) requesting the release thereof, (C) setting forth the amount deposited in the Collection Account with respect thereto and (D) certifying that the amount deposited in the Collection Account (x) equals the Purchase Price of the Loan Contract, in the event a Loan Contract and the related Vehicle are being removed from the Trust Estate pursuant to (i) or (ii) above or (y) equals the entire amount of gross Recoveries received with respect to such Loan Contract and related Vehicle in the event of a release pursuant to (iii) above. (b) Upon satisfaction of the conditions specified in subsection (a) hereof, the Indenture Trustee shall release from this Indenture and the Custodian shall deliver to or upon the order of the Issuer (or to or upon the order of the Company if it has satisfied its obligations under Section 4.03 hereof and 3.04 of the Loan Sale Agreement with respect to a Loan Contract or to or upon the order of the Servicer if it has satisfied its obligations under Section 3.04(a)(ii) of the Loan Sale Agreement), the Loan Contract, the Certificate of Title and/or the Application for Certificate of Title and all interests in the Vehicle described in the Issuer's request for release. SECTION 4.05. Trust Estate. The Indenture Trustee may, and when required by the provisions of Articles Four, Five, Six and Twelve hereof shall, execute instruments to release property from the lien of this Indenture, or convey the Indenture Trustee's interest in the same, in a manner and under circumstances which are not inconsistent with the provisions hereof. No party relying upon an instrument executed by the Indenture Trustee as provided in this Article Four shall be bound to ascertain the Indenture Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any monies. 41 ARTICLE V SATISFACTION AND DISCHARGE SECTION 5.01. Satisfaction and Discharge of Indenture. (a) Following payment in full of (i) all of the Notes, (ii) the fees and charges of the Indenture Trustee, (iii) all other obligations of the Issuer under this Indenture and (iv) all amounts owing to MBIA under the Insurance Agreement, and the release by the Indenture Trustee of the Trust Estate in accordance with Section 5.01(b) hereof, the Indenture shall be discharged and the Indenture Trustee shall notify the Rating Agencies thereof. (b) Upon payment in full of the amounts referred to in clauses (i) through (iv) of Section 5.01(a) hereof, the Issuer may submit to the Indenture Trustee an Officer's Certificate requesting the release to the Issuer or its designee some or all of the Trust Estate (the "Withdrawn Collateral"), together with a written consent executed by MBIA authorizing such release. Promptly after receipt of such Officer's Certificate and authorization to release from MBIA, the Indenture Trustee shall release the Withdrawn Collateral from the lien of this Indenture, and deliver the Withdrawn Collateral to the Issuer or its designee. The Issuer shall be entitled to deliver more than one such Officer's Certificate and MBIA consent, until the entire Trust Estate is released and delivered to the Issuer or its designee. Notwithstanding the foregoing, MBIA may waive the requirement that the Issuer deliver such Officer's Certificate and authorize the Indenture Trustee by written direction to release all or a portion of the Trust Estate from the lien of this Indenture upon payment in full of the amounts referred to in clauses (i) through (iv) of Section 5.01(a) hereof. Notwithstanding termination of this Indenture, the Indenture Trustee shall remain obligated to make claims under the Class A Note Insurance Policy with respect to any Preference Amount. (c) In connection with the discharge of this Indenture and the release of the Trust Estate, the Indenture Trustee shall release from the lien hereof and deliver to or upon the order of the Issuer all property remaining in the Trust Estate and shall execute and file, at the expense of the Issuer, UCC financing statements provided to it evidencing such discharge and release. SECTION 5.02. Application of Trust Money. Subject to the last paragraph of Section 7.15 hereof, all monies deposited with the Indenture Trustee pursuant to Section 5.01 hereof shall be held in trust and if invested, shall be invested in Eligible Investments of the type described in clause (i) of the definition thereof, and applied by the Indenture Trustee, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying 42 Agent as the Indenture Trustee may determine, to the Persons entitled thereto, of the principal and interest for whose payment such money has been deposited with the Indenture Trustee; but such money need not be segregated from other funds except to the extent required herein or to the extent required by law. 43 ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. "Event of Default" wherever used herein means the occurrence of any one of the following events: (a) An Insolvency Event with respect to the Servicer, the Company or the Issuer. (b) The occurrence of a Default or a breach of a representation, warranty, or covenant under any of the Transaction Documents by any of the Servicer, the Company or the Issuer which continues unremedied for a period of 30 days after the Servicer, the Company or the Issuer, as the case may be, becomes aware of such Default or breach or other written notice of such Default or breach shall have been given to the Servicer, the Company or the Issuer, as the case may be; (c) the occurrence of a Servicer Event of Default pursuant to the Servicing Agreement; (d) a payment under the Class A Note Insurance Policy is made by MBIA; (e) the cessation of a valid perfected first priority security interest in the Trust Estate (other than the Vehicles) in favor of the Indenture Trustee on behalf of the Noteholders and MBIA; (f) the average Delinquency Rate for the most current three months exceeds 20% as of each Determination Date; (g) the average Monthly Net Default Rate for the most current three months exceeds 4%; (h) the Cumulative Net Default Rate as of each Determination Date exceeds the level specified for such period in the Cumulative Net Default Table; (i) on and after the third Payment Date, the amount on deposit in the Reserve Account is less than 12% of the Aggregate Loan Balance as of such Payment Date; (j) the weighted average coupon on the outstanding portfolio of Loan Contracts falls below 23%; 44 (k) Scott Zecher shall (i) become deceased, (ii) become unable to work, or (iii) cease to be employed by AutoInfo on a full-time basis, and a replacement for Scott Zecher, reasonably acceptable to MBIA, has not commenced employment within 90 days of the occurrence of any of the events in this clause (k); (l) the stockholder's equity of AutoInfo, calculated in accordance with GAAP, as reflected in AutoInfo's most recent annual or quarterly consolidated financial statements is less than $23,750,000; (m) AutoInfo's Interest Coverage Ratio is less than 1.25:1 in any two consecutive quarters; (n) AutoInfo or any of its Affiliates is in payment default under any indebtedness having an outstanding principal amount of $500,000 or more; (o) AutoInfo realizes a net loss from operations in any two consecutive quarters; (p) a final, non-appealable judgment shall be entered against, or settlements by, the Servicer, the Company or the Issuer by a court of competent jurisdiction assessing monetary damages in excess of $500,000 and, in the case of a judgment, such judgment shall not have been discharged or stayed within 60 days; (q) except as permitted by the Transaction Documents, any assignment by the Servicer of its rights and obligations under the Transaction Documents or any attempt to make such an assignment without the express written consent of MBIA; or (r) the occurrence of a Re-Liening Trigger. SECTION 6.02. Indenture Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relating to the Issuer or any other obligor upon any of the Notes or the property of the Issuer or of such other obligor or their creditors, the Indenture Trustee (irrespective of whether the principal of any of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand on the Issuer for the payment of overdue principal or interest) shall be entitled and empowered, to intervene in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Notes issued hereunder and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for the reasonable compensation, expenses, disbursements 45 and advances of the Indenture Trustee, its agents and counsel and any other amounts due the Indenture Trustee under Section 7.07 hereof and any other amounts due and owing to the Noteholders) and of MBIA and the Noteholders allowed in such judicial proceeding, and (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any receiver, assignee, trustee, liquidator, or sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by MBIA and each Noteholder to make such payments to the Indenture Trustee, and in the event that the Indenture Trustee shall consent to the making of such payments directly to MBIA or the Noteholders, to pay to the Indenture Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, and any other amounts due the Indenture Trustee under Section 7.07 hereof. Nothing contained in this Indenture shall be deemed to authorize the Indenture Trustee to authorize or consent to or accept or adopt on behalf of MBIA or any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting MBIA or any of the Notes or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of MBIA or any Noteholder in any such proceeding. SECTION 6.03. Indenture Trustee May Enforce Claims Without Possession of Notes. (a) In all proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party), the Indenture Trustee shall be held to represent all of the Noteholders, and it shall not be necessary to make any Noteholder a party to any such proceedings. (b) All rights of actions and claims under this Indenture or any of the Notes may be prosecuted and enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceedings instituted by the Indenture Trustee shall be brought in its own name as Indenture Trustee of an express trust, and any recovery whether by judgment, settlement or otherwise shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes and MBIA. 46 SECTION 6.04. Limitation on Suits. No Holder of any Note shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder unless (a) an MBIA Default has occurred and is continuing, (b) such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default; (c) the Controlling Holders shall have made written request to the Indenture Trustee to institute proceedings in respect of such Event of Default in its own name as Indenture Trustee hereunder; (d) such Holder or Holders have offered to the Indenture Trustee reasonable indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request; (e) the Indenture Trustee for 60 days after its receipt of such notice, request and offer of security or indemnity has failed to institute any such proceedings; and (f) no direction inconsistent with such written request has been given to the Indenture Trustee during such 60 day period by the Controlling Holders; it being understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders of Notes. SECTION 6.05. Unconditional Right of Noteholders to Receive Principal and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal and interest on such Note as such principal and interest becomes due and payable and to institute any proceeding for the enforcement of any such payment against the Issuer on or after one year and one day after the Stated Maturity Date, and such right shall not be impaired without the consent of such Holder. 47 SECTION 6.06. Restoration of Rights and Remedies. If the Indenture Trustee, MBIA or any Noteholder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Indenture Trustee, MBIA or to such Noteholder, then, and in every case, the Issuer, the Indenture Trustee, MBIA and the Noteholders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee, MBIA and the Noteholders shall continue as though no such proceeding had been instituted. SECTION 6.07. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 2.07 hereof, no right or remedy herein conferred upon or reserved to the Indenture Trustee, MBIA or the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.08. Control by MBIA or Noteholders. MBIA or, if an MBIA Default has occurred and is continuing, the Controlling Holders shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee or exercising any trust or power conferred on the Indenture Trustee; provided that, in the case of direction by the Noteholders: (a) such direction shall not be in conflict with any rule of law or with this Indenture, including, without limitation, any provision hereof which expressly provides fair approval by a greater percentage of Outstanding Principal Amount of all the Notes; (b) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee which is not inconsistent with such direction; provided, however, that, subject to Section 7.01 hereof, the Indenture Trustee need not take any action which a Responsible Officer or Officers of the Indenture Trustee in good faith determines might involve it in personal liability or be unjustly prejudicial to the Controlling Holders; and 48 (c) the Indenture Trustee has been furnished reasonable indemnity satisfactory to it against costs, expenses and liabilities which it might incur in connection therewith as provided in Section 7.01(f) hereof. SECTION 6.09. Waiver of Certain Events by Less than All. MBIA or, if an MBIA Default has occurred and is continuing, the Controlling Holders may on behalf of the Holders of all the Notes waive any past Event of Default, Re-Liening Trigger or Reserve Account Increase Event hereunder and its consequences, except: (a) the occurrence of the Event of Default described in 6.01(a) hereof, or (b) in respect of a covenant or provision hereof which under Article Nine hereof cannot be modified or amended without the consent of the Holder of each Outstanding Note affected. Upon any such waiver, such Default, Re-Liening Trigger, Event of Default or Reserve Account Increase Event shall cease to exist, and any Event of Default, Re-Liening Trigger or Reserve Account Increase Event or other consequence arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Event of Default, Re-Liening Trigger, Event of Default or Reserve Account Increase Event or impair any right consequent thereon. SECTION 6.10. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Note by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 6.10 shall not apply to any suit instituted by the Indenture Trustee or MBIA, or to any suit instituted by the Controlling Holders, or to any suit instituted by any Noteholder for the enforcement of the payment of the principal of or interest on any Note on or after one year and one day after the Stated Maturity Date expressed in such Note. SECTION 6.11. Waiver of Stay or Extension Laws. 49 The Issuer covenants (to the extent that it may lawfully do so) that it will not, at any time, insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 6.12. Action on Notes. The Indenture Trustee's right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Noteholders or MBIA shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Trust Estate or upon any of the assets of the Issuer. SECTION 6.13. Delay or Omission; Not Waiver. No delay or omission of the Indenture Trustee, MBIA or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein. Every right and remedy given by this Article Six or by law to the Indenture Trustee, MBIA or to the Noteholders may be exercised from time to time, and as soon as may be deemed expedient, by the Indenture Trustee, MBIA or by the Noteholders, as the case may be, subject in each case, however, to the right of MBIA to control any such right and remedy except as provided in Section 13.13 hereof. 50 ARTICLE VII THE INDENTURE TRUSTEE SECTION 7.01. Certain Duties and Responsibilities of the Indenture Trustee. (a) Except during the continuance of an Event of Default known to the Indenture Trustee as provided in subsection (e) below: (i) the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in the Transaction Documents, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and (ii) in the absence of bad faith or negligence on its part, the Indenture Trustee may conclusively rely as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements hereof; but in the case of any such certificates or opinions, which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same and to determine whether or not they conform to the requirements hereof. (b) In case an Event of Default known to the Indenture Trustee, as provided in subsection (e) below, has occurred and is continuing, the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill in its exercise, as a reasonable person would exercise or use under the circumstances in the conduct of his or her own affairs. (c) No provision hereof shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct or bad faith, except that: (i) this subsection (c) shall not be construed to limit the effect of subsection (a) of this Section; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; (iii) the Indenture Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of 51 MBIA or the Controlling Holders relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture, the Loan Sale Agreement or the Servicing Agreement in accordance with the terms of this Indenture, the Loan Sale Agreement and the Servicing Agreement; and (iv) no provision hereof shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or reasonable indemnity satisfactory to it against such risk or liability is not reasonably assured to it, provided that nothing contained herein shall excuse the Indenture Trustee for failure to perform its duties as Indenture Trustee hereunder. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Article VII. (e) For all purposes under this Indenture, the Indenture Trustee shall not be deemed to have notice of any Event of Default, Default, Reserve Account Increase Event, MBIA Default or Re-Liening Trigger unless a Responsible Officer assigned to and working in the Corporate Trust Office has actual knowledge thereof, or unless written notice of any event which is in fact such an Event of Default, Default, Reserve Account Increase Event, Re-liening Trigger or MBIA Default is received by the Indenture Trustee at the Corporate Trust Office, and such notice references any of the Notes generally, the Issuer, the Trust Estate or this Indenture. (f) The Indenture Trustee shall be under no obligation to institute any suit, or to take any remedial proceeding under this Indenture, or to enter any appearance or in any way defend in any suit in which it may be made defendant, or to take any steps in the execution of the trusts hereby created or in the enforcement of any rights and powers hereunder until it shall be indemnified to its satisfaction against any and all costs and expenses, outlays and counsel fees and other reasonable disbursements and against all liability, except liability that is adjudicated, in connection with any action so taken. (g) Notwithstanding anything to the contrary contained herein, the provisions of subsections (e) through (h), inclusive, of this Section 7.01 shall be subject to the provisions of subsections (a) through (c), inclusive, of this Section 7.01. (h) The Indenture Trustee shall provide the reports and accountings as required pursuant to Section 12.03 hereof. 52 (i) If any Loan Contract becomes a Defaulted Loan Contract, the Indenture Trustee shall, subject to the terms of the Servicing Agreement, cooperate with the Issuer or Servicer, or at the request of MBIA, to take such action as may be necessary to assist the Issuer or Servicer in enforcing such payment or performance, including cooperation and/or assistance in the institution and prosecution of appropriate proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and to proceed thereafter as provided in Article Six hereof. SECTION 7.02. Notice of Default and Reserve Account Increase Events. Promptly after the occurrence of any Event of Default, Default, Re-Liening Trigger, Reserve Account Increase Event or MBIA Default known to the Indenture Trustee (within the meaning of Section 7.01(e) hereof) which is continuing, within one Business Day of obtaining such knowledge, the Indenture Trustee shall transmit by telephonic or telegraphic communication confirmed by mail to MBIA and by mail to the Rating Agencies and, within three Business Days, to all Holders of Notes, as their names and addresses appear on the Note Register, notice of such Event of Default, Default, Reserve Account Increase Event, Re-Liening Trigger or MBIA Default hereunder known to the Indenture Trustee. SECTION 7.03. Certain Rights of Indenture Trustee. Except as otherwise provided in Section 7.01, (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other obligation, paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Issuer mentioned herein shall be sufficiently evidenced in writing and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture or any Transaction Document the Indenture Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Indenture Trustee (unless other evidence be herein specifically prescribed) shall be entitled to receive and may, in the absence of bad faith on its part, rely upon an Officer's Certificate; (d) the Indenture Trustee may consult with counsel and the written advice of such counsel selected by the Indenture Trustee with due care or any Opinion of Counsel 53 shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Indenture Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Noteholders pursuant to this Indenture, unless such Noteholders shall have offered to the Indenture Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document, but the Indenture Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Indenture Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer at the sole cost and expense of the Issuer, upon reasonable notice and at reasonable times personally or by agent or attorney; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and shall not be liable for the negligence or the misconduct of, or the supervision of such agents, attorneys, custodians and nominees selected by it with due care. SECTION 7.04. Not Responsible for Recitals or Issuance of Notes. (a) The recitals contained in this Indenture and in the Notes, except the certificates of authentication on the Notes, shall be taken as the statements of the Issuer, and the Indenture Trustee assumes no responsibility for their correctness. The Indenture Trustee makes no representations as to the validity or condition of the Trust Estate or any part thereof, or as to the title of the Issuer thereto or as to the security afforded thereby or hereby, or as to the validity or genuineness of any securities at any time pledged and deposited with the Indenture Trustee hereunder or as to the validity or sufficiency of this Indenture or any of the Notes. The Indenture Trustee shall not be accountable for the use or application by the Issuer of any of the Notes or the proceeds thereof or of any money paid to the Issuer or upon Issuer Order under any provisions hereof. (b) Except as otherwise expressly provided herein and without limiting the generality of the foregoing, the Indenture Trustee shall bear no responsibility or liability for or with respect to the existence or validity of any Vehicle or Loan Contract, the perfection of any security interest (whether as of the date hereof or at any future time), the maintenance of or the taking of any action to maintain such perfection, the validity of the assignment of any portion of the Trust Estate to the Indenture Trustee or of any 54 intervening assignment, the review of any Loan Contract (it being understood that the Indenture Trustee has not reviewed and does not intend to review the substance or form of any such Loan Contract), the performance or enforcement of any Loan Contract, the validity and sufficiency of the Class A Note Insurance Policy, the compliance by the Issuer or the Servicer with any covenant or the breach by the Issuer or the Servicer of any warranty or representation made hereunder or in any related document or the accuracy of any such warranty or representation, any investment of monies in the Trust Accounts or any loss resulting therefrom (other than as obligor under any Eligible Investment) provided that such monies have been invested in accordance with Section 12.02(c) hereof in Eligible Investments, the acts or omissions of the Issuer, the Servicer, MBIA or any Obligor, any action of the Servicer taken in the name of the Indenture Trustee, or the validity of the Servicing Agreement or the Loan Sale Agreement. (c) The Indenture Trustee shall not have any obligation or liability under any Loan Contract by reason of, or arising out of, this Indenture or the granting of a security interest in such Loan Contract hereunder or the receipt by the Indenture Trustee of any payment relating to any Loan Contract pursuant hereto, nor shall the Indenture Trustee be required or obligated in any manner to perform or fulfill any of the obligations of the Issuer under or pursuant to any Loan Contract, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it, or the sufficiency of any performance by any party, under any Loan Contract. SECTION 7.05. May Hold Notes. The Indenture Trustee, the Servicer, any Paying Agent, the Note Registrar, any Authenticating Agent or any other agent of the Issuer, in its individual or any other capacity, may become the owner or pledgee of Notes, and if operative, may otherwise deal with the Issuer with the same rights it would have if it were not Indenture Trustee, Servicer, Paying Agent, Note Registrar, Authenticating Agent or such other agent. SECTION 7.06. Money Held in Trust. Money and investments held in trust by the Indenture Trustee or any Paying Agent hereunder shall be held in one or more trust accounts hereunder but need not be segregated from other funds, except to the extent required herein or required by law. The Indenture Trustee or any Paying Agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Issuer or otherwise specifically provided herein. 55 SECTION 7.07. Compensation and Reimbursement. (a) The Issuer agrees: (i) to pay the Indenture Trustee its fee for all services rendered by it hereunder as Indenture Trustee, in the amount of the Trustee Fee (which compensation shall not otherwise be limited by any provision of law in regard to the compensation of a trustee of an express trust), and to pay to the Back-up Servicer its fee for all services rendered hereunder and under the Servicing Agreement as Back-up Servicer, in the amount of the Back-up Servicer Fee; (ii) except as otherwise expressly provided herein, to reimburse the Indenture Trustee or the Back-up Servicer, as the case may be, upon its request for all reasonable out-of-pocket costs and expenses, disbursements and advances incurred or made by the Indenture Trustee or the Back-up Servicer in accordance with any provision of this Indenture or the Servicing Agreement (including the reasonable compensation and the expenses and disbursements of the Indenture Trustee's and Back-up Servicer's agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct; and (iii) to indemnify and hold harmless the Trust Estate and the Indenture Trustee and the Back-Up Servicer and their respective directors, officers and employees from and against any loss, liability, expense, damage or injury (other than those attributable to a Noteholder in its capacity as an investor in any of the Notes) sustained or suffered pursuant to this Indenture in connection with the transactions contemplated hereby or by reason of any acts, omissions or alleged acts or omissions arising out of activities of the Indenture Trustee (including, without limitation, any violation of any applicable laws by the Issuer as a result of the transactions contemplated by this Indenture), including, but not limited to, any judgment, award, settlement, reasonable attorneys' fees and other expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim; provided, that the Issuer shall not indemnify the Indenture Trustee if such loss, liability, expense, damage or injury is due to the Indenture Trustee's gross negligence or willful misconduct, willful misfeasance or bad faith in the performance of duties. Any indemnification pursuant to this Section shall only be payable from the assets of the Issuer and shall not be payable from the assets of the Trust Estate. The provisions of this indemnity shall run directly to and be enforceable by an injured person subject to the limitations hereof including Section 13.14 and this indemnification agreement shall survive the termination of this Indenture and the earlier resignation or removal of the Indenture Trustee or the Back-Up Servicer, as the case may be. 56 SECTION 7.08. Corporate Trustee Required; Eligibility. There shall at all times be a trustee hereunder which shall be a corporation or association organized and doing business under the laws of the United States of America or of any state, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $100,000,000, acceptable to MBIA, subject to supervision or examination by Federal or state authority and having an office within the United States of America, and which shall have a commercial paper or other short-term rating of the highest short-term rating categories by each of the Rating Agencies, or otherwise acceptable to each of the Rating Agencies. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 7.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Indenture Trustee and no appointment of a successor Indenture Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Indenture Trustee acceptable to MBIA under Section 7.10 hereof. (b) The Indenture Trustee may resign at any time by giving 30 days' written notice thereof to the Issuer, MBIA and to each Noteholder. If an instrument of acceptance by a successor Indenture Trustee shall not have been delivered to the Indenture Trustee within 30 days after the giving of such notice of resignation, the resigning Indenture Trustee may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and may prescribe, appoint a successor Indenture Trustee in compliance with Section 7.08 hereof. (c) The Indenture Trustee may be removed by MBIA or, if an MBIA Default has occurred and is continuing, by the Controlling Holders, at any time if one of the following events have occurred: (i) the Indenture Trustee shall cease to be eligible under Section 7.08 hereof and shall fail to resign after written request therefor by the Issuer, MBIA or by any Noteholder, or 57 (ii) the Indenture Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, or (iii) the Indenture Trustee has failed to perform its duties hereunder or has breached any representation or warranty made herein. (d) If the Indenture Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Indenture Trustee for any cause with respect to any of the Notes, the Issuer by a Board Resolution shall with the prior consent of MBIA promptly appoint a successor Indenture Trustee reasonably satisfactory to MBIA. If no successor Indenture Trustee shall have been so appointed by the Issuer within 30 days of notice of removal or resignation and shall have accepted appointment in the manner hereinafter provided, then MBIA may appoint a successor Indenture Trustee. If MBIA shall fail to appoint a successor Indenture Trustee within 90 days or an MBIA Default shall have occurred and is continuing, then the Controlling Holders or the Indenture Trustee may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee with respect to the Notes. (e) The Issuer shall give notice in the manner provided in Sections 13.02 and 13.03 hereof of each resignation and each removal of the Indenture Trustee and each appointment of a successor Indenture Trustee with respect to the Notes to the Noteholders, MBIA and the Rating Agencies. Each notice shall include the name of the successor Indenture Trustee and the address of its Corporate Trust Office. SECTION 7.10. Acceptance of Appointment by Successor. Every successor Indenture Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer and the retiring Indenture Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Indenture Trustee shall become effective and such successor Indenture Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Indenture Trustee but, on request of the Issuer or the successor Indenture Trustee, such retiring Indenture Trustee shall, upon payment of its reasonable out-of-pocket costs and expenses, execute and deliver an instrument transferring to such successor Indenture Trustee all the rights, powers and trusts of the retiring Indenture Trustee, and shall duly assign, transfer and deliver to such successor Indenture Trustee all property and money held by such retiring Indenture Trustee hereunder. Upon request of any such successor Indenture Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Indenture Trustee all such rights, powers and trusts. 58 No successor Indenture Trustee shall accept its appointment unless at the time of such acceptance such successor Indenture Trustee shall be eligible under this Article. No Indenture Trustee hereunder shall be liable for the acts or omissions of any successor Indenture Trustee hereunder. SECTION 7.11. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any Person into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Indenture Trustee, shall be the successor of the Indenture Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto, and notice thereof shall be provided by the Indenture Trustee to the Noteholders, MBIA and the Rating Agencies. In case any Notes have been authenticated, but not delivered, by the Indenture Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Indenture Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Indenture Trustee had itself authenticated such Notes. SECTION 7.12. Co-Indenture Trustees and Separate Indenture Trustees. At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any of the Trust Estate may at the time be located, the Issuer, MBIA and the Indenture Trustee shall have power to appoint, and, upon the written request of the Indenture Trustee, MBIA or of the Holders representing at least 25% in Outstanding Principal Balance of all Notes, the Issuer shall for such purpose join with the Indenture Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Indenture Trustee and meeting the requirements of Section 7.08 hereof, either to act as co-Indenture Trustee, jointly with the Indenture Trustee of all or any part of such Trust Estate, or to act as separate Indenture Trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Issuer does not join in such appointment within 15 days after the receipt by it of a request so to do, or in case an Event of Default has occurred and is continuing, the Indenture Trustee alone shall have power to make such appointment. Any co-Indenture Trustee or separate Indenture Trustee shall be acceptable to MBIA. 59 Should any written instrument from the Issuer be reasonably required by any co-Indenture Trustee or separate Indenture Trustee so appointed for more fully confirming to such co-Indenture Trustee or separate Indenture Trustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Issuer. Every co-Indenture Trustee or separate Indenture Trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms: (i) the Notes shall be authenticated and delivered by, and all rights, powers, duties and obligations under this Indenture in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Indenture Trustee under this Indenture, shall be exercised solely by the Indenture Trustee; (ii) the rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee by this Indenture in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Indenture Trustee or by the Indenture Trustee and such co-Indenture Trustee or separate Indenture Trustee jointly, as shall be provided in the instrument appointing such co-Indenture Trustee or separate Indenture Trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-Indenture Trustee or separate Indenture Trustee; (iii) the Indenture Trustee at any time, by an instrument in writing executed by it, with the concurrence of the Issuer evidenced by a Board Resolution, may accept the resignation of or remove any co-Indenture Trustee or separate Indenture Trustee, appointed under this Section, and, in case an Event of Default has occurred and is continuing, the Indenture Trustee shall have power to accept the resignation of, or remove, any such co-Indenture Trustee or separate Indenture Trustee without the concurrence of the Issuer. Upon the written request of the Indenture Trustee, the Issuer shall join with the Indenture Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-Indenture Trustee or separate Indenture Trustee that has so resigned or been removed may be appointed in the manner provided in this Section 7.12; (iv) no co-Indenture Trustee or separate Indenture Trustee hereunder shall be personally liable by reason of any act or omission of the Indenture Trustee or any other such Indenture Trustee hereunder nor shall the Indenture Trustee be liable by reason of any act or omission of any co-Indenture Trustee or separate 60 Indenture Trustee selected by the Indenture Trustee with due care or appointed in accordance with directions to the Indenture Trustee pursuant to Section 6.08 hereof; and (v) any Act of Noteholders delivered to the Indenture Trustee shall be deemed to have been delivered to each such co-Indenture Trustee and separate Indenture Trustee. SECTION 7.13. Rights with Respect to the Servicer. The Indenture Trustee's rights and obligations with respect to the Servicer and the Back-up Servicer shall be governed by the Servicing Agreement. SECTION 7.14. Appointment of Authenticating Agent. The Indenture Trustee may appoint an Authenticating Agent or Agents with respect to the Notes which shall be authorized to act on behalf of the Indenture Trustee to authenticate Notes issued upon original issue or upon exchange, registration of transfer or pursuant to Section 2.05 hereof, and Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Indenture Trustee hereunder. Wherever reference is made herein to the authentication and delivery of Notes by the Indenture Trustee or the Indenture Trustee's certificate of authentication or the delivery of Notes to the Indenture Trustee for authentication, such reference shall be deemed to include authentication and delivery on behalf of the Indenture Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Indenture Trustee by an Authenticating Agent and delivery of the Notes to the Authenticating Agent on behalf of the Indenture Trustee. Each Authenticating Agent shall be acceptable to the Issuer, MBIA and the Noteholders and shall at all times be a corporation having a combined capital and surplus of not less than the equivalent of $50,000,000 and subject to supervision or examination by Federal or state authority or the equivalent foreign authority, in the case of an Authenticating Agent who is not organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any 61 merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of such Authenticating Agent, shall continue to be an Authenticating Agent without the execution or filing of any paper or any further act on the part of the Indenture Trustee or such Authenticating Agent; provided, such corporation shall be otherwise eligible under this Section. An Authenticating Agent may resign at any time by giving written notice thereof to the Indenture Trustee, MBIA and to the Issuer. The Indenture Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent, MBIA and to the Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Issuer and MBIA and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Notes, if any, with respect to which such Authenticating Agent will serve, as their names end addresses appear in the Note Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Indenture Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Indenture Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 7.07 hereof. If an appointment is made pursuant to this Section, the Notes may have endorsed thereon, in addition to the Indenture Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Notes described in the within-mentioned Indenture. BANKERS TRUST COMPANY As Indenture Trustee By: ___________________________ As Authenticating Agent By: ___________________________ Authorized Officer 62 SECTION 7.15. Money for Note Payments to Be Held in Trust. The Indenture Trustee shall execute and deliver, and if there is any Paying Agent other than the Indenture Trustee, the Issuer will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee, the Rating Agencies and MBIA an instrument in which such Paying Agent shall agree with the Indenture Trustee that, subject to the provisions of this Section, such Paying Agent will: (i) hold all sums held by it for the payment of principal or interest on Notes in trust for the benefit of the Noteholders entitled thereto and MBIA until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (ii) give the Indenture Trustee, MBIA, the Rating Agencies and the Noteholders notice of any Default by the Issuer (or any other obligor upon the Notes) in the making of any payment of principal or interest; and (iii) at any time during the continuance of any such Default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Issuer Order direct any Paying Agent to pay, to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Indenture Trustee or any Paying Agent in trust for the payment of the principal or interest on any Note and remaining unclaimed for three years after such principal or interest has become due and payable shall be paid to the Issuer upon written request or to MBIA (upon its written request) if such money represents payments made by MBIA; and the Holder of such Note shall thereafter, as an unsecured general creditor, and subject to any applicable statute of limitations, look only to the Issuer for payment thereof, and all liability of the Indenture Trustee, such Paying Agent or MBIA with respect to such trust money or the related Note, shall thereupon cease; provided, however, that the Indenture Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the city in which the Corporate Trust Office is located, notice 63 that such money remains unclaimed and that, after a date specified therein, which shall be not less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer or MBIA, as applicable; and provided, further, that any amounts held that are proceeds of a claim made under the Class A Note Insurance Policy shall be returned to MBIA, and the Noteholders shall look only to MBIA for such payments. The Indenture Trustee may also adopt and employ, at the expense of the Issuer, any other reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Noteholders whose right to or interest in monies due and payable but not claimed is determinable from the records of any Paying Agent, at the last address as shown on the Note Register for each such Noteholder). 64 ARTICLE VIII THE CLASS A NOTE INSURANCE POLICY SECTION 8.01. Payments under the Class A Note Insurance Policy. If, on the close of business on the third Business Day immediately prior to any Payment Date with respect to the Class A Notes, the sum of amounts on deposit in (i) the Collection Account and (ii) the Reserve Account are not sufficient to pay the Class A Interest Payment Amount on such Payment Date in accordance with Section 12.02(d)(v) hereof, the Indenture Trustee shall, no later than 10:00 a.m. New York time, on the second Business Day immediately preceding such Payment Date make a claim under the Class A Note Insurance Policy in an amount equal to such insufficiency. In addition, if on the close of business on the third Business Day immediately prior to any Payment Date for the Class A Notes, the sum of amounts on deposit in (i) the Collection Account and (ii) the Reserve Account are not sufficient to pay the Class A Principal Payment Amount in accordance with Section 12.02(d)(viii) hereof, the Indenture Trustee shall, no later than 10:00 a.m. New York time, on the second Business Day immediately preceding such Payment Date, make a claim under the Class A Note Insurance Policy in an amount equal to such insufficiency. Proceeds of claims on the Class A Note Insurance Policy shall be deposited in the Collection Account, shall remain uninvested and shall be used solely to pay amounts due in respect of interest and principal on the Class A Notes on each Payment Date. In addition, on any day that the Indenture Trustee has actual knowledge or receives written notice that any amount previously paid to a Class A Noteholder has been subsequently recovered from such Noteholder pursuant to a final order of a court of competent jurisdiction that such payment constitutes an avoidable preference within the meaning of any applicable bankruptcy law to such Noteholder (a "Preference Amount"), the Indenture Trustee shall make a claim within one Business Day upon the Class A Note Insurance Policy for the full amount of such Preference Amount in accordance with the terms of the Class A Note Insurance Policy. Any proceeds of any such Preference Amount received by the Indenture Trustee shall be paid to the related Class A Noteholders. 65 ARTICLE IX AMENDMENTS TO INDENTURE SECTION 9.01. Amendments without Consent of Noteholders. The Issuer and the Indenture Trustee, with the consent of MBIA but without the consent of the Holders of any Notes, at any time and from time to time, may amend this Indenture for any of the following purposes: (a) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject to the lien of this Indenture additional property; or (b) to evidence the succession of another Person to the Issuer, and the assumption by such successor of the covenants of the Issuer herein and in the Notes contained, in accordance with Section 3.02(o) hereof; or (c) to add to the covenants of the Issuer, for the benefit of MBIA and the Holders of all Notes, or to surrender any right or power herein conferred upon the Issuer; or (d) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee; or (e) to cure any ambiguity with respect to any provision herein which may be defective or inconsistent with any other provisions with respect to matters or questions arising hereunder, which shall not be inconsistent with the provisions hereof, provided that such action shall not adversely affect the interests of the Holders of the Notes; or (f) to evidence the succession of the Indenture Trustee pursuant to Article Seven hereof; or (g) to add events to the list of Events of Default, Reserve Account Increase Events, or Re-Liening Triggers. The Indenture Trustee is hereby authorized to join in the execution of any such amendment and to make any further appropriate agreements and stipulations that may be therein contained, but the Indenture Trustee shall not be obligated to enter into any such amendment that affects the Indenture Trustee's own rights, duties, liabilities, indemnities or immunities under this Indenture or otherwise. 66 Promptly after the execution by the Issuer and the Indenture Trustee of any amendment pursuant to this Section, the Issuer shall mail to the Rating Agencies, the Custodian, MBIA and each Noteholder a copy of such amendment. SECTION 9.02. Amendments with Consent of Noteholders. (a) With the consent of MBIA and the Controlling Holders, by Act of said Holders delivered to the Issuer and the Indenture Trustee, the Issuer and the Indenture Trustee may enter into amendments hereto for the purpose of adding any provisions or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Notes hereunder other than as described in paragraphs (a) through (g) of Section 9.01; provided, however, that no such amendment shall, without the consent of the Holders of each outstanding Note affected thereby: (i) change the Stated Maturity Date of any Note or the due date of any installment of principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the Note Interest Rate or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment; or (ii) reduce the percentage in the Class A Note Balance or the Class B Note Balance, the consent of the Holders of which is required for any such amendment, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or Events of Default or their consequences; or (iii) impair or adversely affect the Trust Estate; or (iv) modify or alter the provisions of the proviso to the definition of the term "Outstanding"; or (v) modify any of the provisions of this Section 9.02, except to increase the percentage of Holders required for any modification or waiver or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of each Holder of each Outstanding Note affected thereby; or (vi) permit the creation of any lien ranking prior to or on parity with the lien of this Indenture with respect to any part of the Trust Estate or terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security afforded by the lien of this Indenture; or (vii) modify any of Section 12.02(d) hereof. 67 (b) The Indenture Trustee is hereby authorized to join in the execution of any amendment pursuant to clause (a) above and to make any further appropriate agreements and stipulations that may be therein contained, but the Indenture Trustee shall not be obligated to enter into any such amendment that affects the Indenture Trustee's own rights, duties, liabilities, indemnities or immunities hereunder. It shall not be necessary for any Act of Noteholders under this Section to approve the particular form of any amendment, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution by the Issuer and the Indenture Trustee of any amendment pursuant to this Section, the Issuer shall mail to the Holders of the Notes, MBIA, the Custodian and the Rating Agencies a copy of such amendment. SECTION 9.03. Execution of Amendments. In executing any amendments permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Indenture Trustee and MBIA shall be entitled to receive upon request to the Issuer, and (subject to Section 7.01 hereof) shall be fully protected in relying in good faith upon, an Opinion of Counsel reasonably acceptable to the Indenture Trustee and MBIA, and an Officer's Certificate, stating that the execution of such amendments is authorized or permitted by this Indenture. The Indenture Trustee may, but shall not be obligated to, enter into any such amendments which affects the Indenture Trustee's own rights, duties, indemnities or immunities hereunder or otherwise. SECTION 9.04. Effect of Amendments. Upon the execution of any amendment under this Article, this Indenture shall be modified in accordance therewith, and such amendment shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 9.05. Reference in Notes to Amendments. Notes authenticated and delivered after the execution of any amendment pursuant to this Article may, and if required by the Indenture Trustee shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such amendment. If the Issuer shall so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such amendment may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes. 68 ARTICLE X REDEMPTION OF NOTES SECTION 10.01. Redemption at the Option of the Servicer; Election to Redeem. The Servicer shall have the option to redeem all of the Outstanding Notes of any Class at any time the Outstanding Class A Note Balance or Outstanding Class B Note Balance of the Notes of such Class is less than 10% of the Initial Class A Note Balance or Initial Class B Note Balance, in each case at the applicable Redemption Price plus any fees due hereunder and all amounts due to MBIA under the Insurance Agreement; provided, however, that the Class B Notes may not be redeemed before the Class A Notes. MBIA shall have the same option to redeem any Class A Notes in the absence of the exercise thereof by the Servicer. The Servicer or MBIA, as applicable, shall set the Redemption Date and the Redemption Record Date for the Notes and give written notice thereof to the Indenture Trustee pursuant to Section 10.02 hereof. Installments of interest and principal that are due regarding the Notes on or prior to the related Redemption Date shall continue to be payable to the Holders of such Notes called for redemption as of the relevant Record Dates according to their terms and the provisions of Section 2.08 hereof. The election of the Servicer or MBIA to redeem any Notes pursuant to this Section shall be evidenced by a Board Resolution or written notice from MBIA, respectively, directing the Indenture Trustee to make the payment of the Redemption Price on all of the Notes to be redeemed from monies deposited with the Indenture Trustee pursuant to Section 10.04 hereof. SECTION 10.02. Notice to Indenture Trustee; Deposit of Redemption Price. In the case of any redemption pursuant to Section 10.01 hereof, the Servicer or MBIA, as applicable, shall, at least 15 days prior to the related Redemption Date, notify the Indenture Trustee, MBIA and the Noteholders in writing of such Redemption Date and shall deposit into the Redemption Account on such notification date an amount equal to the Redemption Price of all Notes to be redeemed on such Redemption Date plus any fees and interest due under Section 12.02(d)(i) through (vi) (and, with respect to the Class B Notes, (vii)) and all amounts due to MBIA under the Insurance Agreement. Any notice given to the Indenture Trustee hereunder shall include all information required by Section 10.03 hereof. 69 SECTION 10.03. Notice of Redemption by the Indenture Trustee. Upon receipt of such notice and such deposit set forth in Section 10.02 above, the Indenture Trustee shall provide notice of redemption pursuant to Section 10.01 hereof by first-class mail, postage prepaid, mailed no later than the Business Day following the date on which such deposit was made, to MBIA and each Holder of Notes whose Notes are to be redeemed, at the address specified in the Note Register. All notices of redemption shall state: (1) the applicable Redemption Date; (2) the applicable Redemption Price; and (3) that on such Redemption Date, the Redemption Price will become due and payable upon each such Note, and that interest thereon shall cease to accrue on such date. Notice of redemption of Notes shall be given by the Indenture Trustee in the name and at the expense of the Servicer or MBIA, as applicable. Failure to give notice of redemption, or any defect therein, to any Holder of any Note selected for redemption shall not impair or affect the validity of the redemption of any other Note. SECTION 10.04. Notes Payable on Redemption Date. Notice of redemption having been given as provided in Section 10.03 hereof, the Notes to be redeemed shall, on the applicable Redemption Date, become due and payable at the Redemption Price and on such Redemption Date (unless the Issuer or MBIA, as applicable, shall default in the payment of the Redemption Price) such Notes shall cease to bear interest. On the applicable Redemption Date, the Indenture Trustee shall withdraw the applicable Redemption Price from the Redemption Account and the Holders of such Notes shall be paid the Redemption Price by the Paying Agent on behalf of the Servicer; provided, however, that installments of principal and interest that are due regarding such Notes on or prior to such Redemption Date shall be payable to the Holders of such Notes registered as such on the relevant Record Dates according to their terms and the provisions of Section 2.08 hereof. If the Holders of any Note called for redemption shall not be so paid, the principal shall, until paid, bear interest from the applicable Redemption Date at the related Note Interest Rate. 70 SECTION 10.05. Release of Loan Contracts to the Servicer. In connection with any redemption by the Servicer permitted under this Article Ten, the Servicer shall be permitted to obtain a release of all or a portion of the related Loan Contracts as provided in Section 4.04 hereof to the extent that (a) after giving effect to such release, the product of (i) the Aggregate Loan Balance and (ii) the sum of the Class A Percentage and the Class B Percentage equals or exceeds the Outstanding Aggregate Note Balance of all Notes (after giving effect to such redemption) and (b) provided that, the applicable Redemption Price shall have been deposited into the Redemption Account as required by Section 10.02. SECTION 10.06. Release of Loan Contracts to MBIA. In connection with any redemption by MBIA permitted under this Article Ten, MBIA shall be permitted to obtain a release of all or a portion of the related Loan Contracts as provided in Section 4.04 hereof to the extent that (a) after giving effect to such release, the product of (i) the Aggregate Loan Balance and (ii) the Class A Percentage equals or exceeds the Class A Note Balance of the Class A Notes (after giving effect to such redemption) and (b) provided that, the applicable Redemption Price shall have been deposited into the Redemption Account as required by Section 10.02. 71 ARTICLE XI THE CUSTODIAN SECTION 11.01. Acceptance by Indenture Trustee and Appointment of the Custodian. (a) The Indenture Trustee hereby acknowledges the conveyance of the Loan Assets and declares that the Indenture Trustee, through the Custodian and/or through one or more other custodians acceptable to MBIA, which other custodians may, with MBIA's prior written consent, include the Servicer (the Custodian and each such other custodian a "Pledged Asset Custodian"), will hold such Loan Assets conveyed by the Issuer, for the use and benefit of the Noteholders and MBIA subject to the terms and provisions hereof; provided, that in respect of the items described in clauses (i) and (v) of the definition of "Loan Contract Files" (such items, the "Custodial File"), the Custodian shall be the custodian. The Custodian may, upon receipt of a Request for Release of Documents from the Servicer, release any Custodial File to the Servicer, for the limited purpose, if necessary, of temporarily assisting the Servicer to conduct collection and other servicing activities; provided, however, that prior to being released to the Servicer all documents to be released in such Custodial File shall be conspicuously stamped to reflect the sale to the Issuer and the security interest of the Indenture Trustee in the related Loan Assets; provided, further, that if either an Event of Default or Re-Liening Trigger shall have occurred and be continuing, no part of any Custodial File shall be released by the Custodian to the Servicer without MBIA's prior written consent, which shall be evidenced by MBIA's execution of the Request for Release of Documents. Except as noted above, no part of the Custodial File shall be delivered by the Custodian to the Company or the Servicer or otherwise released from the possession of the Custodian. Neither the Indenture Trustee nor any Pledged Asset Custodian shall be under any duty or obligation to inspect, review or examine any document, instrument, certificate, agreement or other papers to determine that they are genuine, enforceable, or appropriate for the represented purpose or that they are other than what they purport to be on their face. The Indenture Trustee shall not appoint a Pledged Asset Custodian other than itself, the Custodian or the Servicer in respect of any Loan Contract File or Loan Asset unless such Person shall be acceptable to MBIA and shall have entered into an agreement with the Indenture Trustee, for the benefit of the Noteholders and MBIA, the Indenture Trustee, the Issuer, and the Servicer, containing provisions substantially similar to Sections 11.01(b)-(e) inclusive. (b) The Custodian shall hold and hereby acknowledges that it is holding the Custodial File documents (except for those noted on an exception report given to the Indenture Trustee on the Closing Date) as the agent of the Indenture Trustee for the use and benefit of the Noteholders and MBIA with respect thereto. The Indenture Trustee shall not have any responsibility, duty, obligation or liability with respect to any Pledged 72 Asset Custodian acting as a custodian hereunder or with respect to any document, agreement, certificate or instrument held or purported to be held by any Pledged Asset Custodian. Neither the Custodian nor the Indenture Trustee shall have any responsibility or liability with respect to any Loan Asset or Loan Contract Files not conveyed by the Issuer hereunder. (c) The Custodian shall perform its duties as a Pledged Asset Custodian in accordance with the terms of this Indenture, the Servicing Agreement and applicable law and, to the extent consistent with such terms, in the same manner in which, and with the same care, skill, prudence and diligence with which, it administers files for other portfolios, if any, giving due consideration to customary and usual standards of practice of prudent custodians. The Custodian shall promptly report to the Indenture Trustee and to MBIA, any failure by it to hold the complete set of Custodial Files as herein provided and shall promptly take appropriate action to remedy any such failure. The Custodian as a Pledged Asset Custodian, shall have and perform the following powers and duties: (i) hold the Custodial Files on behalf of the Indenture Trustee for the benefit of the Noteholders and MBIA, maintain accurate records pertaining to each Loan Contract to enable it to comply with the terms and conditions of this Indenture, and maintain a current inventory thereof; (ii) implement policies and procedures in accordance with the Custodian's normal business practices with respect to the handling and custody of the Custodial Files so that the integrity and physical possession of the Custodial Files will be maintained; and (iii) attend to all details in connection with maintaining custody of the Custodial Files on behalf of the Indenture Trustee on behalf of the Noteholders and MBIA. (d) In acting as a Pledged Asset Custodian, the Custodian agrees further that it does not and will not have or assert any beneficial ownership interest in the Loan Contracts or the Custodial Files or any other Loan Asset. The Custodian shall ensure that each original or copy of a contractual document with an Obligor, and its master data processing records evidencing each Loan Contract that has been released to the Servicer has been marked with a legend, evidencing that each Loan Contract has been pledged to the Indenture Trustee for the benefit of the Noteholders and MBIA, together with all right and title thereto and interest therein as provided herein. (e) The Custodian agrees to maintain any Custodial Files in its possession at its office located in Richmond, Virginia, or at such other offices as shall from time to time be identified by prior written notice to the Indenture Trustee. 73 SECTION 11.02. Obligations of the Custodian. (a) With respect to the documents constituting each Custodial File which is delivered to the Custodian or which come into the possession of the Custodian, the Custodian is the custodian for the Indenture Trustee exclusively. The Custodian shall hold all documents received by it constituting the Custodial Files for the exclusive use and benefit of the Indenture Trustee on behalf of the Noteholders and MBIA, and shall make disposition thereof only in accordance with this Indenture, the Servicing Agreement or the instructions furnished by the Indenture Trustee provided such instructions are consistent with this Indenture and the Servicing Agreement unless otherwise directed in writing by MBIA. The Custodian shall segregate and maintain continuous custody of all documents constituting the Loan Contract Files in secure and fireproof facilities in accordance with customary standards for such custody. The Custodian makes no representations as to and shall not be responsible to verify (i) the validity, legality, enforceability, sufficiency, due authorization, recordability or genuineness of any document in the Loan Contract Files or of any of the Loan Contracts or (ii) the collectability, insurability, effectiveness or suitability of any Loan Contract. (b) Upon the payment in full of any Loan Contract or redemption of the Notes by the Issuer or MBIA, which shall be evidenced by the delivery to the Custodian of the Request for Release of Documents, the Custodian shall promptly release the related Custodial File to the Servicer or MBIA unless otherwise instructed by such party. SECTION 11.03. Certification. (a) Within 45 days after the Closing Date, the Custodian shall ascertain that all documents referred to in Schedule 1 hereto with respect to Loan Contracts are in its possession, and shall deliver to the Indenture Trustee and MBIA a certification in the form of Exhibit F to the effect that, as to each Custodial File listed in the Loan Schedule (other than any Loan Contract paid in full or any Loan Contract specifically identified in such certification as not covered by such certification): (i) all documents required to be in the Custodial Files are in its possession and (ii) such documents have been reviewed by it and appear regular on their face and relate to such Loan Contract. In making this certification, the Custodian shall separately list those Loan Contracts for which an original Certificate of Title was not found in the relevant Custodial File, subject to Section 2.03 of the Loan Sale Agreement, and shall, within 120 days after the Closing Date deliver to the Indenture Trustee and MBIA a certification in the form of Exhibit F to the effect that, as to each such Custodial File (other than any Loan Contract paid in full or any Loan Contract specifically identified in such certification as not covered by such certification): (i) all documents required to be in the Custodial File are in its possession and (ii) such documents have been reviewed by it and appear regular on their face and relate to such Loan Contract. 74 (b) If the Custodian during the process of reviewing the Custodial Files, whether pursuant to clause (a) above or Section 11.04 hereof, finds any document constituting a part of a Custodial File which is not executed, has not been received, is unrelated to the Loan Contract identified in the Loan Schedule, or does not conform to the requirements of clause (a) above or the description thereof as set forth in the Loan Schedule, then the Custodian shall promptly so notify the Issuer, the Company, MBIA and the Indenture Trustee. The Issuer will use reasonable efforts to remedy a material defect in a document constituting part of a Custodial File of which it is so notified by the Custodian. If, however, within 60 days after the Custodian's notice to it respecting such defect the Issuer has not remedied or caused the Company to remedy the defect and the defect materially and adversely affects the interest of the Indenture Trustee or of the Noteholders or MBIA in the related Loan Contract, the Issuer will, on the Determination Date next succeeding the end of such 60 day period to purchase such Loan Contract, which Purchase Price shall be deposited in the Collection Account. SECTION 11.04. Future Defects. During the term of this Indenture, if the Custodian discovers any defect with respect to the Custodial Files, the Custodian shall give written specification of such defect to the Indenture Trustee, the Issuer, the Company and MBIA. SECTION 11.05. Fees of Custodian. The Custodian shall charge such fees for its services under this Indenture as are set forth in a separate agreement between the Custodian and the Servicer, the payment of which fees, together with the Custodian's expenses in connection herewith, shall be solely the obligation of the Servicer. The Custodian shall perform its obligations under the Transaction Documents notwithstanding nonpayment of the fees and expenses of the Custodian. SECTION 11.06. Liability of Custodian. Neither the Custodian nor any of its directors, officers, agents or employees, shall be liable for any action taken or omitted to be taken by it or them hereunder or in connection herewith in good faith and believed by it or them to be within the purview of this Agreement, except for its or their own negligence, lack of good faith or willful misconduct. 75 SECTION 11.07. Reliance of Custodian. In the absence of bad faith on the part of the Custodian, the Custodian may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any request, instructions, certificate, opinion or other document furnished to the Custodian, reasonably believed by the Custodian to be genuine and to have been signed or presented by the proper party or parties and conforming to the requirements of this Indenture; but in the case of any loan document or other request, instruction, document or certificate which by any provision hereof is specifically required to be furnished to the Custodian, the Custodian shall be under a duty to examine the same to determine whether or not it conforms to the requirements of this Indenture. SECTION 11.08. Transmission of Custodial Files. Written instructions as to the method of shipment and shipper(s) the Custodian is directed to utilize in connection with the transmission of files and loan documents in the performance of the Custodian's duties hereunder shall be delivered by the Servicer to the Custodian prior to any shipment of any files and loan documents hereunder. Pursuant to the Servicing Agreement, the Servicer will arrange for the provision of such services at its sole cost and expense (or, at the Custodian's option, reimburse the Custodian for all costs and expenses incurred by the Custodian consistent with such instructions) and will maintain such insurance in connection with shipment of the Custodial Files against loss or damage to files and loan documents as the Servicer deems appropriate. Without limiting the generality of the provisions of Section 11.06 hereof, it is expressly agreed that in no event shall the Custodian have any liability for any losses or damages to any person, including without limitation, the Indenture Trustee, arising out of actions of the Custodian consistent with instructions of the Servicer unless such instructions are inconsistent with the Transaction Documents. SECTION 11.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Custodian and no appointment of a successor Custodian pursuant to this Article Eleven shall become effective until the acceptance of appointment by the successor Custodian under Section 11.10 hereof. (b) The Custodian may resign at any time by giving 30 days' prior written notice thereof to the Issuer, MBIA and the Indenture Trustee. If an instrument of acceptance by a successor Custodian shall not have been delivered to the Custodian within 30 days after the giving of such notice of resignation, the resigning Custodian may petition any court of competent jurisdiction for the appointment of a successor Custodian. Such court may thereupon, after such notice, if any, as it may deem proper and may prescribe, appoint a successor Custodian. 76 (c) The Custodian may be removed by MBIA or, if an MBIA Default has occurred and is continuing, by the Controlling Holders, at any time if one of the following events have occurred: (i) the Custodian shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Custodian or of its property shall be appointed, or any public officer shall take charge or control of the Custodian or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, or (ii) the Custodian has failed to perform its duties under any Transaction Document or any side agreements with the Servicer or has breached any representation or warranty made herein or therein. (d) If the Custodian shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Custodian for any cause with respect to any of the Notes, the Issuer, by a Board Resolution shall, with the prior consent of MBIA, promptly appoint a successor Custodian reasonably satisfactory to MBIA. If no successor Custodian shall have been so appointed by the Issuer within 30 days of notice of removal or resignation and shall not have accepted appointment in the manner hereinafter provided, then MBIA may appoint a successor Custodian. If MBIA shall fail to appoint a successor Custodian within 90 days or if an MBIA Default shall have occurred and is continuing, then the Controlling Holders may petition any court of competent jurisdiction for the appointment of a successor Custodian with respect to the Notes. (e) The Issuer shall give notice in the manner provided in Sections 13.02 and 13.03 hereof of each resignation and each removal of the Custodian and each appointment of a successor Custodian to the Indenture Trustee, MBIA and the Rating Agencies. Each notice shall include the name of the successor Custodian and the address of its chief executive office. SECTION 11.10. Acceptance of Appointment by Successor. Every successor Custodian appointed hereunder shall be acceptable to MBIA and shall execute, acknowledge and deliver to the Issuer, the Indenture Trustee, MBIA and the retiring Custodian an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Custodian shall become effective and such successor Custodian, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Custodian but, on request of the Issuer, the Indenture Trustee, MBIA or the successor Custodian, such retiring Custodian shall execute and deliver an instrument transferring to such successor Custodian all the rights, powers and trusts of the retiring Custodian, and shall duly assign, transfer and deliver to such successor Custodian all property and money held by such retiring Custodian hereunder. Upon request of any such successor Custodian, the Issuer or the 77 Indenture Trustee on behalf of the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Custodian all such rights, powers and trusts. No successor Custodian shall accept its appointment unless at the time of such acceptance such successor Custodian shall be acceptable to MBIA and shall be eligible under this Article Eleven. SECTION 11.11. Merger, Conversion, Consolidation or Succession to Business of Custodian. Any Person into which the Custodian may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Custodian shall be a party, or any corporation succeeding to all or substantially all of the business of the Custodian, shall be the successor of the Custodian hereunder, provided such Person shall be acceptable to MBIA and shall be otherwise qualified and eligible, without the execution or filing of any paper or any further act on the part of any of the parties hereto, and notice thereof shall be provided by the Custodian to the Indenture Trustee, MBIA and the Rating Agencies. SECTION 11.12. Representations and Warranties of the Custodian. The Custodian represents and warrants to, and agrees with the Indenture Trustee, MBIA and the Issuer, as of the Closing Date that: (a) The Custodian is duly organized as a state banking association under the laws of the Commonwealth of Virginia, is validly existing, in good standing and has the corporate power and authority under the laws of the United States of America to conduct its business as now conducted. (b) The Custodian has full corporate power and authority under the laws of the United States of America to enter into and perform all transactions contemplated herein and no consent, approval, authorization or order of any federal court or governmental agency or body governing or having jurisdiction with respect to the Custodian's custodial powers is required for the Custodian to enter into this Indenture and to perform its obligations hereunder. (c) The execution, delivery and performance by it of this Indenture (a) do not violate any provision of any law or regulation governing the banking or the custodial powers of the Custodian or any order, writ, judgment, or decree of any court, arbitrator, or governmental authority applicable to the Custodian or any of its assets, (b) do not violate any provision of its corporate charter or by-laws, or (c) do not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any of the property acquired by 78 the Issuer pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking other than this Indenture to which it is a party. (d) This Indenture has been duly executed and delivered by the Custodian and constitutes the legal, valid and binding agreement of the Custodian, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law. (e) Nothing has come to the Custodian's attention indicating that, with respect to the Loan Contracts and the Vehicles (i) there exist any adverse claims, lien, or encumbrances against any of the same; (ii) any Loan Contract was overdue or had been dishonored or subject to the circumstances described in ss. 3.304 of the Uniform Commercial Code as in effect in the State of New York, or (iii) there exists any other defense against or claim to the Loan Contracts by any other person or entity. For purposes of this subsection (e), the Custodian shall not be deemed to have notice or knowledge of the foregoing matters unless a Responsible Officer assigned to and working in the Custodian's Corporate Trust Administration Department shall have actual knowledge thereof or written notice thereof is received by the Custodian in accordance herewith. 79 ARTICLE XII ACCOUNTS AND ACCOUNTING SECTION 12.01. Collection of Money; Class B Reserve Account Deposit. (a) Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant hereto. The Indenture Trustee shall, upon request from the Servicer, provide the Servicer with sufficient information regarding the amount of collections deposited by the Indenture Trustee in the accounts established pursuant to this Article Twelve, in order to permit the Servicer to perform its duties under the Servicing Agreement. The Indenture Trustee shall hold all such money and property so received by it as part of the Trust Estate and shall apply it as provided herein. As of the Closing Date, the Servicer shall cause all payments theretofore made with respect to the Loan Contracts that were due on and after the Cut-Off Date and received by the Servicer to be deposited into the Collection Account for the benefit of the Noteholders and MBIA in accordance with the Servicing Agreement. (b) On the Closing Date, the Issuer shall cause an amount equal to the Class B Reserve Account Deposit to be deposited into the Class B Reserve Account. Such amount shall be drawn from the proceeds received from the sale of the Notes. SECTION 12.02. Collection Account; Reserve Account; Redemption Account; Class B Reserve Account Payments. (a) On or prior to the Closing Date, the Indenture Trustee shall open and maintain an Eligible Account at its Corporate Trust Office in its name for the benefit of MBIA and the Noteholders (the "Collection Account") for receipt of (i) payments deposited into the Collection Account in accordance with Section 3.03 and 3.05 of the Servicing Agreement, (ii) amounts transferred from the Reserve Account in accordance with Section 12.02(f), (iii) with respect to the Class A Notes, proceeds of claims made under the Class A Note Insurance Policy, in accordance with Article Eight hereof, (iv) the Purchase Price of any Loan Contracts repurchased by the Company, the Issuer or the Servicer and (v) any income and gain from investments in Eligible Investments. Funds in the Collection Account shall not be commingled with any other monies. All payments to be made from time to time to the Noteholders out of funds in the Collection Account pursuant to this Indenture shall be made by the Indenture Trustee. All monies deposited from time to time in the Collection Account pursuant to this Indenture shall be held by the Indenture Trustee as part of the Trust Estate as herein provided. 80 (b) (i) On or prior to the Closing Date, the Indenture Trustee, for the benefit of the Noteholders and MBIA, shall establish and maintain an Eligible Account (the "Reserve Account") in its name for the benefit of MBIA and the Noteholders for receipt of (i) the Reserve Account Initial Deposit, (ii) deposits pursuant to Section 12.02(d)(x) and (iii) any income and gain from investments in Eligible Investments. On the Closing Date, the Issuer will cause to be deposited from the proceeds of the sale of the Notes the Reserve Account Initial Deposit into the Reserve Account. (ii) On or prior to the Closing Date, the Indenture Trustee, for the benefit of the Noteholders, shall establish and maintain an Eligible Account (the "Redemption Account") in its name for the benefit of the Noteholders for receipt of funds and in anticipation of the application of such funds to a redemption of the Notes pursuant to Section 10.02 hereof. Any monies deposited into the Redemption Account for the purposes of redeeming Notes pursuant to Article Ten hereof shall remain in the Redemption Account until used to redeem the related Notes. (iii) On or prior to the Closing Date, the Indenture Trustee, for the benefit of the Class B Noteholders, shall establish and maintain an Eligible Account (the "Class B Reserve Account") in its name for the benefit of the Class B Noteholders for receipt of the Class B Reserve Account Deposit and in anticipation of the application of such funds pursuant to Section 12.02(g) hereof. On the Closing Date, the Issuer will cause to be deposited from the proceeds of the sale of the Notes, an amount equal to the Class B Required Reserve Account Amount into the Class B Reserve Account. (c) Upon the written order of the Issuer (the "Issuer Order"), the Indenture Trustee shall invest the funds in the Trust Accounts in Eligible Investments; provided, however, that proceeds of claims on the Class A Note Insurance Policy and amounts on deposit in the Redemption Account shall remain uninvested. The Issuer Order shall specify the Eligible Investments in which the Indenture Trustee shall invest, shall state that the same are Eligible Investments and shall further specify the percentage of funds to be invested in each Eligible Investment. No such Eligible Investment shall mature later than the second Business Day preceding the next following Payment Date or relevant Redemption Date, as applicable, or be sold or disposed of prior to its maturity. In the absence of an Issuer Order, the Indenture Trustee shall invest funds in the Collection Account in Eligible Investments described in clause (vi) of the definition thereof. Eligible Investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders and MBIA. The Indenture Trustee shall provide to the Servicer and MBIA monthly written confirmation of such investments, describing the Eligible Investments in which such amounts have been invested. Any funds not so invested must be insured by the Federal Deposit Insurance Corporation. The Indenture Trustee shall not be liable for the selection of, or any investment loss resulting from investment of money in the Trust Accounts in any Eligible Investment in accordance with the terms hereof (other than in its capacity as obligor under any Eligible Investment). The Servicer shall deposit into the relevant Trust Account the amount of any investment losses immediately as realized. 81 (d) On each Payment Date, after making all transfers and deposits to the Collection Account pursuant to Section 12.02(a) hereof, the Indenture Trustee shall withdraw all Available Funds on deposit in the Collection Account, including the reinvestment income therein, and shall make the disbursements in the following order in accordance with the provisions of and instructions on the Monthly Servicer's Report; provided, however, that (x) the proceeds of claims under the Class A Note Insurance Policy shall be used solely to pay the amounts due under paragraphs (v) and (viii) of this Section 12.02(d) in accordance with the terms of the Class A Note Insurance Policy; and (y) the Indenture Trustee shall withdraw Available Funds from the Collection Account and make interest payments to Class A Noteholders based on the Class A Note Balance even if it shall not have received the Monthly Servicer's Report: (i) first, to the Servicer, (A) the Servicer Fee then due and any Servicing Charges and (B) from amounts received as Recoveries (prior to reduction for out-of-pocket expenses) from any Defaulted Loan Contracts, the amounts necessary to reimburse the Servicer for reasonable out-of-pocket costs and expenses incurred by the Servicer (including reasonable attorney's fees) in connection with the realization, attempted realization or enforcement of rights and remedies upon the related Defaulted Loan Contracts; provided, however, so long as the Company is the Servicer, payment of one-third of the Servicer Fee shall be subordinate in priority of payment and shall be made in the priority as set forth in the clause (xi) below; (ii) second, to the Back-up Servicer, (A) the Back-up Servicer Fee then due and (B) in the event that the Back-up Servicer becomes the Servicer, an amount equal to the costs and expenses incurred by the Back-up Servicer in assuming the servicing role, such amount not to exceed $50,000, to the extent such amounts have not been paid by the Servicer; provided, however, that payment of such costs and expenses shall not cause a draw of the Reserve Account pursuant to Section 12.02(f) hereof; (iii) third, to the Indenture Trustee, the Indenture Trustee Fee then due; (iv) fourth, to MBIA, the MBIA Premium then due; (v) fifth, to the Class A Noteholders, the Class A Interest Payment Amount for such Payment Date, to be applied as provided in Section 2.08(a) hereof; (vi) sixth, to MBIA, the MBIA Reimbursement Amount for such Payment Date, if any; 82 (vii) seventh, to the Class B Noteholders, the Class B Interest Payment Amount for such Payment Date, to be applied as provided in Section 2.08(a) hereof; (viii) eighth, to the Class A Noteholders, the Class A Principal Payment Amount for such Payment Date, to be applied as provided in Section 2.08(b) hereof; (ix) ninth, in the event that an Event of Default has occurred and has not been waived by MBIA, to the Class A Noteholders, the Additional Class A Principal Distribution Amount for such Payment Date, up to the Class A Note Balance on such Payment Date, to be applied as provided in Section 2.08(b) hereof; (x) tenth, to the Reserve Account, amounts required to fund the Reserve Account up to the Required Reserve Account Amount; (xi) eleventh, so long as the Company is the Servicer, to the Servicer, the remaining one-third of the Servicer Fee then due; (xii) twelfth, to the Indenture Trustee and the Back-up Servicer, any other amounts due and owing the Indenture Trustee or the Back-up Servicer as expressly provided herein; (xiii) thirteenth, to the Class B Reserve Account amounts required to fund the Class B Reserve Account up to the Class B Required Reserve Account Amount; (xiv) fourteenth, to the Class B Noteholders, the Class B Principal Payment Amount, for such Payment Date, to be applied as provided in Section 2.08(b) hereof; (xv) fifteenth, the cost of re-liening if the Back-up Servicer is acting as the Servicer or if the Servicer fails to perform its duties upon the occurrence of a Re-Liening Trigger; (xvi) sixteenth, in the event that the Back-up Servicer becomes the Servicer, an amount equal to the costs and expenses incurred by the Back-up Servicer in assuming the Servicer's role, to the extent such amounts have not been paid by the Servicer or paid pursuant to clause (ii) above; and (xvii) seventeenth, to the Issuer, any remaining Available Funds. (e) Payments on the Notes will be made by the Indenture Trustee by check mailed by first-class mail to the Person whose name appears as the Registered Holder of 83 the Note on the Note Register at the address of such Person as it appears on the Note Register, or by wire transfer in immediately available funds to the account specified in writing to the Indenture Trustee by the Person whose name appears as the Registered Holder of the Note on the Note Register received at least five Business Days prior to the Record Date for the Payment Date on which wire transfers will commence, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. For this purpose, wire instructions delivered to the Indenture Trustee by a Holder will apply to all subsequent Payment Dates until restated by the Holder. Funds represented by checks returned undelivered will be held for payment to the Person entitled thereto, subject to the terms hereof, at the office or agency in the United States of America designated as such by the Issuer for such purpose pursuant hereto. (f) Disbursements from the Reserve Account shall be made, to the extent funds therefor are available, only as follows, all in accordance with the provisions and instructions contained in the Monthly Servicer Report: (i) in the event that the Available Funds in the Collection Account at 10:00 a.m. New York time on the Determination Date immediately preceding any Payment Date are less than the amounts required to be paid from the Collection Account on such Payment Date pursuant to (A), clauses (i) through (viii) except for clauses (ii)(B) and (vii) of Section 12.02(d) with respect to any Determination Date on which the Class A Note Balance is greater than zero and (B), clauses (i) through (viii) and clauses (xi) through (xiii) of Section 12.02(d) with respect to any Determination Date on which the Class A Note Balance is equal to zero, the Indenture Trustee shall withdraw funds from the Reserve Account on or prior to 4:00 p.m. New York time on such Determination Date to the extent necessary to make such payments on such Payment Date and deposit such funds into the Collection Account; (ii) in the event that on any Determination Date the balance in the Reserve Account equals an amount greater than the Required Reserve Account Amount (after giving effect to the distributions listed in clause (i) of this Section 12.02(f) and (A), clauses (i) through (viii) except for clause (vii) of Section 12.02(d) with respect to any Payment Date on which the Class A Note Balance is greater than zero, and (B), clauses (i) through (viii) and clauses (xi) through (xiii) of Section 12.02(d) with respect to any Payment Date on which the Class A Note Balance is equal to zero on such Payment Date and all MBIA Reimbursement Amounts have been paid in full), the Indenture Trustee shall withdraw funds in the Reserve Account in such amount so that the remaining amount in the Reserve Account after such withdrawal will equal the Required Reserve Account Amount, and deposit such amounts in the Collection Account as Available Funds for 84 distribution on such Payment Date in accordance with the priorities set forth in Section 12.02(d); and (iii) on the Senior Liability Termination Date the amount then remaining on deposit in the Reserve Account shall be applied as a portion of the Class B Principal Payment Amount due on such date, and the Reserve Account shall be closed. (g) Disbursements from the Class B Reserve Account shall be made, to the extent funds therefore are available, only as follows, all in accordance with the provisions and instructions contained in the Monthly Servicer Report: (i) in the event that the Available Funds in the Collection Account at 10:00 a.m. New York time on the Determination Date immediately preceding any Payment Date is less than the amounts required to be paid from the Collection Account on such Payment Date pursuant to clause (vii) of Section 12.02(d) (after giving effect to distributions pursuant to clauses (i) through (vi) of such Section, the Indenture Trustee shall withdraw funds from the Class B Reserve Account (to the extent that funds are available therein) on or prior to 4:00 p.m. New York time on such Determination Date to the extent necessary to make such payments on such Payment Date and deposit such funds into the Collection Account for payment in accordance with clause (vii) of Section 12.02(d); (ii) in the event that on any Determination Date the balance in the Class B Reserve Account equals an amount greater than the Class B Required Reserve Account Amount (after giving effect to any withdrawal therefrom pursuant to clause (i) above), the Indenture Trustee shall withdraw funds in the Class B Reserve Account in such amount so that the remaining amount in the Class B Reserve Account after such withdrawal will equal the Class B Required Reserve Account Amount, and deposit such amounts in the Collection Account as Available Funds for distribution on such Payment Date in accordance with the priorities set forth in Section 12.02(d); and (iii) on the Senior Liability Termination Date the amount then remaining on deposit in the Class B Reserve Account shall be applied as a portion of the Class B Principal Payment Amount due on such date, and the Class B Reserve Account shall be closed. SECTION 12.03. Reports by the Indenture Trustee. (a) On each Payment Date the Indenture Trustee shall account to each Holder of Notes on which payments of principal and interest are then being made the 85 amount which represents principal and the amount which represents interest, and shall contemporaneously advise the Issuer and MBIA of all such payments. The Indenture Trustee may satisfy its obligations under this Section 12.03 by delivering the Monthly Servicer's Report to each such Holder of the Notes, MBIA, the Issuer, the Rating Agencies and the Placement Agents. (b) Upon receipt of an Issuer Order or upon an investment pursuant to clause (vi) of the definition of Eligible Investments due to the failure of the Issuer to provide an Issuer Order, the Indenture Trustee shall confirm the credit rating or, if more than one credit rating has been assigned, each such credit rating of each institution in which funds are invested pursuant to clause (ii), (iii), (iv), (v) or (vi) of the definition of Eligible Investments. (c) At least annually, or as otherwise required by law, the Indenture Trustee shall distribute to Noteholders any information returns, or other tax information as is required by applicable tax law to be distributed to Noteholders. Such information shall be compiled by the Indenture Trustee from information that has been provided to the Indenture Trustee by the Servicer. The Indenture Trustee, upon written request, will furnish the Servicer with all information known to the Indenture Trustee as may be reasonably required in connection with the preparation by the Servicer of tax returns. In no event shall the Indenture Trustee be liable for any liabilities, costs or expenses of the Trust Estate or the Noteholders arising under any tax law, including, without limitation, Federal, state, or local income or franchise taxes or any other tax imposed on or measured by income. 86 ARTICLE XIII PROVISIONS OF GENERAL APPLICATION SECTION 13.01. Acts of Noteholders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 7.01 hereof) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 13.01. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Indenture Trustee deems sufficient. (c) The ownership of Notes shall be proved by the Note Registrar. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Note shall bind the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 13.02. Notices, etc., to Indenture Trustee, MBIA, Issuer and Servicer. Any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or other document provided or permitted hereby to be made upon, given or furnished to, or filed with any party hereto shall be sufficient for every purpose hereunder if in writing and telecopied or mailed, first-class postage prepaid and addressed to the appropriate address below: (a) to the Indenture Trustee at Four Albany Street, New York, New York 10006 Attention: Corporate Trust and Agency Group - Structured Finance; Fax No: (212) 87 250-6439, or at any other address previously furnished in writing to the Issuer, MBIA, the Noteholders and the Custodian; or (b) to MBIA at MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention: Insured Portfolio Management - Structured Finance; Fax No.: (914) 765-3810, or at any other address previously furnished in writing by MBIA to Indenture Trustee, the Noteholders, the Custodian and the Issuer; or (c) to the Issuer at 863 Glenrock Road, Norfolk, Virginia 23502; Fax No.:(804) 461-3388, or at any other address previously furnished in writing to the Indenture Trustee, MBIA, the Noteholders and the Custodian by the Issuer; or (d) to the Custodian at Crestar Bank, 919 East Main Street, 10th Floor, Richmond, Virginia 23219, Attention: J. Lee Judy; Fax No.: (804) 782-7855, or at any other address previously furnished in writing to the Indenture Trustee, MBIA, the Noteholders, the Servicer and the Issuer; or (e) to each of (i) Standard & Poors, Attention: Asset Backed Surveillance Group, 26 Broadway, New York, NY 10004; and (ii) Moody's Investor Service, 99 Church Street, New York, NY 10007. SECTION 13.03. Notices to Noteholders; Waiver. Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Noteholder affected by such event, at his address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case in which notice to Noteholders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice which is mailed in the manner herein provided shall conclusively be presumed to have been duly given. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage, or similar activity, it shall be impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. 88 SECTION 13.04. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 13.05. Successor and Assigns. All covenants and agreements in this Indenture by the Issuer shall bind its successors and assigns, whether so expressed or not. There shall be no assignment by the Issuer hereof, except in accordance with the provisions of Section 3.02(n) hereof. SECTION 13.06. Separability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 13.07. Benefits of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto, the Noteholders and any Paying Agent which may be appointed pursuant to the provisions hereof, and any of their successors hereunder, any benefit or any legal or equitable right, remedy, or claim under this Indenture or under the Notes, except that MBIA is an express third party beneficiary to this Indenture and is entitled to enforce the provisions hereof as if it were a party hereto. SECTION 13.08. Legal Holidays. In any case in which the date of any Payment Date or the Stated Maturity Date of any Note shall not be a Business Day, then (notwithstanding any other provision of a Note or this Indenture) payment of principal or interest need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the nominal date of any such Stated Maturity Date or Payment Date and, assuming such payment is actually made on such subsequent Business Day, no additional interest shall accrue on the amount so paid for the period from and after any such nominal date. SECTION 13.09. Governing Law. This Indenture and each Note shall be construed in accordance with and governed by the internal laws of the State of New York applicable to agreements made and to be performed therein, without regard to the conflict of laws provisions of any State. 89 SECTION 13.10. Counterparts. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 13.11. Corporate Obligation. No recourse may be taken, directly or indirectly, against any incorporator, subscriber to the capital stock, stockholder, employee, officer or director of the Issuer or of any predecessor or successor of the Issuer with respect to the Issuer's obligations on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith. SECTION 13.12. Compliance Certificates and Opinions. Upon any application, order or request by the Issuer or the Servicer to the Indenture Trustee to take any action under any provision of this Indenture for which a specific request is required hereunder, the Issuer or the Servicer, as applicable, shall furnish to the Indenture Trustee an Officer's Certificate of the Issuer or the Servicer, as applicable, stating that all conditions precedent, if any, provided for herein relating to the proposed action have been complied with, except that in the case of any such application or request as to which the furnishing of a different certificate is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for herein shall include: (a) a statement that each individual signing such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, such individual has made such examination or investigation as is necessary to enable such individual to express an informed opinion as to whether or not such covenant or condition has been complied with; and 90 (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 13.13. MBIA Default. If an MBIA Default occurs and continues unremedied, MBIA's right to consent hereunder and under any other Transaction Document and to direct the Indenture Trustee shall be suspended until remedied and, in such event, in all provisions of this Agreement wherein MBIA's consent or direction is required or permitted, the consent or direction of the Controlling Holders shall be required or permitted during such period of suspension. SECTION 13.14. Parties not to Institute Insolvency Proceedings. So long as this Indenture is in effect, for 366 days after the Final Payment Date, the Indenture Trustee and the Custodian each agree that it shall not file an involuntary petition or otherwise institute any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceeding under any Federal or state bankruptcy or similar law against the Issuer. Nothing hereunder shall prohibit the Indenture Trustee from filing proofs of claim or otherwise participating in any such proceedings instituted by any other Person. 91 IN WITNESS WHEREOF, the Issuer, the Custodian and the Indenture Trustee have caused this Indenture to be duly executed by their respective officers thereunto duly authorized as of the date and year first above written. BANKERS TRUST COMPANY, as Indenture Trustee By: _______________________________ Name: Title: AUTOINFO RECEIVABLES COMPANY, as Issuer By: _______________________________ Name: Title: CRESTAR BANK, as Custodian By: _______________________________ Name: Title: [Indenture] EXHIBIT A to Indenture FORM OF CLASS A NOTE REGISTERED $__________ No. A-_________ PPN: 052780 AA 1 THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE BALANCE OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (3) IN RELIANCE ON ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUBJECT TO THE RECEIPT BY THE INDENTURE TRUSTEE OF A CERTIFICATION OF THE TRANSFEREE OR AN OPINION OF COUNSEL (SATISFACTORY TO THE INDENTURE TRUSTEE AND THE ISSUER) TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SECTION 2.06 OF THE INDENTURE DATED AS OF OCTOBER 1, 1996 (THE "INDENTURE") BETWEEN AUTOINFO RECEIVABLES COMPANY, AS ISSUER, CRESTAR BANK, AS CUSTODIAN AND BANKERS TRUST COMPANY, AS INDENTURE TRUSTEE, CONTAINS FURTHER RESTRICTIONS ON THE TRANSFER AND RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS NOTE, A-1 SUBJECT TO THE FOREGOING RESTRICTIONS ON TRANSFERABILITY. IN ADDITION, EACH TRANSFEREE OF THIS NOTE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE MADE THE REPRESENTATIONS AND AGREEMENTS SET FORTH IN SECTION 2.08(d) OF THE INDENTURE. (A COPY OF WHICH IS AVAILABLE FROM THE INDENTURE TRUSTEE UPON REQUEST.) AUTOINFO RECEIVABLES COMPANY 6.53% AUTO LOAN BACKED NOTES, CLASS A AutoInfo Receivables Company, a Delaware corporation (including any successor, the "Issuer"), for value received, hereby promises to pay to _____________, or registered assigns, the principal sum of ______ DOLLARS ($_____), partially payable on each Payment Date in an amount equal to the aggregate amount, if any, payable from the Collection Account in respect of principal on the Class A Notes pursuant to Section 2.08 of the Indenture; provided, however, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of the Stated Maturity Date and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. The Issuer will pay interest on this Note at the rate per annum shown above or as is stated in the Indenture, on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the close of business on the day preceding such Payment Date, subject to certain limitations contained in Section 2.08 of the Indenture. Interest on this Note will accrue for each Payment Date from the most recent Payment Date (or in the case of the first Payment Date, from the Closing Date) on which interest has been paid to but excluding the then current Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified in the Indenture. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. The Notes are entitled to the benefits of a financial guaranty insurance policy (the "Policy") issued by MBIA Insurance Corporation ("MBIA"), pursuant to which MBIA has unconditionally guaranteed payments of the Class A Interest Shortfall Amount and the Class A Principal Shortfall Amount on each Payment Date, all as more fully set forth in the Indenture. See also "Statement of Insurance" attached hereto. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. A-2 Unless the certificate of authentication hereon has been executed by the Indenture Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer. Dated: October 11, 1996 AUTOINFO RECEIVABLES COMPANY By: _____________________________________ Name: ___________________________________ Title: __________________________________ A-3 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. Dated: October 11, 1996 BANKERS TRUST COMPANY, not in its individual capacity but solely as Indenture Trustee By: __________________________________________________ Authorized Signatory A-4 This Note is one of a duly authorized issue of Notes of the Issuer, designated as its 6.53% Auto Loan Backed Notes, Class A (herein called the "Class A Notes" or the "Notes"), all issued under an Indenture dated as of October 1, 1996 (such Indenture, as supplemented or amended, is herein called the "Indenture"), between the Issuer, Crestar Bank and Bankers Trust Company, not in its individual capacity but solely as trustee (the "Indenture Trustee", which term includes any successor Indenture Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are not otherwise defined herein and that are defined in the Indenture shall have the meanings assigned to them in or pursuant to the Indenture. The Issuer shall pay interest on overdue installments of interest at the Class A Interest Rate to the extent lawful. As provided in the Indenture, the Notes may be redeemed pursuant to Section 10.01 of the Indenture, in whole, but not in part, at the option of the Servicer or MBIA on any Payment Date on or after the date on which the Class A Note Balance is less than or equal to 10% of the Initial Class A Note Balance on the Closing Date. Each Noteholder, by acceptance of a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of (a) the Indenture Trustee in its individual capacity, (b) any holder of a beneficial interest in the Issuer, the Indenture Trustee or of (c) any successor or assign of the Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. It is the intent of the Issuer and the Noteholders that, for purposes of Federal and State income tax and any other tax measured in whole or in part by income, the Notes will qualify as indebtedness of the Issuer. The Noteholders, by acceptance of a Note, agree to treat, and to take no action inconsistent with the treatment of, the Notes for such tax purposes as indebtedness of the Issuer. Each Noteholder, by acceptance of a Note, covenants and agrees that by accepting the benefits of the Indenture that such Noteholder will not at any time institute against the Issuer, or join in any institution against the Issuer of, any bankruptcy, A-5 reorganization or arrangement, insolvency or liquidation proceedings under any United States Federal or State bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note, but solely from the Trust Estate pledged to the Indenture Trustee under the Indenture and from the Class A Note Insurance Policy at the times, place and rate, and in the coin or currency, herein prescribed. Notwithstanding anything else to the contrary contained in this Note or the Indenture, the obligation of the Issuer to pay the principal of and interest on this Note is not a general obligation of the Issuer, nor its officers or directors, but is limited solely to the Trust Estate pledged under the Indenture or as proscribed in the Class A Note Insurance Policy. Anything herein to the contrary notwithstanding, except as expressly provided in the Transaction Documents, neither Bankers Trust Company, in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees, successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Indenture Trustee for the sole purposes of binding the interests of the Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Transaction Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; [Attach Statement of Insurance] A-6 ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee _____________________________________________________________________________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________ _________________________________________ (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints _______________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. ALEX. BROWN & SONS INCORPORATED By:_____________________ Carla Brothers Dated: October 11, 1996 A-7 EXHIBIT B to Indenture FORM OF CLASS B NOTES REGISTERED $__________________________________________________________________________ NO. B-_________ PPN: 052780 AB 9 THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE BALANCE OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (3) IN RELIANCE ON ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUBJECT TO THE RECEIPT BY THE TRUSTEE OF A CERTIFICATION OF THE TRANSFEREE OR AN OPINION OF COUNSEL (SATISFACTORY TO THE TRUSTEE AND THE ISSUER) TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SECTION 2.06 OF THE INDENTURE DATED AS OF OCTOBER 1, 1996 (THE "INDENTURE") BETWEEN AUTOINFO RECEIVABLES COMPANY, AS ISSUER, CRESTAR BANK, AS CUSTODIAN AND BANKERS TRUST COMPANY, AS INDENTURE TRUSTEE, CONTAINS FURTHER RESTRICTIONS ON THE B-1 TRANSFER AND RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS NOTE, SUBJECT TO THE FOREGOING RESTRICTIONS ON TRANSFERABILITY. IN ADDITION, EACH TRANSFEREE OF THIS NOTE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE MADE THE REPRESENTATIONS AND AGREEMENTS SET FORTH IN SECTION 2.08(d) OF THE INDENTURE. (A COPY OF WHICH IS AVAILABLE FROM THE INDENTURE TRUSTEE UPON REQUEST.) 11.31% AUTO LOAN BACKED NOTES, CLASS B AutoInfo Receivables Company, a Delaware corporation (including any successor, the "Issuer"), for value received, hereby promises to pay to __________, or registered assigns, the principal sum of ________ DOLLARS ($_____), partially payable on each Payment Date in an amount equal to the aggregate amount, if any, payable from the Collection Account in respect of principal on the Class B Notes pursuant to Section 2.08 of the Indenture; provided, however, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of the Stated Maturity Date and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. No payments of interest on the Class B Notes will be made on any Payment Date until the interest due on the Class A Notes on such Payment Date is paid in full. No payments of principal on the Class B Notes will be made on any Payment Date until the interest and principal due on the Class A Notes on such Payment Date has been paid in full and certain payments are made to the Reserve Account for the benefit of the Class A Notes. The Issuer will pay interest on this Note at the rate per annum shown above, on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the close of business on the day preceding such Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in Section 2.08 of the Indenture. Interest on this Note will accrue for each Payment Date from the most recent Payment Date (or in the case of the first Payment Date, from the Closing Date) on which interest has been paid to but excluding the then current Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified in the Indenture. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. B-2 Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer. Dated: October 11, 1996 AUTOINFO RECEIVABLES COMPANY By: ____________________________________ Name: _______________________________ Title: ______________________________ B-3 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. Dated: October 11, 1996 BANKERS TRUST COMPANY, not in its individual capacity but solely as Indenture Trustee By: __________________________________ Authorized Signatory B-4 [REVERSE OF NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its ___% Auto Loan Backed Notes, Class B (herein called the "Class B Notes" or the "Notes"), all issued under an Indenture dated as of October 1, 1996 (such Indenture, as supplemented or amended, is herein called the "Indenture"), between the Issuer, Crestar Bank and Bankers Trust Company, not in its individual capacity but solely as trustee (the "Indenture Trustee," which term includes any successor Indenture Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are not otherwise defined herein and that are defined in the Indenture shall have the meanings assigned to them in or pursuant to the Indenture. The Issuer shall pay interest on overdue installments of interest at the Class B Interest Rate to the extent lawful. As provided in the Indenture, the Notes may be redeemed pursuant to Section 10.01 of the Indenture, in whole, but not in part, at the option of the Servicer, on any Payment Date on or after the date on which the Class B Note Balance is less than or equal to 10% of the Initial Class B Note Balance on the Closing Date. Each Noteholder, by acceptance of a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of (a) the Indenture Trustee in its individual capacity, (b) any holder of a beneficial interest in the Issuer, the Indenture Trustee or of (c) any successor or assign of the Indenture Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. It is the intent of the Issuer, and the Noteholders that, for purposes of Federal and State income tax and any other tax measured in whole or in part by income, the Notes will qualify as indebtedness of the Issuer. The Noteholders, by acceptance of a Note, agree to treat, and to take no action inconsistent with the treatment of, the Notes for such tax purposes as indebtedness of the Issuer. Each Noteholder, by acceptance of a Note, covenants and agrees that by accepting the benefits of the Indenture that such Noteholder will not at any time institute B-5 against the Issuer, or join in any institution against the Issuer of, any bankruptcy, reorganization or arrangement, insolvency or liquidation proceedings under any United States Federal or State bankruptcy or similar law. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note, but solely from the Trust Estate pledged to the Indenture Trustee under the Indenture, at the times, place and rate, and in the coin or currency, herein prescribed. Notwithstanding anything else to the contrary contained in this Note or the Indenture, the obligation of the Issuer to pay the principal of and interest on this Note is not a general obligation of the Issuer, nor its officers or directors, but is limited solely to the Trust Estate pledged under the Indenture. Anything herein to the contrary notwithstanding, except as expressly provided in the Transaction Documents, neither Bankers Trust Company, in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees, successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Indenture Trustee for the sole purposes of binding the interests of the Indenture Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Transaction Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom. B-6 ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee ______________________________________________________________________________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________ ___________________________________________ (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints _________________________________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated:________________ _______________________*/ Signature Guaranteed: _______________________________________________________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. - ---------- */ NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular without alteration, enlargement or any change whatsoever. B-7 Exhibit C to Indenture Form of Class A Note Insurance Policy See Tab 8 Exhibit D to Indenture Cumulative Net Default Table ================================================================================ Months After Closing Reserve Account Increase Event Event of Default - -------------------------------------------------------------------------------- Three 6.50% 7.50% - -------------------------------------------------------------------------------- Six 9.00% 12.00% - -------------------------------------------------------------------------------- Nine 13.50% 19.00% - -------------------------------------------------------------------------------- Twelve 16.50% 23.00% - -------------------------------------------------------------------------------- Fifteen 19.25% 28.75% - -------------------------------------------------------------------------------- Eighteen 21.50% 31.25% - -------------------------------------------------------------------------------- Twenty-One 23.50% 33.75% - -------------------------------------------------------------------------------- Twenty-Four 25.75% 36.75% - -------------------------------------------------------------------------------- Twenty-Seven 27.75% 39.50% - -------------------------------------------------------------------------------- Thirty and Thereafter 30.00% 42.00% ================================================================================ Exhibit E-1 to Indenture Form of Investment Letter (Non-Rule 144A) Bankers Trust Company Four Albany Street New York, New York 10006 AutoInfo Receivables Company 863 Glenrock Road Norfolk, Virginia 23502 Black Diamond Securities, LLC 230 Park Avenue, Suite 635 New York, New York 10169 Alex, Brown & Sons Incorporated 7 St. Paul Street Baltimore, Maryland 21202 Re: AutoInfo Receivables Company ___% Auto Loan Backed, Class [A/B] ---------------------------------- The undersigned purchaser ("Purchaser") understands that the purchase of the above referenced notes described on the Schedule attached hereto (the "Notes") may be made only by institutions which are "Accredited Investors" under Regulation D, as promulgated under the Securities Act of 1933, as amended (the "1933 Act"), which includes banks, savings and loan associations, registered brokers and dealers, insurance companies, investment companies, and organizations described in Section 501(c)(3) of the Internal Revenue Code, corporations, business trusts and partnerships, not formed for the specific purpose of acquiring the Notes offered, with total assets in excess of $5,000,000. The undersigned represents on behalf of the Purchaser that the Purchaser is an "Accredited Investor" within the meaning of such definition. Purchaser is urged to review carefully the responses, representations and warranties it is making herein. E-1-1 Representations and Warranties Purchaser makes the following representations and warranties in order to permit the Trustee, AutoInfo Receivables Company ("AutoInfo"), and Black Diamond Securities, LLC to determine its suitability as a purchaser of Notes and to determine that the exemption from registration relied upon by AutoInfo under Section 4(2) of the 1933 Act is available to it. 1. The execution and delivery of this Representation Letter has been duly authorized by the Purchaser by all necessary corporate action on its part, including due authorization and approval by the Board of Directors or other governing body of the Purchaser. 2. The Purchaser understands that the Notes have not been and will not be registered under the 1933 Act in reliance upon the exemption provided in Section 4(2) of the 1933 Act or any other applicable exemption, that the Notes have not and will not be registered or qualified under the securities or "blue sky" laws of any jurisdiction, that the Notes may be resold (which resale is not currently contemplated) or otherwise transferred only if so registered or qualified or if an exemption from registration or qualification is available, that AutoInfo is not required to register the Notes and that any transfer must comply with Section 2.06 of the Indenture relating to the Notes. 3. The Purchaser will comply with all applicable federal and state securities laws in connection with any subsequent resale of the Notes. 4. The Purchaser is a sophisticated institutional investor and has knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of its investment in the Notes and is able to bear the economic risk of such investment. The Purchaser has been given such information concerning the Notes, the underlying retail installment contracts and AutoInfo as it has requested. 5. The Purchaser is acquiring the Notes as principal for its own account (or for the account of one or more other institutional investors for which it is acting as duly authorized fiduciary or agent) for the purpose of investment and not with a view to or for sale in connection with any distribution thereof, subject nevertheless to any requirement of law that the disposition of the Purchaser's property will at all times be and remain within its control. 6. The Purchaser represents that either (a) it is not (i) an employee benefit plan (as defined in section 3(3) of the Employee Retirement Security Act of 1974, as amended ("ERISA")) subject to the provisions of Title I of ERISA, (ii) a plan described in section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the "Code") or (iii) an entity whose underlying assets are deemed to be assets of a plan described in (i) or (ii) above by reason of such plan's investment in the entity (any such entity described in E-1-2 clauses (i) through (iii), a "Benefit Plan Entity") or (b) the Purchaser's purchase and holding of the Notes with the assets of a Benefit Plan Entity will be covered by a Department of Labor Class Exemption. 7. The Purchaser understands that such Note will bear a legend as set forth in the form of Note included in the Indenture. 8. The Purchaser agrees that it will obtain from any purchaser of the Notes from it substantially the same representations, warranties and agreements contained in the foregoing paragraphs 1 through 7 and in this paragraph 8. E-1-3 The representations and warranties contained herein will be binding upon the heirs, executors, administrators and other successors of the undersigned. If there is more than one signatory hereto, the obligations, representations, warranties and agreements of the undersigned are made jointly and severally. Executed at _________________________, this ________ day of _____________, 199_. _________________________ Purchaser's Name (Print) By_______________________ Signature Its______________________ _________________________ Address of Purchaser _________________________ Purchaser's Taxpayer Identification Number E-1-4 Bankers Trust Company Four Albany Street New York, New York 10006 AutoInfo Receivables Company 863 Glenrock Road Norfolk, Virginia 23502 Black Diamond Securities, LLC 230 Park Avenue, Suite 635 New York, New York 10169 Alex. Brown & Sons Incorporated 7 St. Paul Street Baltimore, Maryland 21202 Re: AutoInfo Receivables Company 11.31% Auto Loan Backed Notes, Class B -------------------------------------- Dear Sirs: SunAmerica Life Insurance Company (the "Purchaser") is today purchasing in a private resale from AutoInfo Receivables Company (the "Issuer") the above captioned notes (the "Notes"), issued pursuant to the Indenture dated as of October 1, 1996 between AutoInfo Receivables Company as issuer (the "Company"), AutoInfo Finance of Virginia, Inc., Crestar Bank and Bankers Trust Company, as trustee (the "Trustee"). In connection with the purchase of the Notes, the Purchaser hereby represents and warrants to you as follows: 1. The execution and delivery of this Representation Letter has been duly authorized by the Purchaser by all necessary corporate action on its part. E-2-1 2. The Purchaser understands that the Notes have not been and will not be registered under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon the exemption provided in Section 4(2) of the 1933 Act or any other applicable exemption, that the Notes have not and will not be registered or qualified under the securities or "blue sky" laws of any jurisdiction, that the Notes may be resold (which resale is not currently contemplated) or otherwise transferred only if so registered or qualified or if an exemption from registration or qualification is available, that AutoInfo Receivables Company is not required to register the Notes and that any transfer must comply with Section 2.06 of the Indenture relating to the Notes. 3. The Purchaser is not acquiring the Notes with a view to, or for resale in connection with, a distribution that would constitute a public offering within the meaning of the 1933 Act or a violation of the 1933 Act or any state securities law (subject to the understanding that disposition of the Purchaser's property will remain at all times within its control). The Purchaser is not an affiliate of the Trustee, any custodian of the Notes or the Company or any affiliate thereof. 4. The Purchaser agrees that if at some time it wishes to dispose of or exchange any of the Notes, it will not transfer or exchange any of the Notes unless such transfer or exchange is in accordance with the provisions of Section 2.06 of the Indenture. 5. The Purchaser is a qualified institutional buyer as defined in Rule 144A of the 1933 Act and has completed either of the forms of certification to that effect attached hereto as Annex 1 or Annex 2; it is aware that the sale to it is being made in reliance on Rule 144A; it is acquiring the Notes for its own account or for the account of a qualified institutional buyer, it understands that such Notes may be resold, pledged or transferred only (i) to a person who the Purchaser reasonably believes is a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A; or (ii) pursuant to another exemption from registration under the 1933 Act. 6. Neither the Purchaser nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of any Note, any interest in any Note to, or solicited any offer to buy or accept a transfer, pledge or other disposition of any Note any interest in any Note with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action, which would constitute a distribution of the Notes under the 1933 Act or which would render the disposition of any Note a violation of Section 5 of the 1933 Act or any state securities law, require registration or qualification pursuant thereto, nor has it authorized or will it authorize any person to act, in such manner with respect to the Notes. 7. The Purchaser represents that either (a) it is not (i) an employee benefit plan (as defined in section 3(3) of the Employee Retirement Security Act of 1974, as amended E-2-2 ("ERISA") subject to the provisions of Title I of ERISA, (ii) a plan described in section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), or (iii) an entity whose underlying assets are deemed to be assets of a plan described in (i) or (ii) above by reason of such plan's investment in the entity (any such entity described in clauses (i) through (iii), a "Benefit Plan Entity") or (b) the Purchaser's purchase and holding of the Notes with the assets of a Benefit Plan Entity will be covered by an ERISA statutory exemption Department of Labor Administrative Exemption. 8. The Purchaser understands that there is no market, nor is there any assurance that a market will develop, for the Notes and that the Issuer does not have any obligation to make or facilitate any such market (or to otherwise repurchase the Notes from the Purchaser) under any circumstances. 9. The Purchaser has consulted with its own legal counsel, independent accountants and financial advisors to the extent it deems necessary regarding the tax consequences to it of ownership of the Notes, is aware that its taxable income with respect to the Notes in any accounting period may not correspond to the cash flow (if any) from the Notes for such period, and is not purchasing the Notes in reliance on any representations of the Issuer or its counsel with respect to tax matters. 10. The Purchaser has reviewed the Private Placement Memorandum (the "Placement Memorandum") dated October 11, 1996, with respect to the Notes, and the agreements and other materials referred to therein, and has had the opportunity to ask questions and receive answers concerning the terms and conditions of the transactions contemplated by the Placement Memorandum and to obtain additional information necessary to verify the accuracy and completeness of any information furnished to the Purchaser or to which the Purchaser had access. 11. The Purchaser hereby further agrees to be bound by all the terms and conditions of the Notes as provided in the Indenture. E-2-3 12. If the Purchaser sells any of the Notes, the Purchaser will obtain from any subsequent purchaser the same representations contained in this Representation Letter. Very truly yours, SUNAMERICA LIFE INSURANCE COMPANY Dated: October 11, 1996 By: ____________________________________________________________ Name: Title: E-2-4 Qualified Institutional Buyer Status Under SEC Rule 144A (Buyers other than investment companies) Bankers Trust Company Four Albany Street New York, New York 10006 AutoInfo Receivables Company 863 Glenrock Road Norfolk, Virginia 23502 Black Diamond Securities, LLC 230 Park Avenue, Suite 635 New York, New York 10169 Alex. Brown & Sons Incorporated 7 St. Paul Street Baltimore, Maryland 21202 Name of Buyer: SunAmerica Life Insurance Company ("Buyer") I hereby certify that as indicated below, I am the _______________ officer of Buyer. In connection with purchases by Buyer from time to time, I hereby certify to you and, if you act as broker for one or more customers, to such customers, that Buyer is a "qualified institutional buyer" as defined in Rule 144A under the Securities Act of 1933 ("Rule 144A") because (i) Buyer owned and/or invested on a discretionary basis $__________(1) in securities (except for the excluded securities referred to below) as of the end of Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A) and (ii) Buyer satisfies the criteria in the category marked below. - ---------- (1) Buyer must own and/or invest on a discretionary basis at least $100,000,000 in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or invest on a discretionary basis at least $10,000,000 in securities. E-2-5 Corporation, etc. Buyer is a corporation (other than a bank, savings and loan association or similar institution), Massachusetts or similar business trust, partnership, or charitable organization described in Section 501(c)(3) of the Internal Revenue Code. Bank. Buyer (a) is a national bank or banking institution organized under the laws of any State, territory or the District of Columbia, the business of which is substantially confined to banking and is supervised by the State or territorial banking commission or similar official or is a foreign bank or equivalent institution, and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements, a copy of which is attached hereto. Savings and Loan. Buyer (a) is a savings and loan association, building and loan association, cooperative bank, homestead association or similar institution, which is supervised and examined by a State or Federal authority having supervision over any such institution or is a foreign savings and loan association or equivalent institution and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements, a copy of which is attached hereto. Broker-dealer. Buyer is a dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934. Insurance Company. Buyer is an insurance company whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies and which is subject to supervision by the insurance commissioner or a similar official or agency of a State, territory or the District of Columbia. State or Local Plan. Buyer is a plan established and maintained by a State, its political subdivisions, or any agency or instrumentality of a State or its political subdivisions, for the benefit of its employees. ERISA Plan. Buyer is an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974. Investment Advisor. Buyer is an investment advisor registered under the Investment Advisers Act of 1940. The term "securities" as used herein does not include (i) securities of issuers that are affiliated with Buyer, (ii) securities that are part of an unsold allotment to or subscription by Buyer (if Buyer is a dealer), (iii) securities issued or guaranteed by the U.S. or any instrumentality thereof, (iv) bank deposit notes and certificates of deposit, (v) E-2-6 loan participations, (vi) repurchase agreements, (vii) securities owned but subject to a repurchase agreement and (viii) currency, interest rate and commodity swaps. For purposes of determining the aggregate of securities owned and/or invested on a discretionary basis by Buyer, Buyer used the cost of such securities to Buyer and did not include any of the securities referred to in the preceding paragraph. Further, in determining such aggregate amount, Buyer may have included securities owned by subsidiaries of Buyer, but only if such subsidiaries are consolidated with Buyer in its financial statements prepared in accordance with generally accepted accounting principles and if the investments of such subsidiaries are managed under Buyer's direction. However, such securities were not included if Buyer is a majority-owned, consolidated subsidiary of another enterprise and Buyer is not itself a reporting company under the Securities Exchange Act of 1934. Buyer acknowledges that it is familiar with Rule 144A and understands that you and your customers (if you act as a broker for one or more customers) are and will continue to rely on the statements made herein because one or more sales by you for your own account or your customer's account to Buyer may be in reliance on Rule 144A. ___ ___ Will Buyer be purchasing Rule 144A Yes No securities only for Buyer's own account? If the answer to this question is "no", Buyer agrees that, in connection with any purchase of securities sold to Buyer for the account of a third party (including any separate account) in reliance on Rule 144A, Buyer will only purchase for the account of a third party that at the time is a "qualified institutional buyer" within the meaning of Rule 144A. In addition, Buyer agrees that Buyer will not purchase securities for a third party unless Buyer has obtained a current representation letter from such third party or taken other appropriate steps contemplated by Rule 144A to conclude that such third party independently meets the definition of "qualified institutional buyer" set forth in Rule 144A. Buyer agrees to notify you of any changes in the information and conclusions herein. Until such notice is given to you, Buyer's purchase of securities from you, or through you from your customers, will constitute a reaffirmation of the foregoing certifications and acknowledgments as of the date of such purchase. E-2-7 Further, if Buyer is a bank or savings and loan as provided above, Buyer agrees that it will furnish you with updated annual financial statements promptly after they become available. Date: October 11, 1996 Very truly yours, SUNAMERICA LIFE INSURANCE COMPANY By __________________________________ Name: Title: E-2-8 Annex 2 to Exhibit E-2 Bankers Trust Company Four Albany Street New York, New York 10006 AutoInfo Receivables Company 863 Glenrock Road Norfolk, Virginia 23502 Black Diamond Securities, LLC 230 Park Avenue, Suite 635 New York, New York 10169 Alex, Brown & Sons Incorporated 7 St. Paul Street Baltimore, Maryland 21202 Name of Buyer: ("Buyer") Name of Investment Adviser: ("Adviser") I hereby certify that, as indicated below, I am the President, Chief Financial Officer or Senior Vice President of Buyer or, if Buyer is a "qualified institutional buyer" as defined in Rule 144A under the Securities Act of 1933 ("Rule 144A") because Buyer is part of a Family of Investment Companies (as defined below), of Adviser. In connection with purchases by Buyer from time to time, I hereby certify to you and, if you act as broker for one or more customers, to such customers, that Buyer is a "qualified institutional buyer" as defined in Rule 144A under the Securities Act of 1933 ("Rule 144A") because (i) Buyer is an investment company registered under the Investment Company Act of 1940 and (ii) as marked below, Buyer alone, or Buyer's Family of Investment Companies, owned at least $100,000,000 in securities (other than the excluded securities referred to below) as of the end of Buyer's most recent fiscal year. Buyer owned $__________ in securities (other than the excluded securities referred to below) as of the end of Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A). Buyer is part of a Family of Investment Companies which owned in the aggregate $__________ in securities (other than the excluded securities E-2-1 referred to below) as of the end of Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A). For purposes of determining the amount of securities owned by Buyer or Buyer's Family of Investment Companies, I used the cost of such securities. The term "Family of Investment Companies" as used herein means two or more registered investment companies (or series thereof) that have the same investment adviser or investment advisers that are affiliated (by virtue of being majority owned subsidiaries of the same parent or because one investment adviser is a majority owned subsidiary of the other). The term "securities" as used herein does not include (i) securities of issuers that are affiliated with Buyer or are part of Buyer's Family of Investment Companies, (ii) securities issued or guaranteed by the U.S., or any instrumentality thereof, (iii) bank deposit notes and certificates of deposit, (iv) loan participations, (v) repurchase agreements, (vi) securities owned but subject to a repurchase agreement and (vii) currency, interest rate and commodity swaps. On behalf of Buyer, I acknowledge that Buyer is familiar with Rule 144A and understands that you and your customers (if you act as a broker for one or more customers) are and will continue to rely on the statements made herein because one or more sales to Buyer by you for your own account or your customer's account will be in reliance on Rule 144A. In addition, on behalf of Buyer, I agree that, in connection with any purchase of securities sold by or through you in reliance on Rule 144A, Buyer will only purchase for Buyer's own account. E-2-2 Finally, on behalf of Buyer or Adviser (as appropriate), I also agree to notify you of any changes in the information and conclusions herein. Until such notice is given to you, Buyer's purchase from time to time of securities from you, or through you from your customers, will constitute a reaffirmation of the foregoing certifications and acknowledgements by me as of the date of such purchase. Date: __________________ Very truly yours, _______________________________________ Name: Title: On behalf of: _______________________________________ Name of Buyer: or _______________________________________ Name of Adviser: E-2-3 EXHIBIT F to Indenture FORM OF CERTIFICATION [To be addressed to the Indenture Trustee and MBIA] Re: The Indenture dated as of October 1, 1996 (the "Indenture"), by and among AutoInfo Receivables Company, as Issuer, Bankers Trust Company, as Indenture Trustee and Crestar Bank, as Custodian. Ladies and Gentlemen: In accordance with the provisions of Section 11.03 of the above-referenced Indenture, the undersigned, as the Custodian, hereby certifies that as to each Custodial File (other than any Loan Contract paid in full or any Loan Contract listed on the attachment hereto) it has reviewed the documents in such Custodial File and has determined that (i) all documents required to be delivered to it pursuant to Section 11.03 of the Indenture are in its possession and (ii) such documents have been reviewed by it and appear regular on their face and related to such Loan Contracts. The Custodian makes no representations as to and shall not be responsible to verify (i) the validity, legality, enforceability, sufficiency, due authorization, recordability or genuineness of any of the documents in the Custodial File or of any of the Loan Contracts or (ii) the collectability, insurability, effectiveness or suitability of any such Loan Contracts. CRESTAR BANK, Custodian By: ___________________________ Name: Title: F-1 Schedule 1 List of Loan Contracts See Tab 12 TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS.................................................................. 2 SECTION 1.01. Definitions............................................ 2 ARTICLE II THE NOTES.................................................................... 23 SECTION 2.01. Form Generally......................................... 23 SECTION 2.02. Denomination........................................... 23 SECTION 2.03. Execution, Authentication, Delivery and Dating......... 23 SECTION 2.04. Temporary Notes........................................ 24 SECTION 2.05. Registration, Registration of Transfer and Exchange.... 24 SECTION 2.06. Limitation on Transfer and Exchange.................... 25 SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Note.............. 26 SECTION 2.08. Payment of Principal and Interest; Principal and Interest Rights Preserved...................................... 27 SECTION 2.09. Persons Deemed Owner................................... 29 SECTION 2.10. Cancellation........................................... 29 SECTION 2.11. Tax Treatment.......................................... 29 ARTICLE III ISSUER REPRESENTATIONS, WARRANTIES AND COVENANTS............................. 30 SECTION 3.01. Representations, Warranties and Covenants of the Issuer......................................................... 30 SECTION 3.02. Covenants.............................................. 32 SECTION 3.03. Representations and Warranties Regarding the Loan Assets......................................................... 37 SECTION 3.04. Limitation on Liability of Directors, Officers, or Employees of the Issuer........................................ 37 ARTICLE IV ISSUANCE OF NOTES; REMOVAL OF COLLATERAL..................................... 38 SECTION 4.01. Conditions to Issuance of Notes........................ 38 SECTION 4.02. Security for Notes..................................... 39 SECTION 4.03. Removals of Loan Contracts............................. 40 i Page ---- SECTION 4.04. Releases............................................... 41 SECTION 4.05. Trust Estate........................................... 41 ARTICLE V SATISFACTION AND DISCHARGE................................................... 42 SECTION 5.01. Satisfaction and Discharge of Indenture................ 42 SECTION 5.02. Application of Trust Money............................. 42 ARTICLE VI DEFAULTS..................................................................... 44 SECTION 6.01. Events of Default...................................... 44 SECTION 6.02. Indenture Trustee May File Proofs of Claim............. 45 SECTION 6.03. Indenture Trustee May Enforce Claims Without Possession of Notes............................................ 46 SECTION 6.04. Limitation on Suits.................................... 47 SECTION 6.05. Unconditional Right of Noteholders to Receive Principal and Interest......................................... 47 SECTION 6.06. Restoration of Rights and Remedies..................... 48 SECTION 6.07. Rights and Remedies Cumulative......................... 48 SECTION 6.08. Control by MBIA or Noteholders......................... 48 SECTION 6.09. Waiver of Certain Events by Less than All.............. 49 SECTION 6.10. Undertaking for Costs.................................. 49 SECTION 6.11. Waiver of Stay or Extension Laws....................... 49 SECTION 6.12. Action on Notes........................................ 50 SECTION 6.13. Delay or Omission; Not Waiver.......................... 50 ARTICLE VII THE INDENTURE TRUSTEE........................................................ 51 SECTION 7.01. Certain Duties and Responsibilities of the Indenture Trustee........................................................ 51 SECTION 7.02. Notice of Default and Reserve Account Increase Events......................................................... 53 SECTION 7.03. Certain Rights of Indenture Trustee.................... 53 SECTION 7.04. Not Responsible for Recitals or Issuance of Notes...... 54 SECTION 7.05. May Hold Notes......................................... 55 SECTION 7.06. Money Held in Trust.................................... 55 SECTION 7.07. Compensation and Reimbursement......................... 55 SECTION 7.08. Corporate Trustee Required; Eligibility................ 56 SECTION 7.09. Resignation and Removal; Appointment of Successor...... 57 SECTION 7.10. Acceptance of Appointment by Successor................. 58 ii Page ---- SECTION 7.11. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee.................................. 58 SECTION 7.12. Co-Indenture Trustees and Separate Indenture Trustees....................................................... 59 SECTION 7.13. Rights with Respect to the Servicer.................... 60 SECTION 7.14. Appointment of Authenticating Agent.................... 61 SECTION 7.15. Money for Note Payments to Be Held in Trust............ 62 ARTICLE VIII THE CLASS A NOTE INSURANCE POLICY............................................ 64 SECTION 8.01. Payments under the Class A Note Insurance Policy....... 64 ARTICLE IX AMENDMENTS TO INDENTURE...................................................... 65 SECTION 9.01. Amendments without Consent of Noteholders.............. 65 SECTION 9.02. Amendments with Consent of Noteholders................. 66 SECTION 9.03. Execution of Amendments................................ 67 SECTION 9.04. Effect of Amendments................................... 67 SECTION 9.05. Reference in Notes to Amendments....................... 67 ARTICLE X REDEMPTION OF NOTES.......................................................... 68 SECTION 10.01. Redemption at the Option of the Servicer; Election to Redeem........................................................ 68 SECTION 10.02. Notice to Indenture Trustee; Deposit of Redemption Price......................................................... 68 SECTION 10.03. Notice of Redemption by the Indenture Trustee........ 69 SECTION 10.04. Notes Payable on Redemption Date..................... 69 SECTION 10.05. Release of Loan Contracts to the Servicer............ 70 SECTION 10.06. Release of Loan Contracts to MBIA.................... 70 ARTICLE XI THE CUSTODIAN................................................................ 71 SECTION 11.01. Acceptance by Indenture Trustee and Appointment of the Custodian................................................. 71 SECTION 11.02. Obligations of the Custodian......................... 73 SECTION 11.03. Certification........................................ 73 SECTION 11.04. Future Defects....................................... 74 iii Page ---- SECTION 11.05. Fees of Custodian.................................... 74 SECTION 11.06. Liability of Custodian............................... 74 SECTION 11.07. Reliance of Custodian................................ 74 SECTION 11.08. Transmission of Custodial Files...................... 75 SECTION 11.09. Resignation and Removal; Appointment of Successor.... 75 SECTION 11.10. Acceptance of Appointment by Successor............... 76 SECTION 11.11. Merger, Conversion, Consolidation or Succession to Business of Custodian.......................................... 76 SECTION 11.12. Representations and Warranties of the Custodian...... 77 ARTICLE XII ACCOUNTS AND ACCOUNTING...................................................... 79 SECTION 12.01. Collection of Money; Class B Reserve Account Deposit........................................................ 79 SECTION 12.02. Collection Account; Reserve Account; Redemption Account; Class B Reserve Account Payments...................... 79 SECTION 12.03. Reports by the Indenture Trustee..................... 84 ARTICLE XIII PROVISIONS OF GENERAL APPLICATION............................................ 86 SECTION 13.01. Acts of Noteholders.................................. 86 SECTION 13.02. Notices, etc., to Indenture Trustee, MBIA, Issuer and Servicer....................................................... 86 SECTION 13.03. Notices to Noteholders; Waiver....................... 87 SECTION 13.04. Effect of Headings and Table of Contents............. 88 SECTION 13.05. Successor and Assigns................................ 88 SECTION 13.06. Separability......................................... 88 SECTION 13.07. Benefits of Indenture................................ 88 SECTION 13.08. Legal Holidays....................................... 88 SECTION 13.09. Governing Law........................................ 88 SECTION 13.10. Counterparts......................................... 89 SECTION 13.11. Corporate Obligation................................. 89 SECTION 13.12. Compliance Certificates and Opinions................. 89 SECTION 13.13. MBIA Default......................................... 90 SECTION 13.14. Parties not to Institute Insolvency Proceedings...... 90 iv Page ---- EXHIBITS Exhibit A Form of Class A Note Exhibit B Form of Class B Note Exhibit C Form of Class A Note Insurance Policy Exhibit D Cumulative Net Default Table Exhibit E Form of Investment Letter Exhibit F Form of Custodian Certification Schedule 1 List of Loan Contracts v EX-10.R 8 SERVICING AGREEMENT SERVICING AGREEMENT dated as of October 1, 1996 by and among AUTOINFO FINANCE OF VIRGINIA, INC. Servicer AUTOINFO RECEIVABLES COMPANY Issuer BANKERS TRUST COMPANY Indenture Trustee and Back-Up Servicer and CRESTAR BANK Custodian This SERVICING AGREEMENT (the "Servicing Agreement"), dated as of October 1, 1996, is by and among AutoInfo Finance of Virginia, Inc., a Virginia corporation (the "Servicer"), AutoInfo Receivables Company, a Delaware corporation (the "Issuer"), Crestar Bank (the "Custodian") and Bankers Trust Company, a New York banking corporation, not in its individual capacity but solely as back-up servicer (in such capacity, the "Back-up Servicer"), and as indenture trustee (in such capacity, the "Indenture Trustee"). The Issuer has entered into an Indenture dated as of October 1, 1996 (the "Indenture"), with the Indenture Trustee, and the Custodian, pursuant to which the Issuer has issued its Class A Auto Loan Backed Notes and its Class B Auto Loan Backed Notes (collectively, the "Notes"). The Issuer and AutoInfo Finance of Virginia, Inc. (the "Company") have entered into a Loan Sale Agreement dated as of October 1, 1996 (the "Loan Sale Agreement"), providing for, among other things, the contribution and sale by the Company to the Issuer of all of its right, title and interest in and to certain Loan Assets which the Issuer is pledging to the Indenture Trustee, and in which the Issuer will be granting to the Indenture Trustee a security interest, as security for the Notes. As a precondition to the effectiveness of such Loan Sale Agreement, the Loan Sale Agreement requires that the Servicer, the Custodian, the Issuer, the Indenture Trustee and the Back-up Servicer enter into this Servicing Agreement to provide for the servicing of the Loan Assets. In order to further secure the Notes, the Issuer is granting to the Indenture Trustee a security interest in, among other things, the Issuer's rights derived under this Servicing Agreement and the Loan Sale Agreement, and the Servicer agrees that all covenants and agreements made by the Servicer herein with respect to the Loan Assets shall also be for the benefit and security of the Indenture Trustee, MBIA and all holders from time to time of the Notes. For its services under this Servicing Agreement, the Servicer, the Back-up Servicer, the Indenture Trustee and the Custodian will receive the compensation described herein or in the Indenture. ARTICLE ONE DEFINITIONS Section 1.01 Defined Terms. Except as otherwise specified or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Servicing Agreement, and the definitions of such terms are equally applicable both to the singular and plural forms of such terms and to the masculine, feminine and neuter genders of such terms. Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Indenture or, if not defined therein, in the Loan Sale Agreement. "Annual Percentage Rate or APR": With respect to a Loan Contract, the rate per annum of finance charges stated in such Loan Contract as the "annual percentage rate" (within the meaning of the Federal Truth-in-Lending Act); provided, however, that if after the Closing Date, the rate per annum with respect to a Receivable as of the Closing Date is reduced as a result of (i) an insolvency proceeding involving the Obligor or (ii) the Soldiers' and Sailors' Civil Relief Act of 1940, the Annual Percentage Rate or APR shall refer to such reduced rate. "Back-up Servicer": shall initially mean Bankers Trust Company, until a successor Person shall have become the Back-up Servicer pursuant to the applicable provisions of this Servicing Agreement, and thereafter "Back-up Servicer" shall mean such successor Person. "Back-up Servicer Officer": shall mean any Responsible Officer of the Indenture Trustee. "Collection Records": shall mean all manually prepared or computer generated records relating to collection efforts or payment histories with respect to the Loan Contracts. "Company": shall mean AutoInfo Finance of Virginia, Inc. and all successors thereto in accordance with the terms of the Loan Sale Agreement. "Credit and Collection Policy": shall mean the credit extension policies and procedures maintained by the Servicer and the administration and collection practices maintained by the Servicer as in effect on the Closing Date, as set forth in Exhibit C hereto. "Eligible Servicer": shall mean AutoInfo Finance of Virginia, Inc., the Back-Up Servicer or any Person that (i) (A) is satisfactory to the Indenture Trustee and MBIA, (B) services not less than $25,000,000 in aggregate outstanding principal amount of sub-prime auto paper and (C) has a net worth of not less than $1,000,000, which at the time of its appointment as Servicer, (ii) is servicing a portfolio of motor vehicle retail installment sales contracts and/or motor vehicle installment loans, (iii) is legally qualified and has the capacity to service the Loan Contracts, (iv) has demonstrated the ability professionally and competently to service a portfolio of motor vehicle retail installment sales contracts and/or motor vehicle installment loans similar to the Loan Contracts with reasonable skill and care, and (v) is qualified and entitled to use, pursuant to a license or other written agreement, and agrees to maintain the confidentiality of, the software which the Servicer uses in connection with performing its duties and responsibilities under this Servicing Agreement or otherwise has available software which is adequate to perform its duties and responsibilities under this Servicing Agreement. "Falk": shall mean Falk Finance Company. "Indenture": shall mean the Indenture, dated as of October 1, 1996 by and among the Issuer, the Indenture Trustee and the Custodian, as amended from time to time in accordance with the terms thereof. "Indenture Trustee": shall mean Bankers Trust Company, until a successor Person shall have become the Indenture Trustee pursuant to the applicable provisions of the Indenture, and thereafter "Indenture Trustee" shall mean such successor Person. "Insurance Agreement Event of Default" shall mean an "Event of Default" as such term is defined in the Insurance Agreement. 2 "Issuer": shall mean AutoInfo Receivables Company and all successors thereto in accordance with the terms of the Indenture. "Loan Sale Agreement": shall mean the Loan Sale Agreement, dated as of October 1, 1996 by and between the Company and the Issuer, as amended from time to time in accordance with the terms thereof. "Lockbox Account": An account maintained on behalf of the Indenture Trustee by the Lockbox Bank pursuant to Section 3.03. "Lockbox Agreement": Lockbox Agreement dated as of October 11, 1996 by and among the Lockbox Bank and the Servicer, as amended, modified or supplemented, or any other agreement, in form and substance acceptable to the Issuer and MBIA. "Lockbox Bank": Crestar Bank, Richmond, Virginia or any other depository institution named by the Servicer and acceptable to the Issuer and so long as an MBIA Default shall not have occurred and be continuing, MBIA. "Monthly Records": All records and data maintained by the Servicer with respect to the Loan Contracts, including the following with respect to each Loan Contract; the account number; Obligor name; Obligor address; Obligor home phone number; original Loan Balance; original term; Annual Percentage Rate; current Loan Balance; current remaining term; origination date; first payment date; final scheduled payment date; next payment due date; date of most recent payment; collateral description; days currently delinquent; amount of Scheduled Payment; and past due late charges. "Monthly Servicer's Report": shall mean the report prepared by the Servicer pursuant to Section 4.01 hereof and substantially in the form of Exhibit A hereof. "Officer's Certificate": shall mean a certificate signed by the Chairman of the Board, the Vice-Chairman of the Board, the President, a Vice President, the Treasurer or the Secretary of the Servicer. "Request for Release of Documents": shall mean the request prepared by the Servicer substantially in the form of Exhibit B hereto. "Servicer": shall mean AutoInfo Finance of Virginia, Inc., until a successor Person shall have become the Servicer pursuant to the applicable provisions of this Servicing Agreement, and thereafter "Servicer" shall mean such successor Person. "Servicer Default": shall mean any occurrence or circumstance which with notice or the lapse of time or both would be a Servicer Event of Default under this Servicing Agreement. "Servicer Event of Default": shall mean each of the occurrences or circumstances enumerated in Section 6.01 hereof. "Servicer State of Incorporation": shall mean the state of incorporation of the Servicer, which, as of the Closing Date, is the State of Virginia. 3 "Servicer Termination Notice": shall mean the notice described in Section 6.01 hereof. "Servicing Agreement": shall mean this Servicing Agreement, and all amendments hereto. "Servicing Officer": shall mean those officers of the Servicer involved in, or responsible for, the administration and servicing of the Loan Contracts, as identified on the list of Servicing Officers furnished by the Servicer to the Indenture Trustee, the Back-up Servicer, and MBIA from time to time. "Sub-Servicer": Any Person with whom the Servicer enters into a Sub-Servicing Agreement. "Sub-Servicing Agreement": Any written contract between the Servicer and any Sub-Servicer as set forth in Section 3.10 hereof, relating to servicing, administration or collection on the Loan Contracts as provided in Article 3. ARTICLE TWO SERVICER REPRESENTATIONS AND WARRANTS Section 2.01 Representations and Warranties. The Servicer makes the following representations and warranties to the Indenture Trustee and MBIA as of the Closing Date, which shall survive the Closing Date: (a) The Servicer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Virginia and has all licenses necessary to carry on its business as now being conducted and is licensed, qualified and in good standing in each state in which a Vehicle is located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by the Servicer and perform its obligations as Servicer hereunder; the Servicer has the power and authority to execute and deliver this Servicing Agreement and to perform in accordance herewith; the execution, delivery and performance of this Servicing Agreement by the Servicer and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Servicer. This Servicing Agreement evidences the valid, binding and enforceable obligation of the Servicer, and all requisite action has been taken by the Servicer to make this Servicing Agreement valid, binding and enforceable upon the Servicer in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium and other, similar laws relating to or affecting creditors' rights generally or the application of equitable principles in any proceeding, whether at law or in equity; (b) All actions, approvals, consents, waivers, exemptions, variances, franchises, orders, permits, authorizations, rights and licenses required to be taken, given or obtained, as the case may be, by or from any Federal, state or other governmental authority or agency (other than any such actions, approvals, etc. under any state securities laws, real estate 4 syndication or "Blue Sky" statutes, as to which the Servicer makes no such representation or warranty), that are necessary in connection with the execution and delivery by the Servicer of the documents to which it is a party, have been duly taken, given or obtained, as the case may be, are in full force and effect, are not subject to any pending proceedings or appeals (administrative, judicial or otherwise) and either the time within which any appeal therefrom may be taken or review thereof may be obtained has expired or no review thereof may be obtained or appeal therefrom taken, and are adequate to authorize the consummation of the transactions contemplated by each of this Servicing Agreement, the Indenture, the Insurance Agreement and the other documents on the part of the Servicer and the performance by the Servicer of its obligations as Servicer under this Servicing Agreement and such of the other 4s to which it is a party; (c) The consummation of the transactions contemplated by this Servicing Agreement will not result in the breach of any terms or provisions of the charter or by-laws of the Servicer or result in the breach of any term or provision of, or conflict with or constitute a default under or result in the acceleration of any obligation under, any material agreement, indenture or loan or credit agreement or other material instrument to which the Servicer or its property is subject, or result in the violation of any law, rule, regulation, order, judgment or decree to which the Servicer or its property is subject; (d) There is no action, suit, proceeding or investigation pending or, to the best of the Servicer's knowledge, threatened against the Servicer which, either in any one instance or in the aggregate, may result in any material adverse change in the business, operations, financial condition, properties or assets of the Servicer or in any material impairment of the right or ability of the Servicer to carry on its business substantially as now conducted, or in any material liability on the part of the Servicer or which would draw into question the validity of this Servicing Agreement or the Loan Contracts or of any action taken or to be taken in connection with the obligations of the Servicer contemplated herein, or which would be likely to impair materially the ability of the Servicer to perform under the terms of this Servicing Agreement; the Servicer has no liability and foresees no liability in the future arising from the suit entitled Chisolm v. Charlie Falk's Auto Wholesale, Inc., case # 2:93-CV-632, E.D. Virginia and the stipulation with respect thereto filed September 29, 1994. (e) The Servicer is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or other) or operations of the Servicer or its properties or might have consequences that would materially and adversely affect its performance hereunder; (f) The Loan Contract Files for each Loan Contract have been transferred to the Custodian pursuant to the terms of this Servicing Agreement, the Loan Sale Agreement or the Indenture. (g) The Servicer is not an investment company which is required to register under the Investment Company Act of 1940, as amended. (h) The Servicer has serviced the Loan Contracts and Vehicles in a manner consistent with industry standards for sub-prime motor vehicle loans and motor vehicles similar to the Loan Contracts and Vehicles, and in any event in a prudent and commercially reasonable 5 manner, and has conducted its servicing operations in a manner consistent with industry standards for servicing of sub-prime automobile loan portfolios. ARTICLE THREE ADMINISTRATION AND SERVICING OF LOAN CONTRACTS Section 3.01 Responsibilities of Servicer. (a) The Servicer, for the benefit of MBIA and the Noteholders, shall be responsible for, and shall, in accordance with its customary servicing procedures, pursue the managing, servicing, administering, enforcing and making of collections on the Loan Contracts, the Vehicles and any Insurance Policies, the enforcement of the Indenture Trustee's security interest in the Loan Contracts and the Vehicles Granted and assigned pursuant to the Indenture, the sale and repossession of a Vehicle upon default of the related Loan Contract and the enforcement of all other remedies under the Loan Contracts, in accordance with the standards and procedures set forth in this Servicing Agreement and any related provisions of the Indenture and the Loan Sale Agreement. The Servicer's responsibilities shall include collecting and posting of all payments, responding to inquiries of Obligors, investigating delinquencies, sending payment statements to Obligors, complying with the terms of the Lockbox Agreement, accounting for collections and furnishing monthly and annual statements to the Back-up Servicer, the Indenture Trustee, MBIA, the Rating Agencies and the Noteholders with respect to payments, providing appropriate federal income tax information to the Indenture Trustee for use in providing information to the Noteholders or MBIA, maintaining Insurance Policies, and maintaining the perfected security interest of the Indenture Trustee in the Trust Estate. The Servicer (at its expense), acting alone or through a Sub-Servicer, shall have full power and authority, acting at its sole discretion, to do any and all things in connection with such managing, servicing, administration, enforcement, collection and sale of the Vehicles that it may deem necessary or desirable, including the prudent delegation of such responsibilities. Without limiting the generality of the foregoing, the Servicer, in its own name or in the name of a Sub-Servicer, shall, and is hereby authorized and empowered by the Indenture Trustee, subject to Section 3.02 hereof, to execute and deliver (on behalf of itself, the Noteholders, the Indenture Trustee or any of them) any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Loan Contracts and any files or documentation pertaining to the Loan Assets. The Servicer, acting alone or through a Sub-Servicer, also may, in its sole discretion, waive any late payment charge or penalty, or any other collection fees that may be payable in the ordinary course of servicing any Loan Contract. Notwithstanding the foregoing, neither the Servicer, nor any Sub-Servicer, shall, except pursuant to a judicial order from a court of competent jurisdiction, or as otherwise expressly provided in this Servicing Agreement, release or waive the right to collect the Scheduled Payments or any unpaid balance on any Loan Contract. The Indenture Trustee shall, at the expense of the Servicer, furnish the Servicer, or at the request of the Servicer, any Sub-Servicer, with any powers of attorney and other documents necessary or appropriate to enable the Servicer or Sub-Servicer to carry out its servicing and administrative duties hereunder, and the Indenture Trustee shall not be responsible for the Servicer's or Sub-Servicer's application thereof. Notwithstanding the appointment by the Servicer of a Sub-Servicer hereunder, the Servicer shall remain primarily liable for the full performance of its obligations hereunder. 6 (b) The Servicer (or a Sub-Servicer) shall conduct any Loan Contract management, servicing, administration, collection or enforcement actions in the following manner: (i) The Servicer, as agent for and on behalf of the Issuer, with respect to any Defaulted Loan Contract shall follow the Credit and Collection Policy and such practices and procedures as are normal and consistent with the Servicer's standards and procedures relating to its own motor vehicle loan contracts, and interests in motor vehicles that are similar to the Loan Contracts and the Vehicles, and in any event, consistent with the standard of care described in Section 3.02 hereof, including without limitation, the taking of appropriate actions to foreclose or otherwise liquidate any such Defaulted Loan Contract, together with the related Vehicle, to collect any Guaranty Amounts, and to enforce the Issuer's rights under the Loan Sale Agreement. All gross Recoveries in respect of any such Loan Contract and the related Vehicle received by the Servicer shall be remitted to the Indenture Trustee for deposit in the Collection Account pursuant to Section 3.03 hereof. (ii) The Servicer may sue to enforce or collect upon Loan Contracts as agent for the Noteholders and the Trust Estate and for the benefit of MBIA. If the Servicer elects to commence a legal proceeding to enforce a Loan Contract, the act of commencement shall be deemed to be an automatic assignment of the Loan Contract to the Servicer for purposes of collection only, and a Servicing Officer shall deliver by facsimile a Request for Release of Documents, substantially in the form of Exhibit B hereto, to the Custodian requesting delivery to the Servicer of the Loan Contract File and/or the related Certificate of Title or Application for Certificate of Title, as applicable. Upon receipt of such delivery request, the Custodian shall release such Loan Contract File, the related Certificate of Title, and/or the Application for Certificate of Title, as applicable, to the Servicer within 48 hours of receipt of such request (receipt being deemed to have occurred upon confirmation of facsimile transmission). All documents contained in the Loan Contract File shall be conspicuously stamped prior to release to the Servicer to show the sale of the Loan Contracts to the Issuer and the security interest of the Indenture Trustee therein. Upon release of such items, the Servicer is authorized to execute an instrument in satisfaction of such Loan Contract and to do such other acts and execute such other documents it deems necessary to discharge the Obligor thereunder and release any security interest in the Vehicle related thereto. The Servicer shall determine in accordance with the standard of care described in Section 3.02 hereof, when a Loan Contract has been paid in full. If in any enforcement suit or legal proceeding it is held that the Servicer may not enforce a Loan Contract on the ground that it is not a real party in interest or a holder entitled to enforce the Loan Contract, then the Indenture Trustee on behalf of the Noteholders and MBIA shall, at the Servicer's request and expense, take such steps as the Servicer or the Issuer deems necessary, and the Servicer shall instruct the Indenture Trustee in writing to enforce the Loan Contract, including bringing suit in its name or the name of the Issuer, as beneficial owner of the Loan Contract, or in the names of the Noteholders or MBIA, as third party beneficiaries thereunder, and the Indenture Trustee shall be indemnified by the Servicer for any such action taken; provided, however, that if 7 a Servicer Event of Default shall have occurred and is continuing, MBIA, so long as an MBIA Default has not occurred and is continuing, shall direct the Indenture Trustee with respect to the enforcement of the Loan Contract; provided further that neither the Indenture Trustee nor the Servicer shall bring suit naming the Noteholders or MBIA without the prior written consent of MBIA so long as no MBIA Default shall have occurred and be continuing. (iii) The Servicer shall exercise any rights of recourse against third parties that exist with respect to any Loan Contract in accordance with the Servicer's usual practice and in any event, consistent with the standard of care described in Section 3.02 hereof. In exercising recourse rights, the Servicer is authorized on the Indenture Trustee's behalf to reassign the Loan Contract to the person against whom recourse exists to the extent necessary, and at the price set forth in the document creating the recourse. The Servicer will not reduce or diminish such recourse rights, except to the extent that it exercises such right; (iv) [Reserved] (v) The Servicer may waive, modify or vary any terms of any Loan Contract or consent to the postponement of strict compliance with any such term if in the Servicer's reasonable and prudent determination such waiver, modification or postponement is necessary to avoid a default on such Loan Contract or will maximize the amount to be received with respect to such Loan Contract, or is otherwise not materially adverse to the Noteholders or MBIA; provided, however, that (A) the Servicer shall not forgive any Scheduled Payment and (B) the Servicer shall not (1) permit any modification with respect to any Loan Contract that would decrease the Scheduled Payment or the annual percentage rate, (2) defer a total of more than two Scheduled Payments for any Loan Contract and provided, further, that any such extension does not extend the final Scheduled Payment on such Loan Contract beyond six months immediately preceding the Stated Maturity of the Class A Notes, (3) reduce the Loan Balance (except in connection with actual payments attributable to such Loan Balance), or (4) prevent the complete amortization of the Loan Balance from occurring by six months preceding the Stated Maturity Date of the Class A Notes. The Servicer shall provide the Back-Up Servicer, MBIA and the Indenture Trustee with an amendment to the Loan Schedule reflecting any modification of any Scheduled Payment; (vi) The Servicer shall not consent to the termination of any Loan Contract in connection with loss of or damage to the related Vehicle unless the Obligor has paid an amount not less than an amount equal to the Loan Balance of such Loan Contract plus any accrued interest thereon, or if less, the maximum amount legally collectible under the related Loan Contract. (vii) In the event that the Servicer or any Sub-Servicer in the enforcement of any Loan Contract takes possession of a Vehicle from an Obligor, the Servicer shall use its best efforts to sell such Vehicle promptly and consistent 8 with the standard of care set forth in Section 3.02 hereof. Any Recoveries related thereto shall be deposited in accordance with Section 3.03 hereof; (viii) Notwithstanding any provision to the contrary contained in this Servicing Agreement, the Servicer or any Sub-Servicer shall use its best efforts to exercise any right under a Loan Contract to accelerate the unpaid Scheduled Payments due, or to become due, thereunder in such a manner as to maximize the net proceeds available to the Trust Estate; provided, however, that the Servicer will not accelerate any Scheduled Payment unless permitted to do so by the terms of the Loan Contract or under applicable law; and (ix) If an Obligor makes a partial prepayment, such prepayment shall be applied to reduce the Loan Balance of the related Loan Contract when received and such Obligor may defer payment of as many as the two next succeeding Scheduled Payments, provided that the partial prepayment was in an amount at least equal to the Scheduled Payments deferred. (c) The Servicer shall not make any material change to its Credit and Collection Policy without the prior written consent of MBIA. (d) With respect to any part of the Loan Contract Files in possession of the Servicer, the Servicer shall hold such items together with any and all other documents that the Servicer would keep on file with respect to a loan contract held for its own account in its capacity as Servicer for the benefit of the Issuer, the Indenture Trustee, MBIA and the Noteholders. Such possession by the Servicer is for the sole purpose of servicing the related Loan Contract. Such items together with any and all other documents that the Servicer would keep on file with respect to a loan contract held for its own account shall be held and maintained by the Servicer at the offices of the Servicer located at the address of the Servicer set forth in Section 8.04 hereof and in accordance with the standard of care set forth in Section 3.02 hereof. In addition, such items shall be segregated from other loan contracts and related documents in the Servicer's possession that are not part of the Trust Estate. Any document in the Loan Contract File held by the Servicer shall be conspicuously stamped with a legend stating "Assigned to and the Property of AutoInfo Receivables Company and pledged to Bankers Trust Company as Indenture Trustee on behalf of the Noteholders and MBIA". Section 3.02 Servicer Standard of Care. In managing, administering, servicing, enforcing and making collections on the Loan Contracts and the Vehicles pursuant to this Servicing Agreement, the Servicer will exercise that degree of skill and care consistent with industry standards for the servicing of sub-prime motor vehicle loan portfolios, and that which the Servicer customarily exercises with respect to similar sub-prime motor vehicle loan contracts and interests in motor vehicle loans owned or originated by it in accordance with the Credit and Collection Policy, and in any event, in a prudent and commercially reasonable manner. The Servicer shall punctually perform all of its obligations and agreements under this Servicing Agreement and shall comply with all applicable Federal and state laws and regulations, shall maintain all state and Federal licenses and franchises necessary for it to perform its servicing responsibilities hereunder, and shall not materially impair the rights of MBIA or the Noteholders in any Loan Contracts or payments thereunder. 9 Section 3.03 Accounts. (a) Lockbox Account. (i)(A) Prior to the Closing Date, the Servicer shall (1) establish and maintain the Lockbox Account, (2) enter into the Lockbox Agreement and (3) within 10 Business Days of the Closing Date, notify the related Obligors to remit all payments with respect to the Loan Contracts to the Lockbox Account. If, at any time, the Lockbox Account ceases to be maintained at the Lockbox Bank, the Servicer shall within ten Business Days of obtaining actual knowledge of such cessation establish a new lockbox account which shall be an Eligible Account with a new Lockbox Bank, transfer any cash 10 EX-10.S 9 COMMON STOCK PURCHASE WARRANT REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT ("Agreement") made as of the 11th day of October, 1996 by and between AutoInfo, Inc., a Delaware corporation (the "Company") and SunAmerica Life Insurance Company ("SunAmerica "). WITNESSETH WHEREAS, SunAmerica owns in the aggregate Warrants to purchase up to 159,095 shares of the Company's Common Stock, $.01 par value per share (the "Warrants"), pursuant to a Warrant by and between the Company and SunAmerica dated the date hereof ( the "Warrant Agreement"); and WHEREAS, in connection with its issuance of the Warrant, the Company has agreed to grant to SunAmerica certain registration rights with respect to the shares issuable upon exercise of the Warrant as set forth in this Registration Rights Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein contained, and other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "Commission" shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the "Securities Act" (as defined herein). "Common Stock" shall mean the Common Stock, $.01 par value per share, of the Company, as constituted as of the date of this Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Majority Holders" shall mean persons holding in the aggregate more than fifty percent (50%) of the total number of Registrable Shares. "Registrable Shares" shall mean the shares of Common Stock of the Company issued upon exercise of the Warrant. "Registration Expenses" shall mean the expenses so described in Section 5. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Selling Expenses" shall mean the expenses so described in Section 5. 2. [Section intentionally omitted] 1 3. Registration. (a) The Majority Holders may on one occasion make a written request for a registration under the Securities Act and state securities laws of all or part of the Registrable Shares (a "Demand Registration"). Such request will specify the number of Registrable Shares to be sold and will also specify the intended method of disposition thereof. The Company will use its best efforts (subject to the provisions of this Agreement) to effect, as soon as practicable after such request, all such registrations, qualifications and compliances under the Securities Act and state securities laws (including without limitation, filings required to effect a registration pursuant to the Securities Act if available or pursuant to any applicable exemption) of the Registrable Shares which the Company has been so requested to register by the Majority Holders. Such request will also specify the number of shares of Registrable Shares to be registered and the intended method of disposition thereof. If (x) the Company intends to make a registered offering of its securities at the same time that the Majority Holders request a Demand Registration, as determined in good faith by the Board of Directors of the Company, or (y) the Company has received a request for a Demand Registration from the holders of other registration rights prior to the date of such request, then the Company may defer its obligation under this section 3(a) for a period of not more than 120 days if the Board of directors of the Company shall determine that filing such a Registration Statement would have material adverse consequences to the Company. The Company shall not for any reason be obligated to effect more than one Demand Registration pursuant to this Section 3(a). If the Majority Holder requesting a Demand Registration so elects, the offering of the Registrable Shares pursuant to the Demand Registration may be in the form of an underwritten offering. The Company shall have the right to select the managing underwriter in connection with such offering; provided, however, that such managing underwriter and additional investment bankers and managers must be reasonably satisfactory to the Majority Holder. If the proposed sale by the Majority Holder is to be effected pursuant to an underwritten public offering, the right of any holder to registration pursuant to this Section 3(a) shall be conditioned upon such holder's participation in such underwriting and the inclusion of such holder's Registrable Shares in the underwriting to the extent requested, unless otherwise mutually agreed by the Company and the Majority Holder, to the extent provided herein. The Company and the holders proposing to distribute their securities through such underwriting shall enter into an agreement in customary form with the underwriter(s) selected for such underwriting, and shall execute powers of attorney and custodial agreements in customary form for selling stockholders. Notwithstanding the foregoing, the Majority Holder shall not have the right to make demand for registration of the Registrable Shares, if, in the reasonable opinion of counsel to the Company, reasonably satisfactory to the Majority Holder and addressed thereto that all of their Registrable Shares may be sold at the time of such demand in reliance upon Rule 144 under the Securities Act of 1933, as amended, or other similar provision during any three month period. The expense of any such legal opinion shall be borne by the Company. (b) If the Company at any time proposes to register any of its securities under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Registrable Shares for sale to the public), then at each such time it will give written notice to holders of outstanding Registrable Shares of its intention to do so. Upon the written request of any such holder, received by the Company within 10 business days after the giving of any such notice by the Company, to register any of such holder's Registrable Shares, the Company will use its best efforts to cause the Registrable Shares as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by the holder (in accordance with its written request) of such Registrable Shares so registered ("Piggy-Back Registration Rights"). The 2 foregoing provisions notwithstanding, (i) the Company may withdraw any registration statement referred to in this Section 3(b) without thereby incurring any liability to the holders of Registrable Shares, and (ii) the inclusion of shares of Registrable Shares under such Piggy-Back Registration Rights is subject to the cut back provisions of Section 3(c) below. (c) If the managing underwriter of an offering described in Section 3(b) above advise the Company that the size of the offering that the Majority Holder, the Company and any other persons intend to make, is such that the success of the offering could be adversely affected by inclusion of all or part of the Registrable Shares requested to be included, then the amount of Registrable Shares to be offered shall be reduced to the extent necessary to reduce the total number of shares of Registrable Shares to be included in such offering to the amount recommended in good faith by the managing underwriter, for the accounts of the selling SunAmerica , provided that any such reductions shall be made in the following priorities: First, the number of shares of Common Stock requested to be registered by the holders requesting Piggy-Back Registration and any holders of Common Stock whose rights are pari passu with the registration rights of such holders requesting Piggy-Back Registration shall be reduced as required; Second, the number of shares of Common Stock to be registered by the holders of registration rights having priority over the registration rights of the holders having Piggy-Back Registration shall be reduced as required; and then Third, the number of shares of Common Stock requested to be registered for the account of any person requesting Demand Registration, if any, shall be reduced as required. Within the categories set forth above for reductions of the number of shares of Common Stock to be registered, the reductions shall be pro rata in relation to the number of shares of Common Stock to be registered, unless other rights exist among such persons. (d) The Company will not grant to any person on or after the date hereof, and prior to the registration of all of the Registrable Securities, a piggy-back registration right which by its terms is senior in any respect as it relates to cut-back provisions to the Piggy-Back Registration Rights. 4. Registration Procedures. If and whenever the Company is required by the provisions of Section 3 above to use its best efforts to effect the registration of Registrable Shares under the Securities Act, the Company will, as expeditiously as possible, or in any event no later than ninety (90) days after the end of the period within which request for registration may be given to the Company : (a) prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby, determined as hereinafter provided; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in subsection (a) above and comply with the provisions of the Securities Act with respect to the disposition of all Registrable Shares covered by such registration statement in accordance with the sellers' intended method of disposition set forth in such registration statement for such period; 3 (c) furnish to each seller of Registrable Shares, and to each underwriter such number of copies of the registration statement and the prospectus included therein, including each preliminary prospectus, as such persons reasonably may request in order to facilitate the public sale or other disposition of the Registrable Shares covered by such registration statement; (d) use its best efforts to register or qualify the Registrable Shares covered by such registration statement under the securities or "blue sky" laws of such jurisdictions as the sellers of Registrable Shares or, in the case of an underwritten public offering, the managing underwriter reasonably shall request; provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (e) use its best efforts to list the Registrable Shares covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed; (f) immediately notify each seller of Registrable Shares and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; For purposes of Sections 4(a) and 4(b) above, the period of distribution of Registrable Shares in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Registrable Shares in any other registration shall be deemed to extend until the earlier of the sale of all Registrable Shares covered thereby and 270 days after the effective date thereof. In connection with each registration hereunder, the sellers of Registrable Shares will furnish to the Company in writing such information with respect to themselves and the proposed distribution by them as shall be reasonably necessary in order to assure compliance with federal and applicable state securities laws. In connection with each registration pursuant to Section 3 above covering an underwritten public offering, the Company and each seller agree to enter into a written agreement with the managing underwriter selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company's size and investment stature. 5. Expenses. All expenses incurred by the Company in complying with Section 3 above, including without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company and independent public accountants for the Company, fees and expenses incurred in connection with complying with state securities or "blue sky" laws, up to $7,500 of fees and disbursements of one special counsel to the sellers of Registrable Shares, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs of insurance are called "Registration Expenses." All underwriting discounts and selling commissions applicable to the sale of Registrable Shares and fees and disbursements of counsel to the sellers of Registrable Shares in excess of the $7,500 payable by the Company as set forth in this provision are called "Selling Expenses." 4 The Company will pay all Registration Expenses in connection with each registration statement relating to the Demand Registration and each Piggy-Back Registration under Section 3 above. All Selling Expenses in connection with each Demand and Piggy-Back Registration under Section 3 above shall be borne by the participating sellers in proportion to the number of shares sold by each. 6. Indemnification and Contribution. (a) In the event of a registration of any of the Registrable Shares under the Securities Act pursuant to Section 3 above, the Company will indemnify and hold harmless each seller of such Registrable Shares thereunder, each underwriter of such Registrable Shares thereunder and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities, or actions in respect thereof, arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Shares was registered under the Securities Act pursuant to Section 4 above, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such seller, any such underwriter or any such controlling person in writing specifically for use in such registration statement or prospectus. (b) In the event of a registration of any of the Registrable Shares under the Securities Act pursuant to Section 3 above, each seller of such Registrable Shares thereunder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities, or actions in respect thereof, arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Shares was registered under the Securities Act pursuant to Section 3 above, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that such seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished in writing to the Company by such seller specifically for use in such registration statement or prospectus; and provided further, however, that the liability of each seller hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the shares sold by such seller under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the proceeds 5 received by such seller from the sale of Registrable Shares covered by such registration statement. (c) Promptly after receipt by a party indemnified hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 6 and shall only relieve it from any liability which it may have to such indemnified party under this Section 6 if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 6 for any legal expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified parties shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. (d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Registrable Shares exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section 6 but it is judicially determined, by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal, that such indemnification may not be enforced in such case, the fact that this Section 6 provides for indemnification in such case notwithstanding, or (ii) contribution under the Securities Act may be required on the part of any such selling holder or any such controlling person in circumstances for which indemnification is provided under this Section 6, then and in each such case, the Company and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject, after contribution from others, in such proportion so that such holder is responsible for the portion represented by the percentage that the public offering price of its Registrable Shares offered by the registration statement bears to the public offering price of all securities offered by such registration statement, and the Company is responsible for the remaining portion; provided, however, that in any such case, (x) no such holder will be required to contribute any amount in excess of the public offering price of all such Registrable Shares offered by it pursuant to such registration statement; and (y) no person or entity guilty of fraudulent misrepresentation, within the meaning of Section 11(f) of the Securities Act, will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 7. Changes in Common Stock. If, and as often as, there is any change in the Common Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization where the Company is the surviving entity, appropriate adjustment shall be made in the provisions hereof so that the rights 6 and privileges granted hereby to the holders of Registrable Shares shall continue with respect to the Common Stock as so changed. 8. Representations and Warranties of the Company. The Company represents and warrants to each other party to this Agreement as follows: (a) The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Certificate of Incorporation or by-laws of the Company or any provision of any indenture, agreement or other instrument to which it or any or its properties or assets is bound, conflict with, result in a breach of or constitute, with due notice or lapse of time or both, a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company; and (b) This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms. 9. Rule 144. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company will file the reports required to be filed by it, and in the manner required to be filed by it, under the Securities Act and the Exchange Act (or, if the Company is not required to file such reports, will, upon the request of any holder of Registrable Shares, make publicly available other information) and will take such further action as any holder of Registrable Shares may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Shares without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time (b) any similar rule or regulation hereafter adopted by the Commission ("Rule 144"). Upon the reasonable request of any holder of Registrable Shares, the Company will deliver to such holder written statement as to whether it has complied with such requirements. 10. Miscellaneous. (a) All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not; provided, however, that registration rights conferred herein on the holders of Registrable Shares shall only inure to the benefit of a transferee of Registrable Shares if such transferee agrees to be bound by the provisions of the Warrant and this Agreement. (b) Except as otherwise expressly provided herein, any notice required or desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered upon the earlier of (i) personal delivery to the address set forth below, (ii) in the case of mailed notice, three (3) days after deposit in the United States mails, with proper postage for certified mail, return receipt requested, prepaid, or (iii) in the case of notice by Federal Express or other reputable overnight courier service, one (1) business day after delivery to such courier service, addressed to the party to be notified as follows: if to the Company or the SunAmerica , at the address of such party set forth in the Warrant Agreement to which it is a party; 7 if to any subsequent holder of Registrable Shares, to it at such address as may have been furnished to the Company in writing by such holder; or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Registrable Shares) or to the holders of Registrable Shares (in the case of the Company) in accordance with the provisions of this paragraph. (c) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflict-of-laws principles which would require the application of the laws of another jurisdiction. (d) This Agreement may not be amended or modified, and no provision hereof may be waived, without the written consent of the Company and the Majority Holders. (e) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (f) The obligations of the Company to register shares of Registrable Shares under Section 3 above shall terminate on October 31, 2001. (g) If requested in writing by the underwriters for any underwritten public offering of securities of the Company, each holder of Registrable Shares who is a party to this Agreement shall agree not to sell publicly any shares of Registrable Shares or any other shares of Common Stock (other than shares of Registrable Shares or other shares of Common Stock being registered in such offering), without the consent of such underwriters, for a period of not more than 45 days following the effective date of the registration statement relating to such offering. (h) The provisions of Section 4(a) above to the contrary notwithstanding, the Company's obligation to file a registration statement, or cause such registration statement to become and remain effective, shall be suspended for a period not to exceed 90 days in any 12-month period if there exists at the time material non-public information relating to the Company which, in the reasonable opinion of the Company, should not be disclosed. (i) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. (j) As used in this Agreement, the masculine, feminine or neutral gender and the singular or plural number shall be deemed to include the others whenever the context so indicates or requires. 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by a duly authorized officer as of the date first written above. AutoInfo, Inc. By: __________________________ Scott Zecher, President SunAmerica Life Insurance Company By: __________________________ Yvonne Stevens, Authorized Agent 9 COMMON STOCK PURCHASE WARRANT Warrant No. S-1 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. Void after 5:00 p.m. Eastern Standard Time, on October 31, 2001. WARRANT TO PURCHASE COMMON STOCK OF AUTOINFO, INC. FOR VALUE RECEIVED, AUTOINFO, INC., a Delaware corporation, (the "Company"), hereby certifies that OKGBD & Co., as nominee for SunAmerica Life Insurance Company, or its permitted assigns, (the "Holder") is entitled to purchase from the Company, at any time, or from time to time, commencing on the date hereof, and prior to 5:00 p.m., Eastern Standard Time, on October 31, 2001, a total of 159,095 (subject to adjustment as provided herein) fully paid and nonassessable shares of the Common Stock, par value $.01 per share, of the Company for an aggregate purchase price of $429,556.50 (subject to adjustment as provided herein). (Hereinafter, (i) said Common Stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "Common Stock", (ii) the shares of the Common Stock purchasable hereunder are referred to as the "Warrant Shares", (iii) the aggregate purchase price payable hereunder for the Warrant Shares is referred to as the "Aggregate Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares is referred to as the "Per Share Warrant Price", (v) this Warrant, and all warrants hereafter issued in exchange or substitution for this Warrant, are referred to as the "Warrant" and (vi) the holder of this Warrant is referred to as the "Holder"). The Per Share Warrant Price is subject to adjustment as hereinafter provided. Except as otherwise provided in Section 3, in the event of any such adjustment, the number of Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment. 1. Exercise of Warrant. This Warrant may be exercised, in whole at any time or in part from time to time, commencing on the date hereof (the "Commencement Date") and prior to 5:00 p.m., Eastern Standard Time, on October 31, 2001, by the Holder of this Warrant by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set forth in Subsection 9 (a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part. Payment for Warrant Shares shall be made (i) in cash, by certified or official bank check -1- or wire transfer payable to the order of the Company, (ii).by Net-Issue Exercise (as hereinafter defined), or (iii) by any combination of (i) or (ii). A "Net-Issue Exercise" means a "cashless" exercise by a holder by delivery of a subscription form instructing the Company to retain, in payment of the Per Share Warrant Price (or portion thereof), a number of Warrant Shares (the "Payment Shares") equal to the quotient of the aggregate Per Share Warrant Price of the Warrants then being exercised by Net-Issue Exercise divided by the Market Price (as hereinafter defined) of such shares as of the date of exercise, and to deduct the number of Payment Shares from the Warrant Shares to be delivered to such holder If this Warrant is exercised in part, this Warrant must be exercised for a minimum of 1,000 shares of the Common Stock, and the Holder is entitled to receive a new Warrant covering the number of Warrant Shares in respect of which this Warrant has not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such remaining Warrant Shares. Upon such surrender of this Warrant, the Company will issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled and, (a) in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, cash equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), or (b) deliver a new Warrant for the proportionate part thereof in respect of which this Warrant has not been exercised, if this Warrant is exercised in part, pursuant to the provisions of this Warrant. 2. Reservation of Warrant Shares. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times have authorized and in reserve, free from preemptive rights, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the shares of the Common Stock as from time to time shall be receivable upon the exercise of the Warrant. The Company covenants and agrees that all shares of Common Stock which are issuable hereunder will, upon issuance, be duly authorized and issued, fully paid and non-assessable. 3. Anti-Dilution Provisions. (a) In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Common Stock, including options and other securities convertible into, or exchangeable for Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the Per Share Warrant Price in effect immediately prior to such action shall be adjusted so that if the Holder surrendered this Warrant for exercise immediately thereafter the Holder would be entitled to receive the number of shares of Common Stock or other capital stock of the Company which he would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this subsection (a), the Holder of this Warrant shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of this Warrant promptly after such adjustment) shall in good faith determine the allocation of the adjusted Per Share Warrant Price between or among shares of such classes of capital stock or shares of Common Stock and other capital stock; provided that the effect thereof does not materially adversely affect the value of this Warrant. -2- (b) In case of any reorganization, consolidation or merger to which the Company is a party, other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder shall have the right thereafter to convert this Warrant into the kind and amount of securities, cash or other property which he would have owned or have been entitled to receive immediately after such reorganization, consolidation, merger, statutory exchange, sale or conveyance had such Warrant been converted immediately prior to the effective date of such reorganization, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the conversion of this Warrant. The above provisions of this subsection (b) shall similarly apply to successive reorganizations, consolidations, mergers, statutory exchanges, sales or conveyances. Notice of any such reorganization, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holder not less than 30 days prior to such event. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (c) If the Company shall, at any time after the date hereof issue any shares of Common Stock, other than Excluded Shares (as defined in subsection (h) below), for a consideration per share less than the Market Price in effect immediately prior to such issuance, then (i) the Per Share Warrant Price in effect immediately prior to each such instance shall forthwith be adjusted to a price equal to the Per Share Warrant Price then in effect multiplied by the quotient obtained by dividing (a) an amount equal to the sum of (1) the total number of shares of Common Stock outstanding on a fully diluted basis immediately prior to such issuance multiplied by the Market Price in effect immediately prior to such issuance, plus (2) the consideration received by the Company upon such issuance, by (b) the total number of shares of Common Stock outstanding on a fully diluted basis immediately after such issuance multiplied by the Market Price in effect immediately prior to such issuance, and (ii) the number of shares of Common Stock then issuable upon the exercise of Warrant shares outstanding immediately prior to each such issuance shall forthwith be adjusted by adding a number of shares of Common Stock equal to the product of (a) the number of shares of Common Stock issuable upon the exercise of Warrant Shares outstanding immediately prior to such issuance, times (b) the quotient obtained by dividing (1) an amount equal to the Per Share Warrant Price in effect immediately prior to such issuance less the Per Share Warrant Price in effect immediately after such issuance, by (2) the Per Share Warrant Price in effect immediately after such issuance. (d) For the purpose of any adjustment of the Per Share Warrant Price and the number of shares of Common Stock issuable upon exercise of the Warrants pursuant to the clause (c), the following provisions shall be applicable: -3- (i) In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of cash received by the Company therefor. (ii) In the case of the issuance of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the "fair value" of such consideration as determined in the good faith judgment of the Board of Directors of the Company. (iii) In the case of the issuance of (x) options to purchase or rights to subscribe for Common Stock, (y) securities by their terms convertible into or exchangeable for Common Stock or (z) options to purchase or rights to subscribe for such convertible or exchangeable securities: (1) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subdivisions (i) and (ii) above), if any, received by the Company upon the issuance of such options or rights plus the minimum purchase price provided in such options or rights for the Common Stock covered thereby; (2) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration received by the Company for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration, if any, to be received by the Company upon the conversion or exchange of such securities or the or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subdivisions (i) and (ii) above); (3) on any change in the number of shares or exercise price of Common Stock deliverable upon exercise of any such options or rights or conversions of or exchange for such convertible or exchangeable securities, other than a change resulting from the antidilution provisions thereof, the Per Share Warrant Price and the number of shares of Common Stock issuable upon exercise of the Warrants shall forthwith be readjusted to such Per Share Warrant Price and to such number of shares as would have obtained had the adjustment made at the time of the issuance of such options, rights or securities not converted prior to such change been made upon the basis of such change; and -4- (4) on the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Per Share Warrant Price and the number of shares of Common Stock issuable upon exercise of the Warrants shall forthwith be readjusted to such Per Share Warrant Price and to such number of shares as would have obtained had such options, rights, securities, or options or rights related to such securities not been issued. (e) Whenever the Per Share Warrant Price is adjusted as provided in this Section 3 and upon any modification of the rights of the Holder of this Warrant in accordance with this Section 3, the Company shall promptly prepare a certificate of an officer of the Company, setting forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause a copy of such certificate to be mailed to the Holder. (f) If the Board of Directors of the Company shall declare any dividend or other distribution in cash or property (including securities other than Common Stock) with respect to the Common Stock, the Company shall mail notice thereof to the Holder not less than 15 days prior to the record date fixed for determining shareholders entitled to participate in such dividend or other distribution. (g) (i) If any event occurs of the type contemplated by the provisions of this Section 3 but not expressly provided for by such provisions, the Board of Directors, or, at the election of holders of a majority of the Warrants, an appraiser (to be selected by the Board of Directors with the consent of such holders of Warrants), will determine whether to make appropriate adjustments to the terms and conditions of the Warrants as may be necessary fully to carry out the adjustments contemplated by Section 3 hereof. (ii) the Company will not, by amendment of its Certificate of Incorporation or by-laws or through any reorganization, transfer of assets, reclassification, merger, dissolution, issue or sale of securities or otherwise, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company hereunder but will at all times in good faith assist in the carrying out of all the provisions hereof and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the holders of the Warrants against impairment. (h) For purposes of this Section 3, "Excluded Shares" shall mean (i) all shares issued upon (a) exercise or conversion of any other warrants outstanding on the date hereof, (b) exercise of any options outstanding on the date hereof, and (c) the issuance of shares of Common Stock or options to purchase such shares, to officers and employees or former employees of the Company and its subsidiaries pursuant to any equity incentive plan, agreements or other arrangements. (i) Definition of Market Price. "Market Price" shall mean either: (1) if shares of the Common Stock are listed or admitted to trading on any exchange or quoted through NASDAQ or any similar organization, the average -5- of the daily closing prices per share of the Common Stock for the 20 consecutive trading days immediately preceding the date of public announcement of the event giving rise to adjustment under this Section 3 or, if no such public announcement is made with respect to such event, the average of the daily closing prices per share of the Common Stock for the 20 consecutive trading days immediately preceding the day as of the which "Market Price" is being determined. The closing price of each day shall be the last sale price regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case on the New York Stock Exchange, or, if shares of the Common Stock are not listed or admitted to trading on the New York Stock Exchange, on the principal national securities exchange or national market on which the shares are listed or admitted to trading or quoted, or if the shares are not so listed or admitted to trading or quoted, the average of the highest reported bid and lowest reported asked prices as furnished by the National Association of Securities Dealers, Inc. through NASDAQ or through a similar organization if NASDAQ is no longer reporting such information; or (2) if such shares of common Stock are not listed or admitted to trading on any exchange or quoted through NASDAQ or any similar organization, such value shall be determined by the Board of Directors of the Company, in good faith and in the exercise of reasonable business judgment, without taking into consideration any premium for share representing control of the Company, any discount for any minority interest therein or any restrictions on transfer under Federal and applicable state securities laws or otherwise, which determination shall be conclusive, and which determination of valuation shall be sent in writing by the Board of Directors to the registered holders of Warrants outstanding. 4. Fully Paid Stock; Taxes. The Company agrees that the shares of the Common Stock represented by each and every certificate for Warrant Shares delivered on the exercise of this Warrant shall, at the time of such delivery, be duly and properly authorized, validly issued and outstanding, fully paid and non-assessable, and not subject to preemptive rights, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all time equal to or less than the then Per Share Warrant Price. The Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp or similar taxes that may be payable in respect of the issue of any Warrant Share or certificate therefor. 5. Transfer. (a) Securities Laws. Neither this Warrant nor the Warrant Shares issuable upon the exercise hereof have been registered under the Securities Act, of 1933, as amended (the "Securities Act"), or under any state securities laws, and unless so registered, may not be transferred, sold, pledged, hypothecated or otherwise disposed of unless an exemption from such registration is available. In the event the Holder desires to transfer this Warrant or any -6- of the Warrant Shares issued, the Holder must give the Company prior written notice of such proposed transfer including the name and address of the proposed transferee. Such transfer may be made only (i) upon receipt by the Company of an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer will not violate the provisions of the Securities Act, as amended, or the rules and regulations promulgated under either such act; or (ii) if the Warrant or Warrant Shares to be sold or transferred have been registered under the Securities Act and there is in effect a current prospectus meeting the requirements of Subsection 10(a) of the Securities Act, which is being or will be delivered to the purchaser or transferee at or prior to the time of delivery of the certificates evidencing the Warrant or Warrant Shares to be sold or transferred. (b) Conditions to Transfer. Prior to any such proposed transfer, and as a condition thereto, if such transfer is not made pursuant to an effective registration statement under the Securities Act, the Holder will, if requested by the Company, deliver to the Company (i) an investment covenant signed by the proposed transferee, (ii) an agreement by such transferee to the impression of the restrictive investment legend set forth herein on the certificate or certificates representing the securities acquire by such transferee and (iii) an agreement by such transferee that the Company may place a "stop transfer order" with its transfer agent or registrar. (c) Transfer. Except as restricted hereby, this Warrant and the Warrant Shares issued may be transferred by the Holder in whole or in part at any time or from time to time. Upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with assignment documentation duly executed and funds sufficient to pay any transfer tax, and upon compliance with the foregoing provisions, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment, and this Warrant shall promptly be canceled. Any assignment, transfer, pledge, hypothecation or other disposition of this Warrant attempted contrary to the provisions of this Warrant, or any levy of execution, attachment or other process attempted upon the Warrant, shall be null and void and without effect. (d) Legend and Stop Transfer Orders. Unless the Warrant Shares have been registered under the Securities Act, or the Company shall have received an opinion of counsel satisfactory to the Company to the effect that it is not required, upon exercise of any part of the Warrant and the issuance of any of the shares of Warrant Shares, the Company shall instruct its transfer agent to enter stop transfer orders with respect to such shares, and all certificates representing Warrant Shares shall bear on the face thereof substantially the following legend, insofar as is consistent with Delaware law: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL TO THE HOLDER HEREOF IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO COUNSEL TO THE COMPANY, IS EXEMPT FROM REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS." 6. Listing of Common Stock. The Company covenants and agrees for the benefit of the Holders and each other holder of any Common Stock issued upon -7- exercise of the Warrants, that at the time of and in connection with the listing of Common Stock on any national securities exchange, it will, at its expense, use its best efforts to cause the shares of Common Stock issuable form time to time upon exercise of the Warrants to be approved for listing, subject to notice of issuance, and will provide prompt notice to each such exchange of the issuance thereof from time to time. 7. Registration Rights. The Holder has been granted certain registration with respect to the Common Stock underlying this Warrant as more fully described in that certain Registration Rights Agreement of even date herewith between the Holder and the Company. 8. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 9. Warrant Holder Not Shareholder. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a shareholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a shareholder, prior to the exercise hereof. 10. Communication. No notice or other communication under this Warrant shall be effective unless the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at 1600 Route 208, Fair Lawn, New Jersey 07410, Attn.: President, or such other address as the Company has designated in writing to the Holder, or (b) the Holder at One SunAmerica Center Los Angeles, CA 90067-6022, Attn.: Yvonne Stevens, or such other address as the Holder has designated in writing to the Company. 11. Headings. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 12. Applicable Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law thereof. 13. Gender and Number. As used in this Warrant, the masculine, feminine or neuter gender and the singular or plural number shall be deemed to include the others whenever the context so indicates or requires. -8- IN WITNESS WHEREOF, AUTOINFO, INC., has caused this Warrant to be signed by its President and its corporate seal to be hereunto affixed and attested by its Assistant Secretary this 11th day of October, 1996. ATTEST: AUTOINFO, INC. __________________________ By: __________________________ Kenneth S. Rose Scott Zecher Assistant Secretary President -9- SUBSCRIPTION The undersigned, _________________________, pursuant to the provisions of the foregoing Warrant agrees to subscribe for the purchase of ___________________ shares of the Common Stock of AUTOINFO, INC. covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated:___________________ Signature: _________________________ Address: _________________________ _________________________ ASSIGNMENT FOR VALUE RECEIVED _________________________, hereby sells, assigns and transfers unto _________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint __________________, attorney, to transfer said Warrant on the books of AUTOINFO, INC. Dated:___________________ Signature: _________________________ Address: _________________________ _________________________ PARTIAL ASSIGNMENT FOR VALUE RECEIVED _________________________ hereby assigns and transfers unto _______________ the right to purchase _________ shares of the Common Stock of AUTOINFO, INC. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced hereby, and does irrevocably constitute and appoint _________________, attorney, to transfer that part of said Warrant on the books of AUTOINFO, INC. Dated:___________________ Signature: _________________________ Address: _________________________ _________________________ -10- EX-10.T 10 LOAN, SECURITY AND SERVICING AGREEMENT ================================================================================ LOAN, SECURITY AND SERVICING AGREEMENT dated as of December 9, 1996 among AUTOINFO FINANCE OF VIRGINIA, INC. as Borrower and as Servicer, and CAR LOAN CO., INC., as Borrower and as Servicer, and CS FIRST BOSTON MORTGAGE CAPITAL CORP., as Lender ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE I CERTAIN DEFINITIONS............................ 2 SECTION 1.1. Certain Definitions..................................... 2 ARTICLE II LOAN PROCEDURES............................. 12 SECTION 2.1. Advances................................................ 12 SECTION 2.2. Promissory Note......................................... 12 SECTION 2.3. Advance Procedure....................................... 12 SECTION 2.4. Recordkeeping........................................... 13 SECTION 2.5. Joint and Several....................................... 13 SECTION 2.6. Certain Waivers......................................... 13 SECTION 2.7. Fees.................................................... 14 ARTICLE III CONDITIONS............................... 15 SECTION 3.1. Initial Advance......................................... 15 SECTION 3.2. All Advances............................................ 16 SECTION 3.3. Termination of Advance Commitment....................... 18 ARTICLE IV PRINCIPAL AND INTEREST.......................... 19 SECTION 4.1. Interest................................................ 19 SECTION 4.2. Prepayments............................................. 19 SECTION 4.3. Borrowing Base Deficiency as of a Determination Date... .............................. 19 SECTION 4.4. Collateral Value Deficiency............................. 19 ARTICLE V COLLATERAL............................... 20 SECTION 5.1. Grant of Security Interest.............................. 20 SECTION 5.2. Change of Location or Name.............................. 20 SECTION 5.3. Deliveries; Further Assurances.......................... 20 SECTION 5.4. Delivery of Receivable Files............................ 20 SECTION 5.5. Hypothecation or Pledge of Collateral................... 20 ARTICLE VI i TABLE OF CONTENTS (continued) Page ---- ACCOUNTS; COLLECTIONS......................... 22 SECTION 6.1. Establishment of Lock-Boxes and Settlement Accounts................................. 22 SECTION 6.2. Collections............................................. 22 ARTICLE VII REPRESENTATIONS AND WARRANTIES..................... 23 SECTION 7.1. Representations and Warranties as to each Borrower................................. 23 SECTION 7.2. Representations and Warranties Regarding the Receivables........................... 26 SECTION 7.3. Vendor's Single Interest Policy......................... 31 ARTICLE VIII AFFIRMATIVE COVENANTS.......................... 32 SECTION 8.1. Corporate Existence; Foreign Qualification.............. 32 SECTION 8.2. Books, Records and Inspections.......................... 32 SECTION 8.3. Accounting Methods; Financial Records................... 32 SECTION 8.4. Reporting Requirements.................................. 33 SECTION 8.5. Taxes and Obligations................................... 35 SECTION 8.6. Business................................................ 36 SECTION 8.7. Payments on Receivables................................. 36 SECTION 8.8. Notation of Lien........................................ 36 SECTION 8.9. Further Assurances...................................... 36 SECTION 8.10 Minimum Net Worth....................................... 36 SECTION 8.11 Limitations on Debt..................................... 37 ARTICLE IX NEGATIVE COVENANTS............................ 38 SECTION 9.1. Liens................................................... 38 SECTION 9.2. Impairment of Rights.................................... 38 SECTION 9.3. Waiver, Amendments, Etc................................. 38 SECTION 9.4. No Mergers.............................................. 38 SECTION 9.5. Insolvency.............................................. 39 SECTION 9.6. Extension or Amendment of Receivables................... 39 SECTION 9.7. Change in Business, Credit Policy or Servicing Policies.................................. 39 SECTION 9.8. Investments............................................. 39 SECTION 9.9. Negative Pledges........................................ 39 ii TABLE OF CONTENTS (continued) Page ---- ARTICLE X EVENTS OF DEFAULT....................................... 40 SECTION 10.1. Events of Default.............................. 40 Section 10.1.1 Non-Payment of Advances........................ 40 Section 10.1.2 Non-Payment of Other Amounts................... 40 Section 10.1.3 Events of Bankruptcy........................... 40 Section 10.1.4 Non-Compliance With Provisions................. 40 Section 10.1.5 Representations and Warranties................. 40 Section 10.1.6 Servicer Default............................... 41 Section 10.1.7 Judgments...................................... 41 Section 10.1.8 Litigation..................................... 41 Section 10.1.9 Material Adverse Change........................ 41 Section 10.1.10 Notice of Lien................................. 41 Section 10.1.11 Defaults on Other Indebtedness................. 42 Section 10.1.12 Invalidity of Related Agreements............... 42 Section 10.1.13 Change of Control.............................. 42 Section 10.1.14 Commitment..................................... 42 Section 10.1.15 Effect on Security Interest.................... 42 Section 10.1.16 Failure to Provide Assurance................... 42 Section 10.1.17 Default on Other Agreements.................... 42 Section 10.1.18 Going Concern.................................. 43 Section 10.1.19 Amendment to Credit Policy..................... 43 Section 10.1.20 Amendment to Fee Agreement with Custodian.............................. 43 Section 10.1.21 Failure to Obtain or Maintain Vendor's Single Interest Policy............. 43 SECTION 10.2. Effect of Event of Default.............................. 43 SECTION 10.3. Remedies................................................ 43 SECTION 10.4. Application of Proceeds................................. 45 SECTION 10.5. Reimbursement........................................... 45 SECTION 10.6 Power of Attorney.................................. 46 SECTION 10.7 Right of Set-off................................... 47 SECTION 10.8 Rights and Remedies Cumulative..................... 47 ARTICLE XI SERVICER................................. 48 SECTION 11.1. Representations and Warranties of each Servicer.... 48 SECTION 11.2. Indemnities of Servicer............................ 49 iii TABLE OF CONTENTS (continued) Page ---- SECTION 11.3. Merger or Consolidation of or Assumption of the Obligations of a Servicer............... 50 SECTION 11.4. Servicer Not to Resign............................. 50 SECTION 11.5. Fidelity Bond, Errors and Omissions Insurance or Crime Coverage Insurance........................................... 51 ARTICLE XII ADMINISTRATION AND SERVICING OF RECEIVABLES........... 52 SECTION 12.1. Duties of Servicer; Standard of Care............... 52 SECTION 12.2. Collection and Allocation of Receivable Payments... 53 SECTION 12.3. Realization Upon Receivables....................... 53 SECTION 12.4. Physical Damage Insurance; Other Insurance......... 53 SECTION 12.5. Maintenance of Security Interests in Financed Vehicles.............................. 54 SECTION 12.6. Additional Covenants of Servicer................... 54 SECTION 12.7. Monthly Servicing Fee.............................. 54 SECTION 12.8. Monthly Servicing Report. ......................... 54 SECTION 12.9. Semi-Annual Statement as to Compliance; Notice of Default.............................. 54 SECTION 12.10. Independent Certified Public Accountant's Report............................ 55 SECTION 12.11. Interim Certified Public Accountant's Reports........................... 55 SECTION 12.12. Servicer Expenses.................................. 56 SECTION 12.13. Access to Certain Documentation and Information Regarding Receivables.............. 56 SECTION 12.14. Documents Maintained by Servicer................... 56 ARTICLE XIII SERVICER DEFAULT............................. 57 SECTION 13.1. Servicer Default................................... 57 SECTION 13.2. Appointment of Successor Servicer.................. 58 SECTION 13.3. Action Upon Certain Failures of the Servicer....... 59 ARTICLE XIV THE LENDER................................ 60 SECTION 14.1. CSFB's Authority................................... 60 SECTION 14.2. Degree of Care..................................... 60 iv TABLE OF CONTENTS (continued) Page ---- ARTICLE XV GENERAL.................................. 61 SECTION 15.1. Survival........................................... 61 SECTION 15.2. Waiver; Amendments................................. 61 SECTION 15.3. Confirmations...................................... 61 SECTION 15.4. Notices............................................ 61 SECTION 15.5. Costs, Expenses and Taxes.......................... 61 SECTION 15.6. Indemnification.................................... 62 SECTION 15.7. FORUM SELECTION AND CONSENT TO JURISDICTION................................................. 62 SECTION 15.8. Governing Law; Severability........................ 63 SECTION 15.9. JURY TRIAL......................................... 63 SECTION 15.10. Successors and Assigns............................. 63 SECTION 15.11. Headings........................................... 64 v SCHEDULES SCHEDULE 7.1(f) Consents, Licenses, Approvals or Authorizations SCHEDULE 7.1(k) Ownership of Each Borrower SCHEDULE 7.1(l) Business Locations; Tradenames SCHEDULE 7.2(p) Location of Receivable Files SCHEDULE 11.1(h) Consents, Licenses, Approvals or Authorizations SCHEDULE I Receivable Information List SCHEDULE II Names and Address For Communications Between Parties EXHIBITS EXHIBIT A Form of Promissory Note EXHIBIT B Form of Borrowing Request EXHIBIT C Form of Monthly Servicing Report EXHIBIT D Form of Confirmation Letter vi LOAN, SECURITY AND SERVICING AGREEMENT -------------------------------------- THIS LOAN, SECURITY AND SERVICING AGREEMENT (this "Agreement"), is dated as of December 9, 1996, and is entered into among AUTOINFO FINANCE OF VIRGINIA, INC., a Virginia corporation ("AutoInfo Finance"), CAR LOAN CO., INC., a Connecticut corporation ("Car Loan Co.") (AutoInfo Finance and Car Loan Co. are referred to herein collectively, the "Borrowers" and each a "Borrower"), and CS FIRST BOSTON MORTGAGE CAPITAL CORP., a New York corporation ("CSFB"). BACKGROUND ---------- 1. Each Borrower is a company in the business of purchasing from Dealers motor vehicle retail financing agreements for new and used automobiles. 2. Each Borrower intends to purchase Receivables (capitalized terms used herein shall have the meaning assigned thereto in Section 1.1) from Dealers and desires to obtain from CSFB financing for such purchases of Receivables. 3. CSFB is willing to make Advances to the Borrowers on the terms and conditions set forth in this Agreement. 4. The Advances made to each Borrower will be secured by all of such Borrower's right, title and interest in and to, among other things, (a) the Receivables owned by it and financed with Advances made hereunder and all monies at any time paid or payable thereon or in respect thereof, (b) the security interests in the Financed Vehicles granted by Obligors pursuant to the Receivables, (c) certain insurance proceeds relating to the Financed Vehicles and the Obligors, (d) the Related Agreements, (e) certain additional property specified in this Agreement and (f) all income and proceeds of the foregoing. 5. Accordingly, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to the terms and conditions hereof, the parties hereto agree as follows: ARTICLE I CERTAIN DEFINITIONS SECTION 1.1. Certain Definitions. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, whenever capitalized shall have the meanings set forth below. In addition, any capitalized words and phrases not defined herein shall have the meanings specified in the Custody Agreement: "Accepted Servicing Standards" shall have the meaning specified in Section 12.1. "Accrued Interest" means, with respect to any Advance as of any day, an amount equal to the sum of (a) the product of (i) the Applicable Rate for such Advance, (ii) the principal balance of such Advance outstanding on such day and (iii) a fraction (A) the numerator of which is the actual number of days from and including the Advance Date on which such Advance was made to but excluding the date of determination and (B) the denominator of which is 360, plus (b) all Accrued Interest with respect to such Advance which was due but not paid on the immediately preceding Distribution Date (with interest thereon, to the extent permitted by applicable law, at the Late Payment Rate). "Advance" shall have the meaning specified in Section 2.1. "Advance Date" means the date on which an Advance is made by CSFB to a Borrower. "Advance Rate Percentage" shall mean, with respect to a Receivable, a fraction, expressed as a percentage, the numerator of which is the purchase price paid by the applicable Borrower to the Dealer for such Receivable net of any fees (including fees paid to the Dealer) and expenses paid by such Borrower in connection with the acquisition of such Receivable by such Borrower, and the denominator of which is the Amount Financed under such Receivable. "Affiliate" of any Person means any Person who directly or indirectly controls, is controlled by, or is under direct or indirect common control with such Person. For purposes of this definition of "Affiliate", the term "control" (including the terms "controlling, "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause a direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Aggregate Principal Balance" means, with respect to any date of determination, the sum of the Principal Balances for all Eligible Receivables. "Agreement" means this Agreement, as the same may be amended and supplemented from time to time. 2 "Amount Financed" means, with respect to a Receivable, the aggregate amount originally advanced to the Obligor under the Receivable toward the purchase price of the Financed Vehicle plus any related costs. "Annual Percentage Rate" or "APR" of a Receivable means the annual rate of finance charges stated in the Receivable. "Applicable Cutoff Date" with respect to any Receivable shall have the meaning specified in the Borrowing Request listing such Receivable in the Schedule of Receivables. "Applicable Rate" with respect to each Interest Period commencing prior to the Commitment Termination Date, shall mean an interest rate equal to LIBOR plus 3.00% and, with respect to each Interest Period commencing on or after the Commitment Termination Date, shall mean an interest rate equal to the Prime Rate plus 3.00% as determined on the Commitment Termination Date. "Authorized Officers" means any person whose name appears on a list of Authorized Officers delivered to CSFB, the Borrowers, the Servicers and the Custodian, as the same may be amended from time to time. "Bankruptcy Code" means The Bankruptcy Reform Act of 1978, as amended from time to time, and as codified as 11 U.S.C. Section 101, et seq. "Borrowing Base" shall mean, as of any date of determination, the lesser of (i) the product of (x) the weighted average of all Advance Rate Percentages for all Eligible Receivables and (y) the Aggregate Principal Balance for all Eligible Receivables and (ii) the Collateral Value of all Eligible Receivables. "Borrowing Base Deficiency" shall mean, as of any date of determination, the amount by which (a) the aggregate principal balance of all outstanding Advances exceeds (b) the Borrowing Base. "Borrowing Request" means a request for an Advance delivered pursuant to Section 2.3 by a Borrower in the form set forth in Exhibit B. "Business Day" means any day other than a Saturday, a Sunday or a day on which banking institutions in the City of New York, the State of New York, the State of Virginia or the State of Connecticut or the State in which the principal place of business of CSFB or the Borrowers is located shall be authorized or obligated by law, executive order, or governmental decree to be closed. "Casualty" means, with respect to a Financed Vehicle, the total loss or destruction of such Financed Vehicle as determined by the Servicer. 3 "Change in Control" means, with respect to each Borrower, either (i) a change of control or ownership of such Borrower shall have occurred other than in connection with and as a result of the issuance and sale by such Borrower of common stock, or (ii) the chief executive officer of such Borrower ceases to be employed by such Borrower and functioning in such capacity and a successor reasonably acceptable to CSFB shall not have been immediately employed by such Borrower and commenced functioning in such capacity; provided, however, that in the event such chief executive officer ceases to be employed as a result of death or physical or mental disability, then such Borrower shall have thirty (30) days from such cessation to employ a successor chief executive officer reasonably acceptable to CSFB. "Collateral" shall mean (i) all right, title and interest of each Borrower in and to the Receivables; (ii) all Liquidation Proceeds received with respect to such Receivables; (iii) all right, title and interest of each Borrower in and to the security interests in the Financed Vehicles granted by Obligors pursuant to the Receivables and any other interest of each Borrower in the Financed Vehicles, including, without limitation, the certificates of title with respect to the Financed Vehicles; (iv) all right, title and interest of each Borrower under any Insurance Policies; (v) all right, title and interest of each Borrower in and to any proceeds from claims on any physical damage, repossession loss, credit life and credit accident, vendor's single interest and health insurance policies or certificates relating to the Financed Vehicles or the Obligors, if any such policy is in effect; (vi) all right, title and interest of each Borrower in, to and under the Related Agreements; (vii) all right, title and interest of Borrower in and to refunds for the costs of extended service contracts with respect to Financed Vehicles, refunds of unearned premiums with respect to credit life and credit accident and health insurance policies or certificates covering an Obligor or Financed Vehicle or such Obligor's obligations with respect to a Financed Vehicle and any recourse to Dealers for any of the foregoing; (viii) the Receivable File related to each Receivable; (ix) all amounts and property from time to time held in or credited to the Settlement Accounts; (x) all amounts and property from time to time held in the Lock-Boxes and representing collections on or proceeds of the Receivables; (xi) the income and proceeds of any and all of the foregoing; and (xii) all documents, books, records and other information (including, without limitation, computer programs, tapes, discs, customer lists, credit files, ledger cards, computer software and hardware, electronic data processing software, printouts and other computer materials and records) of each Borrower evidencing or containing information regarding any of the foregoing. "Collateral Value" shall mean, with respect to a Receivable, the value of such Receivable as determined in good faith from time to time (but in no event less frequently than monthly) by CSFB in its sole discretion. "Collateral Value Deficiency Notice" shall have the meaning assigned thereto in Section 8.12. "Collection Period" means, with respect to any Distribution Date, the calendar month preceding the month in which such Distribution Date occurs. "Commitment Amount" means One Hundred Million Dollars ($100,000,000). 4 "Commitment Termination Date" means the earliest to occur of (i) the Distribution Date occurring in the 36th calendar month following the date of this Agreement, (ii) at CSFB's or the Borrowers' (on a joint basis) option, the date on which either CSFB or the Borrowers (on a joint basis) give notice of termination pursuant to Section 3.3(b), (iii) the date CSFB gives notice of termination pursuant to Section 3.3(c), and (iv) the date on which termination occurs or is deemed to occur pursuant to Section 10.2. "Computer File" means the computer tape or listing generated by or on behalf of the applicable Borrower which provides information relating to the Receivables in a format as may be requested by CSFB, including, without limitation, the information set forth in Schedule I. "Confirmation" means a confirmation of the terms of a request for an Advance delivered pursuant to Section 2.3 by the Lender in the form of Exhibit D. "Credit Policy" means, with respect to each Borrower, the credit origination policies or underwriting guidelines of such Borrower, as modified without violating the terms of this Agreement or as otherwise consented to by CSFB, delivered by such Borrower to CSFB prior to the date of this Agreement and from time to time thereafter pursuant to Section 8.4(a)(x). "Custodian" means Crestar Bank, Richmond, Virginia, a Virginia banking corporation, or its successors and (to the extent permitted under the Custody Agreement) assigns as custodian under the Custody Agreement. "Custodian Fee" means the fee and expenses of the Custodian payable by the Borrowers in accordance with an existing agreement between the Borrowers and the Custodian. "Custodian's Office" means the office of the Custodian, which shall initially be located at 919 East Main Street, 10th Floor, Richmond, Virginia 23219. "Custody Agreement" means that certain Custody Agreement dated as of December 9, 1996 among the Borrowers, CSFB and the Custodian. "Dealer" means, with respect to a Receivable, any licensed motor vehicle dealer who sold a Financed Vehicle to an Obligor and who originated such Receivable that was acquired by a Borrower. "Dealer Agreement" means an agreement between a Borrower and a Dealer relating to the sale of motor vehicle retail financing agreements (and installment notes, if any) pursuant to which such Borrower acquires Receivables and all documents and instruments relating thereto. "Dealer Assignment" means, with respect to a Receivable, the executed assignment executed by a Dealer conveying such Receivable to the applicable Borrower. "Defaulted Receivable" means, on any date of determination, any Receivable with respect to which (i) an Obligor has failed to make a Scheduled Payment for sixty (60) days or more, (ii) 5 the Servicer has repossessed the Financed Vehicle, or (iii) such Receivable is in default and the applicable Servicer has determined in good faith that payments under such Receivable are not likely to be resumed. "Determination Date" means, with respect to any Distribution Date, the third (3rd) Business Day prior to such Distribution Date. "Distribution Date" means, for each Collection Period, the fifteenth (15th) day of the following month, or if such day is not a Business Day, the next following Business Day, commencing on January 15, 1997. "Eligible Account" means a segregated account that is maintained with a depository institution acceptable to CSFB. "Eligible Investments" mean book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form which evidence: (a) direct obligations of, and obligations fully guaranteed as to the full and timely payment of principal and interest by, the United States of America or any agency thereof; (b) demand deposits, time deposits or certificates of deposit of any depository institution or trust company incorporated under the laws of the United States of America or any State thereof (or any domestic branch of a foreign bank) and subject to supervision and examination by Federal or State banking or depository institution authorities; provided, however, that at the time of the investment or contractual commitment to invest therein, the commercial paper or other short-term unsecured debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such depository institution or trust company) thereof shall have a credit rating from each of Moody's and Standard & Poor's in the highest investment category granted thereby; (c) commercial paper having, at the time of the investment or contractual commitment to invest therein, a rating from each of Moody's and Standard & Poor's in the highest investment category granted thereby; (d) bankers' acceptances issued by any depository institution or trust company referred to in clause (b) above; (e) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed as to the full and timely payment by, the United States of America or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with (i) a depository institution or trust company (acting as principal) described in clause (b) or (ii) a depository institution or trust company whose commercial paper or other short term and long term unsecured debt obligations are rated not less than the highest investment category granted by Moody's and Standard & Poor's; 6 (f) money market mutual funds registered under the Investment Company Act of 1940, as amended, having a rating, at the time of such investment, from each of Moody's and Standard & Poor's in the highest investment category granted thereby; and (g) any other investment as may be acceptable to CSFB, as evidenced by a writing to that effect, as may from time to time be confirmed in writing to the Custodian by CSFB. "Eligible Receivable" shall mean, with respect to a Receivable, on any date of determination, a Receivable that complies in all respects with the representations and warranties set forth in Section 7.2 and which Receivable is not a Defaulted Receivable or a Liquidated Receivable. "ERISA" means the Employee Retirement Income Security Act of 1974, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "Event of Bankruptcy" shall be deemed to have occurred with respect to a Person if either: (a) a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the like for such Person or all or any substantial part of its assets, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for a period of 60 consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary case under the federal bankruptcy laws or other similar laws now or hereafter in effect; or (b) such Person shall commence a voluntary case or other proceeding under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law now or hereafter in effect, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) for such Person or for any substantial part of its property, or shall make any general assignment for the benefit of creditors or shall fail to or admit in writing its inability to pay its debts generally as they become due or, if such Person is a corporation or similar entity, its board of directors shall vote to implement any of the foregoing. "Event of Default" means an event specified in Section 10.1. "Financed Vehicle" means a new or used automobile, together with all accessions thereto, securing an Obligor's indebtedness under a Receivable. 7 "Financial Statements" means the financial statements, documents, reports and other information delivered pursuant to Section 8.4. "Guarantor" means AutoInfo, Inc., or any successor thereto. "Guaranty Agreement" means the guaranty dated as of December 9, 1996, issued by the Guarantor, AutoInfo, Inc., for the benefit of CSFB. "Holder" means CSFB and any other person to which CSFB has assigned or transferred an interest in the Promissory Note, and their respective successors and assigns. "Insurance Policy" means, with respect to a Receivable, any insurance policy (including the insurance policies described in Section 7.2(m)) benefiting the holder of the Receivable providing loss or physical damage and credit life, credit disability, theft, mechanical breakdown or similar coverage with respect to the Financed Vehicle or the Obligor. "Interest Period" means, with respect to any Advance, the period from and including the Advance Date with respect to such Advance to but excluding the next succeeding Distribution Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "Late Payment Rate" as of any day shall mean an annual interest rate equal to three (3) percentage points above the Prime Rate, each change in such rate to take effect simultaneously with any change in such Prime Rate. "Lender" means CS First Boston Mortgage Capital Corp. or any successor or assign thereto. "LIBOR" means for each Interest Period the offered rate for United States dollars with a maturity of one month which appears on Dow Jones Telerate Service page 3750 as of 9:00 A.M. New York City time, on the day that is the first LIBOR Determination Date of the calendar month in which the Advance Date occurs; provided, however, that if such rate does not appear on the Dow Jones Telerate Service page 3750 (or such other page as may replace that page on that service) or if such service is no longer offered, the rate for United States dollars with a maturity of one month quoted by such other service as may be selected by CSFB on each LIBOR Determination Date. "LIBOR Determination Date" means any day other than a Saturday, Sunday or any other day on which banking institutions in the City of London, England are required or authorized by law to be closed. "Lien" means a security interest, lien, charge, pledge, equity or encumbrance of any kind. 8 "Liquidated Receivable" means, with respect to any date of determination, a Receivable as to which (i) sixty (60) days have elapsed since the applicable Servicer repossessed the Financed Vehicle, (ii) the applicable Servicer has determined in good faith that all amounts it expects to recover have been received, or (iii) the Financed Vehicle has been sold and the proceeds received. "Liquidation Proceeds" means, with respect to a Liquidated Receivable, the monies collected from whatever source, whether during or after the Collection Period in which such Receivable became a Liquidated Receivable, net of the reasonable costs of liquidation plus any amounts required by law to be remitted to the Obligor; provided that, in no event shall the Liquidation Proceeds with respect to any Receivable be less than zero. "Lock-Box" means a segregated post-office box designated as such, established and maintained pursuant to the applicable Lock-Box Agreement and identified in Section 6.1(a). "Lock-Box Agreement" means the agreement dated December 9, 1996, between the Lock-Box Bank and AutoInfo Finance or the agreement dated December 9, 1996 between the Lock-Box Bank and Car Loan Co., as each agreement may be amended, modified or supplemented from time to time. "Lock-Box Bank" means Crestar Bank, Norfolk, Virginia, at which each Lock-Box is established and maintained, as specified in Section 6.1(a). "Maximum Advance Amount" means the excess of the Borrowing Base over the principal balance of all outstanding Advances. "Minimum Advance Amount" shall mean One Million Dollars ($1,000,000). "Monthly Servicing Fee" means the fee payable to each Servicer for services rendered by it during the respective Collection Period, determined pursuant to Section 12.7. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means a multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) in respect of which a Borrower makes contributions or has liability. "Obligations" means all obligations of the Borrowers to CSFB arising under or in connection with this Agreement, the Promissory Note or any other Related Agreement, in each case, howsoever created, arising or evidenced, whether direct or indirect, joint or several, joint and several, absolute or contingent, or now or hereafter existing, or due or to become due, including, without limitation, interest accruing after the filing of a bankruptcy petition, whether or not allowed as a claim. "Obligor" means, with respect to a Receivable, the purchaser or co-purchasers of the related Financed Vehicle or any other Person who owes or may be liable for payments under such Receivable. 9 "Officer's Certificate" means a certificate signed by the chairman of the board, the president, any vice chairman of the board, any vice president, the treasurer, the controller or any assistant treasurer or any assistant controller of a Borrower or a Servicer, as appropriate. "Opinion of Counsel" means a written opinion of counsel (who may be counsel to the Borrower or Servicer) which counsel and opinion shall be acceptable to CSFB in form and substance. "Pension Plan" means any Plan (other than a Multiemployer Plan) subject to Title IV of ERISA, which is maintained by a Borrower or in respect of which such Borrower has liability. "Person" means any individual, corporation, limited liability company or partnership, estate, partnership, joint venture, association, joint stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof. "Plan" means an "employee benefit plan" within the meaning of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the Internal Revenue Code. "Potential Event of Default" means an event or circumstance which, with the giving of notice, the passage of time, or both, would constitute an Event of Default or Servicer Default. "Prime Rate" means, with respect to any date of determination, the daily prime loan rate as reported in The Wall Street Journal as most recently available as of the date of determination or, if such rate is not published for any reason, a daily prime loan rate from a comparable financial publication. "Principal Balance" means, with respect to a Receivable, as of any date of determination, the Amount Financed minus the sum of the following amounts determined without duplication, (i) that portion of all amounts received on or prior to such date and allocable to principal in accordance with the terms of the Receivable; (ii) any refunded portion of extended warranty protection plan costs or of physical damage, credit life, or credit accident or health insurance premiums included in the Amount Financed; and (iii) any prepayment in full or any partial prepayments applied to reduce the Principal Balance of such Receivable. "Promissory Note" has the meaning specified in Section 2.2. "Rating Agency" shall mean Standard & Poor's and Moody's or any other nationally recognized rating agency as may be designated by CSFB from time to time. "Receivable" means each motor vehicle retail financing agreement or contract (and any related note or installment note and security agreement) for a Financed Vehicle which shall appear on Schedule A to any Borrowing Request (which Schedule A may be in the form of microfiche or computer file) and which is the subject of this Agreement, and all interest, rights and obligations thereunder including all proceeds thereof. 10 "Receivable File" shall have the meaning assigned thereto in the Custody Agreement. "Receivable Information List" means the list of Receivables delivered by a Borrower to the Custodian, substantially in the form of Schedule I, setting forth categories of information contained in such Schedule I with respect to each Receivable, possession of which is maintained by the Custodian pursuant to the terms of the Custody Agreement. "Related Agreements" shall mean this Agreement, the Promissory Note, each Dealer Agreement, each Dealer Assignment, the Custody Agreement and each Lock-Box Agreement. "Related Collection Period" means, with respect to any date of determination, the Collection Period most recently ended as of such date. "Scheduled Payment" means, for any Collection Period for any Receivable, the amount indicated in such Receivable as required to be paid by the Obligor in such Collection Period (without giving effect to deferments of payments pursuant to Section 12.2 or any rescheduling of payments in any insolvency or similar proceedings). "Schedule of Receivables" means the list of Receivables attached as Schedule A to a Borrowing Request. "Servicer" means AutoInfo Finance of Virginia, Inc., or Car Loan Co., Inc., as applicable, and each successor thereto, in the capacity as servicer for its respective Receivables pursuant to the terms of this Agreement. "Servicer Default" has the meaning specified in Section 13.1. "Servicing Policies" means the servicing and collection policies and procedures of each Servicer delivered to CSFB by the initial Servicers prior to the date of this Agreement or, if and when applicable, by a successor servicer prior to the date on which such successor servicer commenced servicing the Receivables pursuant to this Agreement. "Servicing Rate" shall be 3.00% per annum. "Settlement Account" means an account designated as such, established and maintained pursuant to Section 6.1(b) and the Custody Agreement. "Standard Poor's" means Standard & Poor's Ratings Services, a Division of the McGraw Hill Companies. "State" means any State of the United States of America, or the District of Columbia. "Structuring Advisory Fee" means the structuring advisory fee in the amount of $750,000.00 in consideration of advisory services provided by CSFB to each of the Borrowers and AutoInfo, Inc., with respect to the advice on the method of financing Receivables and other sub- 11 prime auto loans in their respective portfolios, including, among other services, advice and consultations regarding structuring options and transaction costs and valuation reviews. "Subordinated Debt" shall have the meaning assigned thereto in Section 8.11. "Trust Receipt" shall have the meaning assigned thereto in the Custody Agreement. "UCC" shall mean the Uniform Commercial Code as in effect in the applicable jurisdiction. 12 ARTICLE II LOAN PROCEDURES SECTION 2.1. Advances. Subject to the terms and conditions of this Agreement, CSFB has agreed to make advances (each, an "Advance" and collectively, the "Advances") to the Borrowers from time to time prior to the Commitment Termination Date; provided, that (a) the amount of any Advance on an Advance Date shall not exceed the Maximum Advance Amount, and (b) the aggregate principal amount of all Advances outstanding to the Borrowers on any day shall not exceed the Commitment Amount on such Advance Date. Each Advance shall mature and be payable in full on the Commitment Termination Date. Each Borrower shall deliver a Borrowing Request in the form of Exhibit B to CSFB and the Custodian and as specified in Section 2.3 below. On each Distribution Date the outstanding principal amounts of all Advances to each of the Borrowers (after giving effect to all principal payments made on such Advances on such Distribution Date) will be aggregated and automatically consolidated into a single Advance to the Borrowers (i.e., the Advance Date with respect to such consolidated Advance (for which no additional Borrowing Request shall be required) will be such Distribution Date for purposes of determining the Applicable Rate and calculating Accrued Interest) which will accrue interest at the Applicable Rate for the related Interest Period. SECTION 2.2. Promissory Note. The Advances shall be evidenced by a promissory note issued by the Borrowers (as from time to time supplemented, extended or replaced, the "Promissory Note"), substantially in the form set forth in Exhibit A, with appropriate insertions, dated as of the date of this Agreement, payable to the order of CSFB and its assigns. SECTION 2.3. Advance Procedure. (a) A Borrower shall deliver to CSFB and Custodian a Borrowing Request (in the form of Exhibit B) and a Computer File no later than 12:00 p.m., New York City time, at least two (2) Business Days prior to the proposed Advance Date specified in such Borrowing Request. Each Borrowing Request shall be irrevocable, and shall (i) specify, among other things, (w) the amount of the proposed Advance, (x) the proposed Advance Date, (y) the aggregate Principal Balance of the Receivables subject to such Advance as of the Applicable Cutoff Date, and (z) the weighted average Advance Percentage Rate for such Receivables and (ii) contain attached thereto a Schedule of Receivables listing such Receivables. No Advance shall be for an initial aggregate principal amount of less than the Minimum Advance Amount. (b) When CSFB determines that the Receivables identified in the Schedule of Receivables attached to the Borrowing Request are Eligible Receivables, CSFB will confirm the terms of each Advance by delivering a written confirmation to the applicable Borrower on or before the related Advance Date, in the form of Exhibit D (a "Confirmation"). On the terms and subject to the conditions of the Confirmation and this Agreement, on or before 2:00 p.m., New York City time, on the Advance Date, CSFB shall, in accordance with the applicable Borrower's wiring instructions set forth in the related Borrowing Request, transfer on the same day in 13 immediately available funds to the applicable Borrower's account specified in such Borrowing Request the amount specified in such Confirmation. (c) Each Borrowing Request made pursuant to this Section 2.3 shall constitute the applicable Borrower's representation and warranty that all of the applicable conditions contained in Article III will, after giving effect to such Advance, be satisfied and be true and correct. A Borrower's acceptance of funds advanced by CSFB on the Advance Date shall be deemed such Borrower's acknowledgment of and agreement with such Confirmation, and upon acceptance of such funds advanced by CSFB, the applicable Borrower shall execute such Confirmation where provided therein and return the original executed copy of such Confirmation to CSFB within forty-eight (48) hours following the funding of such Advance. (d) Any Confirmation by CSFB shall be deemed to have been received by the applicable Borrower (i) on the date sent if given by telecopy, telex or other telecommunication device capable of transmitting or creating a written record directly to the office of such Borrower, and (ii) on the Business Day following the day sent if sent by a nationally recognized overnight courier service. SECTION 2.4. Recordkeeping. CSFB shall record in its records, or at its option on a schedule attached to the Promissory Note, the date and amount of each Advance made hereunder, each repayment thereof, and the other information provided for thereon. The aggregate unpaid principal amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on the Promissory Note. The failure so to record any such information or any error in so recording any such information shall not, however, limit or otherwise affect the obligations of the Borrowers hereunder or under the Promissory Note to repay the principal amount of all Advances made to it, together with all interest accruing thereon, and any other amounts payable hereunder and under any other Related Agreements. SECTION 2.5. Joint and Several. The Advances made by CSFB to any of the Borrowers shall be deemed to be made to the Borrowers jointly and severally and accordingly shall constitute the joint and several obligations of the Borrowers. Any obligations of the Borrowers to make payments to CSFB hereunder, under the Promissory Note and under any other Related Agreements shall be the joint and several obligations of the Borrowers. SECTION 2.6. Certain Waivers. Each Borrower hereby waives presentment, demand for payment, notice of dishonor and protest, notice of the creation of any of the Obligations and all other notices whatsoever to such Borrower with respect to the Obligations. The obligations of the Borrowers under this Agreement, the Promissory Note and the other Obligations shall not be affected by (i) the failure of CSFB or the holder of the Promissory Note or holders of any of the Obligations to assert any claim or demand or to exercise or enforce any right, power or remedy against a Borrower or the Collateral or Guarantor or otherwise, (ii) any extension or renewal for any period (whether or not longer than the original period) or exchange of any of the Obligations or the release or compromise of any obligation of any nature of any Person with respect thereto, (iii) the surrender, release or exchange of all or any part of any property (including the Collateral) securing payment and performance of any of the Obligations or the compromise or extension or 14 renewal for any period (whether or not longer than the original period) of any obligations of any nature of any Person with respect to any such property (including the Collateral), and (iv) any other act, matter or thing which would or might, in the absence of this provision, operate to release, discharge or otherwise affect the obligations of a Borrower. SECTION 2.7. Fees. (a) In the event that a Borrower or its parent, AutoInfo, Inc., does not use or engage CSFB or any of its Affiliates in any manner with respect to a securitization or other disposition involving any of the applicable Receivables subject to this Agreement, such Borrower shall pay, upon release of CSFB's security interest in the related Receivables, a fee equal to the following (the "Exit Fee"): (i) if the related Receivables have in the aggregate an outstanding principal balance of $25,000,000 or less at the time of such release, the Exit Fee shall be an amount equal to the product of (x) 1.0% and (y) such outstanding principal balance; (ii) if the related Receivables have in the aggregate an outstanding principal balance greater than $25,000,000 but less than or equal to $50,000,000 at the time of such release, the Exit Fee shall be an amount equal to the product of (x) .75% and (y) such outstanding principal balance; and (iii) if the related Receivables have in the aggregate an outstanding principal balance greater than $50,000,000 at the time of such release, the Exit Fee shall be .50% of such outstanding principal balance; provided, however, that in the event CSFB elects to terminate this Agreement pursuant to Section 3.3(b) or Section 3.3(c), such Borrower shall not be obligated to pay an Exit Fee upon release of CSFB's security interest in the related Receivables. (b) Upon execution of this Agreement, the Borrowers shall pay to CSFB the Structuring Advisory Fee in immediately available funds in accordance with the wire instructions provided by CSFB. The Structuring Advisory Fee is non-refundable. (c) In the event a Borrower or its parent, AutoInfo, Inc., uses or engages CSFB or any of its Affiliates as lead manager in a securitization transaction or other disposition involving the applicable Receivables subject to this Agreement, such parties shall enter into a separate agreement and a securitization fee arrangement referred to and set forth in the letter dated October 31, 1996 between CSFB and AutoInfo, Inc. 15 ARTICLE III CONDITIONS SECTION 3.1. Initial Advance. The effectiveness of this Agreement and the obligation of CSFB to make the initial Advance to each Borrower shall be subject to the delivery of each of the following documents, on or prior to such effectiveness, in form and substance satisfactory to CSFB: (a) Promissory Note. The Promissory Note duly executed by the Borrowers in an original maximum principal amount equal to the Commitment Amount; (b) Organizational Documents. The articles of incorporation of each Borrower, each duly certified by the Secretary of State of the jurisdiction of its formation together with a copy of the bylaws of each Borrower, each duly certified by the Secretary or an Assistant Secretary of each Borrower; (c) Resolutions. Copies of resolutions of the Board of Directors of each Borrower authorizing or ratifying the execution, delivery and performance of this Agreement, the Promissory Note, the Custody Agreement and those documents and matters required of it with respect thereto, duly certified by the Secretary or Assistant Secretary of each Borrower; (d) Consents. Certified copies of all documents evidencing any necessary corporate action, consents and governmental approvals (if any) with respect to this Agreement; (e) Incumbency and Signatures. A certificate of the Secretary or an Assistant Secretary of each Borrower certifying the names of the individual or individuals authorized to sign this Agreement, the Promissory Note and the other Related Agreements to be executed by such party, together with a sample of the true signature of each such individual (CSFB may conclusively rely on each such certificate until formally advised by a like certificate of any changes therein); (f) Opinions of Counsel. Opinions of Counsel from counsel to the Borrowers acceptable to CSFB covering such matters as CSFB shall reasonably request and satisfactory in form and substance to CSFB; (g) Good Standing Certificates. Certificates of good standing for each Borrower in the jurisdiction of its organization and the jurisdiction of its principal place of business; (h) Search Reports. A written search report from a Person satisfactory to CSFB listing all effective financing statements that name each Borrower as debtor or assignor and that are filed in the jurisdictions in which filings were made pursuant to subsection (i) below, together with copies of such financing statements, and tax and judgment lien search 16 reports from a Person satisfactory to CSFB showing no evidence of any tax or judgment liens filed against each Borrower; (i) Evidence. With respect to Receivables that are chattel paper, evidence of the filing of proper financing statements on Form UCC-1 with the State of Virginia and the State of Connecticut, as applicable, each indicating the Receivables as collateral, each executed by the applicable Borrower and each naming the applicable Borrower as debtor and CSFB as secured party, or other similar instruments or documents, as may be necessary or, in the reasonable opinion of CSFB, desirable under the UCC of all applicable jurisdictions to perfect the interest of CSFB in the Collateral; (j) No Material Adverse Change. A certificate of the chief financial officer of each Borrower certifying that since March 31, 1996, there has been no material adverse change in the financial condition, business or results of operations of each such Borrower; (k) Establishment of Settlement Accounts; Lock-Boxes. Evidence, in form and substance satisfactory to CSFB, that (i) the Settlement Accounts have been established by the Custodian in accordance with the terms of this Agreement, the Custody Agreement and the applicable Lock-Box Agreements, (ii) the Lock-Boxes have been established with the applicable Lock-Box Banks in accordance with the applicable Lock-Box Agreements, and (iii) the applicable Lock-Box Agreements, in form and substance satisfactory to CSFB, have been executed and delivered by the parties thereto; (l) Payment of Fees. The Borrowers shall have paid to CSFB the Structuring Advisory Fee in accordance with Section 2.7(b); (m) Warrant. A Warrant Agreement, in form and substance satisfactory to CSFB, shall have been executed and delivered by AutoInfo, Inc.; (n) Custody Agreement. A Custody Agreement to cover the Receivables, in form and substance satisfactory to CSFB, shall have been executed and delivered by the parties thereto; and (o) Consent and Release. Each Borrower shall have obtained: (i) a consent of FINOVA Capital Corporation ("FINOVA") to (x) the execution, delivery and performance by each Borrower of this Agreement and the other Related Agreements and (y) the execution, delivery and performance of AutoInfo, Inc. of the Guaranty; and (ii) a release of FINOVA's security interest in Receivables pledged or to be pledged to CSFB under this Agreement, in form and substance satisfactory to CSFB. SECTION 3.2. All Advances. All Advances (including the initial Advance) shall be subject to the further conditions precedent that: (a) CSFB shall have received (i) from the applicable Borrower a completed Borrowing Request and Computer File and (ii) from the Custodian a Trust Receipt 17 containing the Custodian's certification described therein and in the form attached to the Custody Agreement; (b) prior to the delivery of the Borrowing Request to CSFB, the applicable Borrower shall have delivered to the Custodian in accordance with the terms hereof and the Custody Agreement, the Borrowing Request, the Receivable File and related Computer File with respect to each Receivable listed on the Schedule of Receivables attached to the applicable Borrowing Request; and (c) on the date of such Advance, the following statements shall be true and correct, and the applicable Borrower, by accepting the amount of such Advance, shall be deemed to have represented and warranted that: (i) the representations and warranties contained in Section 7.1 with respect to such Borrower are true and correct in all material respects (to the extent that any such representation or warranty does not incorporate a materiality limitation in its terms) on and as of such date or dates as are set forth in Sections 7.1, which representations and warranties shall survive as specified therein; (ii) the representations and warranties contained in Section 7.2 are true and correct in all respects on and as of such date or dates as set forth in Section 7.2, which representations and warranties shall survive as specified therein; (iii) no Potential Event of Default, Event of Default, Servicer Default, or Borrowing Base Deficiency has occurred which is continuing and would remain in existence after, or would result from, the making of such Advance or from the application of the proceeds of such Advance; (iv) no selection procedures adverse to the interest of CSFB shall have been utilized in selecting the Receivables; (v) the Commitment Termination Date shall not have occurred; (vi) all collections received by the applicable Borrower or the applicable Servicer on or after the Applicable Cutoff Date with respect to the Receivables shall have been deposited into the applicable Settlement Account; (vii) the Applicable Cutoff Date with respect to the Receivables shall be no more than ten (10) Business Days prior to the Advance Date; (viii) CSFB shall have received payment of all its fees and reimbursement for all its out-of-pocket costs incurred in connection with entering into or enforcing this Agreement, including reasonable attorneys fees, provided that CSFB has delivered to the Borrowers an invoice therefor setting forth the amounts payable in reasonable detail; 18 (ix) such Advance shall be for an amount at least equal to the Minimum Advance Amount; (x) the aggregate amount of all Advances outstanding to the Borrowers at any one time shall not exceed the Commitment Amount; and (xi) CSFB shall have received such other documents and instruments, and the Borrowers and the Servicers shall have taken all such other actions and delivered all such other instruments, documents and agreements as CSFB shall reasonably request. SECTION 3.3. Termination of Advance Commitment. (a) The commitment by CSFB to advance to the Borrowers hereunder shall terminate on the Commitment Termination Date, whereupon the Promissory Note and all other Obligations shall become immediately due and payable. (b) The Borrowers (acting jointly) and CSFB each shall have the option ("Termination Option") to terminate in whole on December 9, 1997 (the "First Termination Date") or on December 9, 1998 (the "Second Termination Date") the commitment by CSFB to advance hereunder, unless such commitment is terminated earlier in accordance with the terms of this Agreement. The Borrowers (acting jointly) or CSFB may exercise their respective Termination Option only upon delivery to the party not exercising its Termination Option a written notice at least fifteen (15) Business Days prior to the First Termination Date or the Second Termination Date, as the case may be. In the event CSFB and the Borrowers (acting jointly) do not exercise their respective Termination Option prior to the First Termination Date, CSFB and the Borrowers (acting jointly) shall still have the right to exercise their respective Termination Option with respect to the Second Termination Date. (c) Notwithstanding anything to the contrary contained herein, CSFB shall at any time have the right, exercised by written notice to the Borrowers, to terminate in whole or in part its commitment to advance hereunder if it determines in good faith, in its sole discretion, that there is no financing available to CSFB. 19 ARTICLE IV PRINCIPAL AND INTEREST SECTION 4.1. Interest. Each Borrower shall pay interest, at the Applicable Rate in effect from time to time, on the unpaid principal amount of each Advance for the period commencing on the date such Advance is made to such Borrower until such Advance is paid in full. Interest will be calculated on the basis of the actual number of days in the related Interest Period and a 360 day year and will be payable on each Distribution Date. SECTION 4.2. Prepayments. Each Borrower shall be entitled to prepay any outstanding Advance (plus Accrued Interest thereon) in whole or in part on any Business Day specified by such Borrower with at least seven (7) Business Days' prior written notice to CSFB, provided that such Borrower prepays such outstanding Advance in whole or in part on such Business Day, provided, further that each prepayment shall be subject to payment by such Borrower on such Business Day of an Exit Fee in accordance with the terms and conditions of Section 2.7(a), which Exit Fee shall be separate and in addition to any such prepayment amounts. The amounts so prepaid (excluding any Exit Fee) shall be applied to Accrued Interest and other charges accrued on such Advances to the day such prepayment shall have been received by CSFB, in such order as CSFB shall determine in its sole discretion, and then to the outstanding principal amounts of such Advances. SECTION 4.3. Borrowing Base Deficiency as of a Determination Date. If, on a Determination Date, a Borrowing Base Deficiency exists as of such Determination Date, then, on the next succeeding Distribution Date the amount of such Borrowing Base Deficiency shall be satisfied out of the Settlement Accounts in accordance with the terms of the Custodial Agreement. SECTION 4.4. Collateral Value Deficiency. If CSFB, at any time other than on a Determination Date, determines, in its sole discretion, that the Collateral Value of the Receivables in the aggregate is less than the product of (x) the aggregate weighted average of all Advance Rate Percentages for all such Receivables and (y) the aggregate Principal Balance of all such Receivables ("Collateral Value Deficiency"), the Borrowers shall, upon receipt of notice ("Collateral Value Deficiency Notice") from CSFB of a Collateral Value Deficiency, transfer to CSFB, as additional Collateral, either cash or additional Eligible Receivables in the amount equal to the amount of such Collateral Value Deficiency specified in such notice prior to 4:00 p.m. New York City time on the date of such notice, provided such notice is given to the Borrowers at or prior to 1:00 p.m. New York City time; provided, further, that if such notice is given after 1:00 p.m. New York City time, the Borrowers shall transfer such cash or additional Eligible Receivables prior to 4:00 p.m. New York City time on the Business Day immediately following the date of such notice. 20 ARTICLE V COLLATERAL SECTION 5.1. Grant of Security Interest. As security for the prompt and complete repayment of the principal of and interest on the Advances and the performance of the Obligations hereunder, each Borrower hereby grants to CSFB a continuing, first-priority security interest in all of such Borrower's right, title and interest in and to each item constituting the Collateral whether now owned or hereafter acquired. SECTION 5.2. Change of Location or Name. So long as any of the Obligations shall remain outstanding or the Commitment Termination Date shall not have occurred, each Borrower will not change (a) the location of its principal place of business, chief executive office or its consolidated records concerning its business and financial affairs, or (b) its legal name or the name under or by which it conducts its business, in each case without first giving CSFB at least thirty (30) days' advance written notice thereof and having taken any and all actions required to maintain and preserve the first priority perfected Lien of CSFB on the Collateral, as evidenced by an Opinion of Counsel satisfactory to CSFB; provided, however, that notwithstanding the foregoing, each Borrower shall not change the location of its principal place of business, chief executive office or its consolidated records concerning its business and financial affairs to any place in Louisiana or outside the United States of America. SECTION 5.3. Deliveries; Further Assurances. Each Borrower agrees that it will, at its sole expense, (i) immediately deliver or cause to be delivered to the Custodian, in due form for transfer, all securities, chattel paper, instruments and documents, if any, at any time representing all or any of the Collateral, including the Receivable File pursuant to Section 5.4, and (ii) execute and deliver, or cause to be executed and delivered to the Custodian in due form for filing or recording (and pay the cost of filing or recording the same in all public offices reasonably deemed necessary or advisable by such Borrower or CSFB), such assignments, security agreements, mortgages, consents, waivers, financing statements, and other documents, and do such other acts and things, all as may from time to time be reasonably necessary or desirable to establish and maintain to the satisfaction of CSFB a valid first priority perfected Lien on and security interest in all of the Collateral now or hereafter existing or acquired to secure payment and performance of the Obligations. SECTION 5.4. Delivery of Receivable Files. Prior to the delivery of a Borrowing Request and each Advance, the applicable Borrower shall transfer and deliver to the Custodian at the Custodian's Office the Receivable File for each Receivable listed on the applicable Schedule of Receivables, to be held by the Custodian as the bailee of and on behalf of CSFB. As of the making of each Advance, all blanks on any form shall have been properly filled in and each form shall have otherwise been correctly prepared. Notwithstanding the above, the originals of the complete Receivable File for each Receivable shall be in the possession of the Custodian. Each Servicer shall hold all other documents with respect to the Receivables as custodian for CSFB in accordance with Section 12.14. 21 SECTION 5.5. Hypothecation or Pledge of Collateral. Nothing in this Agreement shall preclude CSFB from transferring, pledging, repledging, hypothecating, or rehypothecating any of the Collateral, but no such transaction shall relieve CSFB of its obligations to the applicable Borrower under this Agreement or the Custody Agreement with respect to the Collateral or impair the Borrower's right to obtain the Collateral as provided herein. 22 ARTICLE VI ACCOUNTS; COLLECTIONS SECTION 6.1. Establishment of Lock-Boxes and Settlement Accounts. (a) Lock-Boxes. (i) AutoInfo Finance of Virginia, Inc. has established a Lock-Box with Crestar Bank, Norfolk, Virginia, as a Lock-Box Bank. (ii) Car Loan Co., Inc. has established a Lock-Box with Crestar Bank, Norfolk, Virginia, as a Lock-Box Bank. (b) Settlement Accounts. Each Borrower shall establish with the Custodian in accordance with the terms of the Custody Agreement a separate Settlement Account for the benefit of CSFB, which each such Settlement Account shall be an Eligible Account. SECTION 6.2. Collections. Each Servicer shall make diligent and reasonable efforts to collect all payments called for under the terms of the Receivables as and when the same shall become due and payable consistent with the terms of such Receivables and this Agreement and in accordance with the Accepted Servicing Standards. On each Business Day, pursuant to and in accordance with the applicable Lock-Box Agreement, the applicable Lock-Box Bank shall transfer any payments from Obligors and other payments in respect of the Collateral received in such Lock-Box to the applicable Settlement Account. In addition, each Servicer and each Borrower shall remit directly into the applicable Settlement Account all payments by or on behalf of the Obligors received by such Servicer or such Borrower, as applicable, with respect to the Receivables and other Collateral, and all Liquidation Proceeds and other recoveries as soon as practicable after receipt thereof (but in any event no later than one (1) Business Day following receipt thereof.) Each Servicer shall cause all collections on the Receivables financed with the proceeds of Advances to be identified to the Receivables to which such collections respectively relate, and posted in the records of such Servicer accordingly, as soon as practicable but not later than the second (2nd) Business Day following receipt thereof by such Servicer. 23 ARTICLE VII REPRESENTATIONS AND WARRANTIES SECTION 7.1. Representations and Warranties as to each Borrower. To induce CSFB to enter into this Agreement and to make Advances hereunder, each Borrower hereby makes and shall be deemed to have made the following representations and warranties to CSFB as to such Borrower as of the execution and delivery of this Agreement, as of each day during the term of this Agreement and as of the making of each Advance to such Borrower, which representations and warranties shall survive the making of each such Advance and shall continue until this Agreement is terminated. (a) Due Organization; Qualification; Power and Authority. Each Borrower (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of the jurisdiction of its incorporation, (ii) is duly qualified to do business as a foreign corporation and in good standing under the laws of each jurisdiction where the character of its property, the nature of its business or the performance of its obligations make such qualification necessary, and (iii) has all corporate powers and authorizations and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and for purposes of the transactions contemplated by this Agreement and the other Related Agreements. (b) Due Authorization. The execution, delivery and performance of each of the Related Agreements by each Borrower are within its corporate powers and have been duly authorized by all necessary corporate action and do not require any additional approvals or consents or other action by or any notice to or filing with any Person. (c) Noncontravention. None of the execution and delivery of the Related Agreements by each Borrower, the consummation of the transactions contemplated thereby or the satisfaction of the terms and conditions of the Related Agreements (i) contravenes, conflicts with, or results in any breach or violation of any provision of the articles or certificate of incorporation or by-laws of such Borrower or any law, rule, regulation, order, writ, judgment, injunction, decree, determination, or award currently in effect having applicability to such Borrower, or any of its properties, including regulations issued by an administrative agency or other governmental authority having supervisory powers over such Borrower, (ii) constitutes a default by such Borrower under or a breach of any provision of any loan or credit agreement, mortgage, indenture or other agreement or instrument to which such Borrower or any of its Affiliates is a party or by which it or any of its properties is or may be bound or affected, or (iii) results in or requires the creation of any lien upon or in respect of any of the assets of such Borrower or any of its Affiliates except as otherwise expressly contemplated by this Agreement or any other Related Agreement. (d) Valid and Binding Obligations. Each of the Related Agreements to which each Borrower is a party when executed and delivered by such Borrower will constitute 24 the legal, valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors' rights generally, and general equitable principles. (e) Legal Proceedings. There is no action, suit, proceeding or investigation pending or, to the knowledge of each Borrower, threatened, before any court, regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over such Borrower or its properties that, if adversely determined would materially and adversely affect the financial condition, operations or business prospects of such Borrower or any of its Affiliates or would adversely affect any Receivable. (f) No Consents. Except as set forth in Schedule 7.1(f), no consent, license, approval or authorization from, or registration, filing or declaration with, any regulatory body, administrative agency, or other governmental instrumentality, nor any consent, approval, waiver or notification of any creditor, lessor or other nongovernmental person, is required in connection with the execution, delivery and performance by each Borrower of this Agreement or of any other Related Agreement. (g) Accuracy of Information. There is no fact known to each Borrower which has a reasonable likelihood of causing a material adverse effect with respect to such Borrower and its financial condition or of causing an adverse effect with respect to the Receivables. None of the documents or information prepared by or on behalf of each Borrower and provided by such Borrower to CSFB relating to such Borrower or its financial condition (A) contain any statement of material fact with respect to such Borrower or its financial condition that was untrue or misleading in any respect when made or (B) omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. Since the furnishing of such documents or information, there has been no change, nor any development or event involving a prospective change known to each Borrower, that would render any such documents or information untrue or misleading in any material respect. (h) Employee Benefit Plans. During the twelve consecutive month period prior to (x) the date of this Agreement and (y) the applicable Advance Date, (i) no steps have been taken by the Pension Benefit Guaranty Corporation, each Borrower or to the knowledge of such Borrower, by any Person, to terminate any Pension Plan (other than a Pension Plan with no unfunded benefit liabilities on a termination basis); and (ii) no contribution failure has occurred with respect to any Pension Plan maintained by each Borrower sufficient to give rise to a lien under Section 302(f)(1) of ERISA in connection with such Pension Plan; and (iii) no condition exists or event or transaction has occurred with respect to any Plan which could reasonably be expected to result in the incurrence by each Borrower of liabilities, fines or penalties in an amount that is reasonably likely to have a materially adverse effect on the ability of such Borrower to perform its obligations under this Agreement or the Promissory Note, or the other Related Agreements. 25 (i) Financial Statements. The Financial Statements of each Borrower, copies of which have been furnished to CSFB, (i) present fairly the financial condition and results of operations of each of the Borrowers as of the dates and for the periods indicated and (ii) have been prepared in accordance with generally accepted accounting principles consistently applied, except as noted therein (subject as to interim statements to normal year-end adjustments). Since the date of the most recent Financial Statements, there has been no material adverse change in such financial condition or results of operations. Except as disclosed in the Financial Statements or otherwise disclosed to CSFB in writing, neither of the Borrowers is subject to any contingent liabilities or commitments that, individually or in the aggregate, if made absolute would have a material adverse effect in respect of such Borrower and its business or operations. (j) Use of Proceeds. The proceeds of the Advances will be used by each Borrower solely to purchase Eligible Receivables from Dealers. (k) Ownership of Borrower. Except as set forth on Schedule 7.1(k), each Borrower has no subsidiaries and owns no capital stock of, or other interest in, any other Person. Each Borrower is a wholly-owned subsidiary of AutoInfo, Inc. (l) Business Locations: Trade Names. Schedule 7.1(l) lists (i) where each Borrower maintains its chief executive office, principal place of business, and the location of its consolidated business and financial records, and (ii) each Borrower's legal name and each name under or by which each Borrower conducts its business. (m) Taxes. Each Borrower has filed all tax returns which have been required to be filed by it, and has paid or provided adequate reserves for the payment of all taxes, including, without limitation, all payroll taxes and federal and state withholding taxes, and all assessments payable by it that have become due, other than those that are not yet delinquent or that are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been established, and are being maintained, in accordance with generally accepted accounting principles. (n) Solvency; Fraudulent Conveyance. Each Borrower is solvent and will not be rendered insolvent by the transfer, assignment and pledge of the Receivables hereunder and pursuant hereto, and, after giving effect to any such transfer, assignment or pledge, each Borrower will not be left with an unreasonably small amount of capital with which to engage in its business. Each Borrower does not intend to incur, or does not believe that it has incurred, debts beyond its ability to pay such debts as they mature. Each Borrower is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such Borrower or any of its assets. (o) Investment Company Act. Each Borrower is not registered or required to be registered under the Investment Company Act of 1940, as amended, and each Borrower 26 is not controlled by an "investment company" registered or required to be registered under the Investment Company Act. (p) Compliance With Law, Etc. No practice, procedure or policy employed or proposed to be employed by each Borrower in the conduct of its business violates any law, regulation, judgment, agreement, order or decree applicable to it which, if enforced, would result in a material adverse effect upon such Borrower. (q) Independent Entity. Each Borrower is a separate and independent corporate entity from the custodian named in the Custody Agreement; each Borrower does not own a controlling interest in such custodian either directly or through Affiliates; and no director or officer of such Borrower is also a director or officer of such custodian. SECTION 7.2. Representations and Warranties Regarding the Receivables. To induce CSFB to enter into this Agreement and to make Advances hereunder and thereunder, each Borrower hereby makes and shall be deemed to have made the following representations and warranties to CSFB with respect to each Receivable transferred, assigned and pledged by it as of each Advance Date and as of each date thereafter, which representations and warranties shall survive the making of each Advance and the transfer, assignment and pledge of such Receivable and shall continue until this Agreement is terminated: (a) Characteristics of Receivables. Each Receivable (1) has been originated in the United States of America by a Dealer for the retail sale of a Financed Vehicle in accordance with the applicable Credit Policy in the ordinary course of the Dealer's business, and such Dealer had all necessary licenses and permits to originate Receivables in the state where the Dealer is located; (2) is evidenced by a retail installment sales agreement or contract which has been fully and properly executed by the parties thereto and has been purchased or otherwise originated by the Dealer in connection with the sale of Financed Vehicles by such Dealer, without any fraud or misrepresentation on the part of the Dealer or on the part of the Obligor; (3) has created a valid, perfected, subsisting, and enforceable first priority security interest in favor of the Dealer with respect to such Receivable in the Financed Vehicle, which security interest has been validly assigned by the Dealer to the applicable Borrower, which in turn has validly assigned such security interest to CSFB as security for the Obligations; (4) contains customary and enforceable provisions such that the rights and remedies of the holder or assignee thereof shall be adequate for realization against the Collateral or the benefits of the security; (5) is a fully amortizing Receivable which provides for level monthly payments that fully amortize the Amount Financed over the original term (except for the first or the last payment, which may be different from the level payment) and yields interest at the Annual Percentage Rate; (6) is denominated and payable only in U.S. Dollars in the United States of America; (7) provides for, in the event that such Receivable is prepaid by the Obligor, a prepayment that fully pays the Principal Balance and to the extent permitted by applicable law, includes a full month's interest, in the month of prepayment, at the Annual Percentage Rate; (8) has a remaining maturity, as of the Advance Date, of at least twelve (12) months but not more than sixty (60) months; provided, however, that with respect to the initial Advance to each 27 Borrower hereunder, such Receivable may have a remaining maturity of less than twelve (12) months; (9) has an original maturity of at least twelve (12) months but not more than sixty (60) months; (10) has an unpaid Principal Balance, as of the Advance Date, of at least $3,500 and not more than $25,000; provided, however, that with respect to the initial Advance to each Borrower hereunder, such Receivable may have an unpaid Principal Balance that is less than $3,500 as of the initial Advance Date; (11) bears interest at a fixed rate and has an Annual Percentage Rate of at least 10.50%; and (12) is not more than fifty-nine (59) days past due as of the Advance Date. (b) Other Characteristics of Receivables. With respect to each Receivable (1) no funds have been advanced by each Borrower, each Servicer, any Dealer, or anyone acting on behalf of any of them in order to cause such Receivable to qualify under clause (12) of Section 7.2(a) above; (2) the Amount Financed did not exceed 125% of the sum of (x) the retail value indicated for the related Financed Vehicle in the National Automobile Dealers Association's Guide on Retail and Wholesale Values and (y) taxes and such costs, fees and other amounts associated with titling and licensing of such Financed Vehicle and warranties and customary insurance policies purchased by the related Obligor; and (3) the Advance Rate Percentage was equal to or greater than 80% and equal to or less than 95%. (c) Schedule of Receivables. The information with respect to the Receivables set forth in the applicable Schedule of Receivables, including the Receivable Information List, is true and correct in all respects as of the close of business on the applicable Advance Date and each such Receivable is an Eligible Receivable. (d) Compliance with Law. Each Receivable, the sale of the Financed Vehicle and, to the extent sold by the Dealer or any Affiliate thereof, the sale of any physical damage, credit life and credit accident and health insurance and any extended service contracts at the time each of the above was originated or made complied with and each of the above currently complies with all requirements of applicable Federal, State, and local laws, and regulations thereunder including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, State adaptations of the National Consumer Act and of the Uniform Consumer Credit Code, and other consumer credit laws and equal credit opportunity and disclosure laws and no party to the contract evidencing such Receivable is in violation of any such law, rule or regulation in any respect if such violation would impair the collectibility of such Receivable. (e) No Government Obligor. No Receivable is due from the United States of America or any State or from any agency, department, subdivision or instrumentality of the United States of America or any State. (f) Good Title; Valid Transfer; Absence of Liens; Security Interest. No Receivable has been sold, transferred, assigned or pledged by the applicable Borrower to 28 any Person other than CSFB. Immediately prior to the transfer, assignment and pledge of such Receivable to CSFB pursuant hereto, such Borrower was the owner of, and had good, indefeasible and marketable title to such Receivable free and clear of any security interest, lien, charge, pledge, preference, equity or encumbrance of any kind, including, but not limited to, tax liens, mechanic's liens and any liens that attach by operation of law, and restrictions on transferability, and had full right, corporate power and lawful authority to assign, transfer and pledge such Receivable. This Agreement constitutes a valid pledge and grant of security interest in the Receivable to CSFB enforceable against creditors of and purchasers of either Borrower and CSFB shall have a valid and perfected first priority security interest in such Receivable free and clear of any security interest, lien charge, pledge, preference, equity or encumbrance of any kind, including, but not limited to, tax liens, mechanic's liens and any liens that attach by operation of law, and restrictions on transferability. No Dealer has a participation in, or other right to receive, proceeds of such Receivable. Neither Borrower has taken any action to convey any right to any Person that would result in such Person having a right to payments due or received under the related Insurance Policies or the related Dealer Agreements or Dealer Assignments or to payments due under such Receivables or otherwise to impair the rights of CSFB in any Receivable or the proceeds thereof. (g) Perfection of Liens and Security Interest. Upon the making of each Advance, the lien and security interest in favor of CSFB with respect to the Receivable will be perfected by the filing of financing statements on Form UCC-1 in each jurisdiction where such recording or filing is necessary for the perfection thereof, the delivery of the Receivable File for such Receivable to the Custodian and the establishment of the applicable Settlement Account and the applicable Lock-Box in accordance with the provisions of this Agreement and the Related Agreements and no other filings in any jurisdiction or any other actions (except as expressly provided herein) are necessary to perfect CSFB's lien on and security interest in the Collateral as against any third party or parties. All filings (including, without limitation, UCC filings), and all other actions of any Person, necessary in any jurisdiction to perfect CSFB's first priority security interest in the Receivable have been filed in the appropriate filing office(s). (h) Security Interest in Financed Vehicle. Immediately prior to the transfer, assignment and pledge thereof under this Agreement, (i) each Receivable was secured by a valid, binding and enforceable first priority perfected security interest in the Financed Vehicle in favor of the applicable Borrower as secured party, or (ii) application has been duly made with the appropriate governmental authority for a valid, binding and enforceable first priority perfected security interest in the Financed Vehicle in favor of such Borrower. The certificate of title for each Financed Vehicle shows, or if a new or replacement certificate of title is being applied for with respect to such Financed Vehicle the certificate of title will be received by the applicable Borrower within 120 days after the related Advance Date and will show the applicable Borrower named as the original secured party under each Receivable and, accordingly, such Borrower will be the holder of a first priority security interest in such Financed Vehicle; provided, however, that with respect to Receivables of AutoInfo Finance that are subject to Advances to AutoInfo Finance 29 within 90 days after the date of this Agreement and for which no certificate of title, guaranty of title or application for title is delivered prior to the related Advance Date, the certificate of title will be received by such Borrower prior to the earlier of (x) 90 days after such Advance Date and (y) 180 days after the date of origination of the related Receivable. With respect to each Receivable (other than Receivables of AutoInfo Finance referred to in the proviso in the immediately preceding sentence) for which the certificate of title has not yet been returned from the registrar of titles, the applicable Borrower has received written evidence from the related Dealer that such certificate of title showing such Borrower as first lienholder has been applied for. If the Receivable was originated in a state in which a filing or recording is required of the secured party to perfect a security interest in motor vehicles, such filings or recordings have been duly made to show the applicable Borrower named as the original secured party under the related Receivable. Such security interest in the Financed Vehicle has been validly assigned by the Dealer to the applicable Borrower pursuant to the related Dealer Agreement and by such Borrower to CSFB pursuant to this Agreement. Immediately after the transfer, assignment and pledge thereof to CSFB, there shall exist under each Receivable a valid, subsisting and enforceable first priority perfected security interest in the Financed Vehicle securing such Receivable and at such time as enforcement of such security interest is sought there shall exist a valid, subsisting and enforceable first priority perfected security interest in such Financed Vehicle in favor of CSFB (other than, as to the priority of such security interest, any statutory lien arising by operation of law after such transfer, assignment and pledge thereof, which is prior to such interest). (i) Receivables in Force. No Receivable has been satisfied, subordinated or rescinded, nor has any Financed Vehicle been released from the lien granted by the related Receivable in whole or in part. (j) No Waiver. No provision of a Receivable has been amended, waived, altered or modified in any respect since its origination, except by instruments or documents identified in the Receivable File held by the Custodian. No Receivable has been modified as a result of application of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended. (k) No Defenses. No right of rescission, setoff, counterclaim or defense exists or has been asserted or threatened with respect to any Receivable. The operation of the terms of any Receivable or the exercise of any right thereunder will not render such Receivable unenforceable in whole or in part or subject to any such right of rescission, setoff, counterclaim, or defense. (l) No Liens. There are no Liens or claims existing or which have been filed for taxes, work, labor, storage or materials relating to or affecting a Financed Vehicle that are or may be prior to, or equal or coordinate with, the lien of the related Receivable or the security interest in the Financed Vehicle granted by any Receivable. There is not, with 30 respect to any Receivable, any lien against the related Financed Vehicle for delinquent taxes. (m) No Default. Except for payment delinquencies continuing for a period of not more than fifty-nine (59) days, (x) no default, breach, violation or event permitting acceleration under the terms of any Receivable has occurred and (y) no condition exists or event has occurred and is continuing that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any Receivable has arisen, and there has been no waiver of any of the foregoing. (n) Insurance; Other. The related Financed Vehicle is covered by a comprehensive and collision insurance policy in an amount at least equal to the lesser of (a) its insurable value as determined by the insurer (less any deductible) or (b) the principal amount due from the Obligor under the related Receivable. Each Obligor has obtained insurance covering the Financed Vehicle as of the Advance Date insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage and each Receivable requires the Obligor to maintain such insurance naming the applicable Borrower and its successors and assigns as a loss payee, and each Receivable permits the holder thereof to obtain physical loss and damage insurance at the expense of the Obligor if the Obligor fails to do so. Each Receivable that finances the cost of premiums for credit life and credit accident and health insurance is covered by an insurance policy or certificate of insurance naming the applicable Borrower and its successors and assigns as the credit beneficiary under each such insurance policy and certificate of insurance. As to each Receivable that finances the cost of an extended service contract, the respective Financed Vehicle which secures the Receivable is covered by an extended service contract. (o) Lawful Assignment. No Receivable has been originated in, or is subject to the laws of, any jurisdiction under which the sale, transfer, and assignment of such Receivable under this Agreement shall be unlawful, void, or voidable. Neither Borrower has entered into any agreement with any account debtor that prohibits, restricts or conditions the assignment of any portion of the Receivable. (p) Receivable File; One Original. The applicable Borrower has delivered to the Custodian at the location listed in Schedule 7.2(p) a complete original Receivable File with respect to each Receivable pursuant to the terms of the Custody Agreement, and such Custodian is in possession thereof. There is only one manually executed original of each Receivable. Each document in the Receivable File which is required to be signed by the Obligor has been signed by the Obligor in the appropriate spaces. All applicable blanks on any form have been properly filled in and each form has otherwise been correctly prepared. (q) Chattel Paper. Each Receivable constitutes "chattel paper" under the UCC. 31 (r) Valid and Binding Obligation of Obligor. Each Receivable represents the genuine, legal, valid and binding obligation of the Obligor thereunder and is enforceable by the holder or assignee thereof in accordance with its terms, except only as such enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally, and all parties to such Receivable had full legal capacity to execute and deliver such Receivable and all other documents related thereto and to grant the security interest purported to be granted thereby. (s) Characteristics of Obligors. No Obligor on any Receivable is currently the subject of a bankruptcy proceeding. Each Obligor under a Receivable is a resident of the United States of America and is not an Affiliate of any of the parties hereto. (t) Past Due. No Receivable is sixty (60) or more days past due at the Advance Date. (u) Origination of Receivables. Each Obligor under a Receivable has been approved by the applicable Borrower based on the applicable Credit Policy; each Receivable satisfies all applicable requirements of the applicable Credit Policy; and each Receivable was underwritten in accordance with the applicable Credit Policy. (v) Casualty. No Financed Vehicle has suffered a Casualty. (w) Accuracy of Computer File. Each Computer File made available by each Borrower to CSFB and the Custodian from time to time is complete and accurate as of the Advance Date and includes a description of the same Receivables that are described in the Schedule of Receivables. (x) Receivable Not Assumable. No Receivable is assumable by another Person in a manner which would release the Obligor thereof from such Obligor's obligations to the originator or applicable Borrower with respect to such Receivable. (y) No Adverse Selection Procedures. No selection procedures adverse to CSFB have been utilized in selecting the Receivable from those receivables owned by each Borrower eligible for transfer, pledge and assignment to CSFB pursuant to this Agreement. (z) No Repossession. No Financed Vehicle with respect to any Receivable has been repossessed or put out for repossession. (aa) Marking Record. As of the Advance Date, the applicable Borrower has caused the portions of the electronic ledger relating to the Receivable to be clearly and unambiguously marked to show that such Receivable has been transferred, assigned and pledged to CSFB. SECTION 7.3. Vendor's Single Interest Policy. As of the date hereof, neither Borrower has in place or obtained vendor's single interest policy covering each Receivable and naming 32 CSFB as the loss payee. CSFB shall, at any time hereafter (but in no event earlier than six (6) months from the date of this Agreement), have the right to require any of the Borrowers to obtain and maintain such vendor's single interest policy with respect to any additional Receivables that are subject to this Agreement thereafter, but not including the Receivables that had been subject to this Agreement prior thereto. 33 ARTICLE VIII AFFIRMATIVE COVENANTS Until the Commitment Termination Date, and thereafter until the Promissory Note and all other Obligations are paid in full, each Borrower and each Servicer (as applicable) agrees that, unless at any time CSFB shall otherwise expressly consent in writing, it will perform and comply with each of the following covenants. SECTION 8.1. Corporate Existence; Foreign Qualification. Each Borrower and each Servicer shall do and cause to be done at all times all things necessary to (a) maintain and preserve its corporate existence, rights, franchises and privileges, (b) be duly qualified to do business and in good standing as a foreign corporation in each jurisdiction where the nature of its business makes such qualification necessary and the failure to so qualify is reasonably likely to have an adverse effect on its performance of its respective obligations, or enforcement of its rights, under this Agreement or any Related Agreement and (c) perform and comply with each of its obligations under this Agreement and any other Related Agreements and to comply with all requirements of law, rule or regulation binding upon or applicable to it or thereto, or that are required in connection with its performance under this Agreement and any other Related Agreements, except to the extent that the failure to comply therewith is not reasonably likely to, in the aggregate, have an adverse effect on its performance of its respective obligations, or enforcement of its rights, under this Agreement or any Related Agreement. Each Borrower and each Servicer shall each maintain all licenses, permits, charters and registrations which are material to the performance by each Borrower or each Servicer, as the case may be, of its respective obligations, or enforcement of its rights, under this Agreement and each other Related Agreement to which each Borrower or each Servicer, as the case may be, is a party or by which it is bound. SECTION 8.2. Books, Records and Inspections. Each Borrower shall: (a) maintain complete and accurate books and records with respect to the Collateral; (b) at any time and from time to time during regular business hours, upon at least two (2) Business Days prior notice from CSFB, permit CSFB or such other person who may be designated from time to time by CSFB or its agents or representatives to examine and make copies of such books, records and documents in the possession or under the control of such Borrower relating to the Collateral as CSFB or such person may reasonably request; and (c) permit or such other person to visit the office and properties of such Borrower for the purpose of examining such materials, and to discuss matters relating to the Collateral or such Borrower's performance under this Agreement with such Borrower's independent public accountants or with any of the officers or employees of such Borrower having knowledge of such matters. SECTION 8.3. Accounting Methods; Financial Records. Each Borrower shall maintain a system of accounting established and administered in accordance with generally accepted accounting principles, keep adequate records and books of account in which complete entries will be made in accordance with such accounting principles and reflecting all transactions required to be reflected by such accounting principles and keep accurate and complete records of its properties and assets. 34 SECTION 8.4. Reporting Requirements. (a) The Borrowers shall furnish, or cause to be furnished to CSFB: (i) Annual Financial Statements. As soon as available, and in any event within ninety (90) days after the close of each fiscal year of each of the Borrowers, the consolidated audited balance sheets of AutoInfo, Inc. and its consolidated subsidiaries as of the end of such fiscal year and the audited statements of income, changes in shareholders' equity and cash flows of AutoInfo, Inc. and its consolidated subsidiaries for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by the certificate of the Borrowers' and AutoInfo's independent accountants (who shall be, in each case, a nationally recognized firm or otherwise acceptable to CSFB) and by the certificate specified in Section 8.4(b) hereof. (ii) Quarterly Financial Statements. As soon as available, and in any event within forty-five (45) days after the close of each of the first three quarters of each fiscal year of each of the Borrowers, the unaudited balance sheets of each of the Borrowers and of AutoInfo, Inc. and its consolidated subsidiaries as of the end of such quarter and the unaudited statements of income, changes in shareholders' equity and cash flows of each of the Borrowers and of AutoInfo, Inc. and its consolidated subsidiaries for the portion of the fiscal year then ended, all in reasonable detail and, stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles, consistently applied (subject to normal year-end adjustments). (iii) Monthly Financial Statements. As soon as available, and in any event within thirty (30) days after the last day of each calendar month, the unaudited balance sheets of each of the Borrowers and of AutoInfo, Inc. and its consolidated subsidiaries as of the end of such calendar month and the unaudited statements of income and changes in equity of each of the Borrowers and of AutoInfo, Inc. and its consolidated subsidiaries for the portion of the fiscal year then ended, all in reasonable detail and prepared in accordance with generally accepted accounting principles, consistently applied (subject to normal year-end adjustments.) (iv) Accountants' Reports. Copies of any reports submitted to each Borrower or AutoInfo, Inc. by its independent accountants in connection with any examination of the financial statements of such Borrower or AutoInfo, Inc., promptly upon receipt thereof. (v) Other Information. Promptly upon receipt thereof, copies of all reports, statements, certifications, schedules, or other similar items delivered to or by each Borrower or AutoInfo, Inc. pursuant to the terms of the Related Agreements and, 35 promptly upon request, such other information or data as CSFB may reasonably request. (vi) Filings. Promptly after the filing or sending thereof, copies of all proxy statements, financial statements, Form 10-K, Form 10-Q or other reports, filings and registration statements (but not including ordinary course communications to partners, shareholders or members) which the Borrowers or AutoInfo, Inc. files, or delivers to, its stockholders, the Securities and Exchange Commission, or any other federal, state or foreign government agency, authority or body which supervises the issuance of securities by the Borrowers or AutoInfo, Inc. or any national securities exchange. (vii) Annual Budgets; Business Plans. Such annual budgets, monthly and annual comparisons of conformity of operations with annual budgets, three-year projections of financial and operations results, strategic business plans and other internal reports prepared by or received by the chief financial officer or chief executive officer of each Borrower as CSFB may reasonably request. (viii) Receivable Performance Data. Monthly reports in form and scope satisfactory to CSFB, setting forth data regarding the performance of the Receivables, including, without limitation, information with respect to delinquencies, repossessions, charge-offs, Obligor bankruptcies, extensions and modifications and such other information as CSFB may reasonably request. (ix) Monthly Servicing Diskettes. A computer tape and a diskette (or any other electronic transmission acceptable to CSFB) in a format acceptable to CSFB containing such information with respect to the Receivables and the servicing of the Receivables as CSFB may reasonably request. (x) Delivery of Credit Policy. A new copy of each Credit Policy at the end of each calendar quarter ending March 31, June 30, September 30 and December 31. (b) Compliance Certificate. Each Borrower shall deliver to CSFB concurrently with the delivery of the financial statements required pursuant to Sections 8.4(a)(i), (ii) and (iii) a certificate signed by the chief financial officer of such Borrower stating that: (i) a review of such Borrower's performance under the Related Agreements during such period has been made under such officer's supervision; (ii) no Event of Default has occurred, and if a Default or a Potential Event of Default has occurred, specifying the nature thereof and stating in reasonable detail the steps, if any, being taken by such Borrower, to cure such Default or Potential Event of Default or to otherwise comply with the terms of the agreement to which such Default or Potential Event of Default relates; and 36 (iii) the attached financial reports submitted in accordance with Section 8.4(a)(i) or (ii) or (iii) hereof, as applicable, present fairly the financial condition and results of operations of such Borrower and AutoInfo, Inc. and its consolidated subsidiaries as of the dates and for the periods indicated, in accordance with generally accepted accounting principles consistently applied (subject as to interim statements to normal year-end adjustments). (c) Events of Default. Promptly after becoming aware of the occurrence of (A) any Servicer Default, Event of Default or Potential Event of Default or (B) any other event, circumstance or condition that has resulted, or is reasonably likely to result, in a material adverse effect upon any Borrower, such Borrower shall deliver written notice thereof to CSFB describing such event and the action that such Borrower proposes to take with respect thereto. (d) Litigation. Promptly after becoming aware of any claim, litigation, arbitration, governmental or judicial investigation or proceeding or inquiry that is pending or threatened (A) against any Borrower or any Servicer which is reasonably likely to have an adverse effect on the ability of such Borrower or such Servicer to perform its respective obligations pursuant to this Agreement or any Related Agreement, (B) against any Borrower or any Servicer pertaining to the applicable Receivables, (C) with respect to a material portion of the Receivables or (D) in which a request has been made for certification as a class action (or equivalent relief) that would involve a material portion of the Receivables, such Borrower or such Servicer, as applicable, shall deliver written notice thereof to CSFB. (e) ERISA. Promptly after becoming aware of (i) the termination of any Pension Plan, (ii) the failure to make a contribution to any Pension Plan maintained by a Borrower or a Servicer sufficient to give rise to a lien under Section 302(f)(1) of ERISA, or (iii) the existence or occurrence of a condition, event or transaction with respect to any Plan which could reasonably be expected to result in the incurrence by such Borrower or such Servicer, of liabilities, fines or penalties in an amount that is reasonably likely to have an adverse effect on the ability of such Borrower or such Servicer to perform its respective obligations pursuant to this Agreement or any Related Agreement, such Borrower or such Servicer, as applicable, shall deliver written notice thereof to CSFB. (f) Change in Location. Each Borrower and each Servicer shall promptly inform CSFB in writing of any change in the location of such Borrower's or such Servicer's principal office or any change in the location of such Borrower's or such Servicer's books and records. (g) Other. Each Borrower and each Servicer shall promptly provide such other information, documents, or reports respecting the Collateral or the condition, financial or otherwise, or operations of such Borrower as CSFB may from time to time reasonably request in order to protect the interests of CSFB under or as contemplated by this Agreement or any Related Agreement. 37 SECTION 8.5. Taxes and Obligations. Each Borrower shall pay when due all taxes, assessments and other material (determined on a consolidated basis) liabilities (including titling fees and registration fees payable with respect to any Receivables) except as contested in good faith and by appropriate proceedings with respect to which adequate reserves have been established, and are being maintained, in accordance with generally accepted accounting principles if and so long as forfeiture of any part of the Collateral will not result from the failure to pay any such taxes, assessments or other material liabilities during the period of any such contest. SECTION 8.6. Business. Each Borrower shall engage only in the business of (i) purchasing Receivables from a Dealer, (ii) financing such purchases, (iii) selling such Receivables in connection with securitization or other dispositions, or (iv) otherwise dealing with Receivables and engaging in related activities. SECTION 8.7. Payments on Receivables. Each Borrower and each Servicer shall direct each Obligor to make all payments under the related Receivable financed with Advances directly to the applicable Lock-Box. All payments from Obligors under the Receivables which are received directly by a Borrower or a Servicer shall be deposited directly into the applicable Settlement Account as soon as practicable after receipt thereof (but in any event no later than one (1) Business Day following receipt thereof). In addition, each Borrower and each Servicer shall cause all other payments with respect to the Collateral to be made directly to the applicable Settlement Account. Any such payments with respect to such Collateral (other than payments received from Obligors) received directly by a Borrower or a Servicer shall be deposited into the applicable Settlement Account as soon as practicable after receipt thereof (but in any event no later than one (1) Business Day following receipt thereof). SECTION 8.8. Notation of Lien. Concurrently with each purchase of a Receivable with the proceeds of any Advance, each of the applicable Borrower and the applicable Servicer shall indicate on its computer records the security interest therein granted to CSFB pursuant to this Agreement. SECTION 8.9. Further Assurances. Each Borrower and each Servicer shall file all necessary financing statements, assignments or other instruments, and any amendments or continuation statements relating thereto, necessary to be kept and filed in such manner and in such places as may be required by law to preserve and protect fully the lien on and first-priority perfected security interest in, and all rights of CSFB with respect to the Receivables under this Agreement. In addition, each Borrower and each Servicer shall, upon the request of CSFB from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, within thirty (30) days of such request, such amendments hereto and such further instruments and take such further action as may be reasonably necessary to effectuate the intention, performance and provisions of the Related Agreements or to protect the interest of CSFB in the Receivables, free and clear of all liens and restrictions on transferability except the lien in favor of CSFB and the restrictions on transferability imposed by this Agreement. SECTION 8.10 Minimum Net Worth. The Borrowers, on a consolidated basis with AutoInfo, Inc., shall maintain at all times on and after December 31, 1996 a minimum Net Worth 38 of not less than $10,000,000. The "Net Worth" of AutoInfo, Inc. and its consolidated subsidiaries, including the Borrowers, as of any date of determination shall be equal to the sum of (i) the par value of its capital stock and (ii) additional paid-in capital plus retained earnings (or minus accumulated deficit) of AutoInfo, Inc. on a consolidated basis, each item to be determined in accordance with generally accepted accounting principles, less (x) amounts attributable to stock that may be redeemed at the option of the holder and with respect to which such holder has elected to have such stock redeemed and (y) intangible assets. SECTION 8.11 Limitations on Debt. The ratio of the total Debt of AutoInfo, Inc. and its consolidated subsidiaries, including the Borrowers, to the Net Worth of AutoInfo, Inc. and its consolidated subsidiaries, including the Borrowers, shall not be more than 6 to 1. "Debt" shall mean any indebtedness (other than Subordinated Debt), contingent or otherwise, in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of AutoInfo, Inc. or such consolidated subsidiaries or only to a portion thereof), or evidenced by bonds, notes, debentures or similar instruments or letters of credit or representing the balance deferred and unpaid of the purchase price of any property (except any such balance that constitutes a trade payable and an accrued liability arising in the ordinary course of business that is not overdue by more than ninety (90) days or that is being contested in good faith), if and to the extent any of the foregoing indebtedness would appear as a liability upon a consolidated balance sheet of AutoInfo, Inc. prepared in accordance with generally accepted accounting principles, and shall also include, to the extent not otherwise included, indebtedness secured by a lien or mortgage to which the property or assets owned or held by AutoInfo, Inc. or such consolidated subsidiaries is subject (whether or not the obligations secured thereby shall have been assumed), guarantees of items that would be included within this definition (without regard to whether such items would appear upon such balance sheet), and obligations in respect of interest rate swap obligations. The amount of Debt of AutoInfo, Inc. and its consolidated subsidiaries, including the Borrowers, at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such contingent obligations at such date. "Net Worth" shall have the meaning assigned thereto in Section 8.10 above; provided, however, that for the purposes of this Section 8.11, Subordinated Debt shall be added thereto. "Subordinated Debt" means all indebtedness of each Borrower which shall, by its terms or in a manner reasonably satisfactory to CSFB, be subordinated in right of payment to the Obligations. 39 ARTICLE IX NEGATIVE COVENANTS Until the Commitment Termination Date and thereafter until the Promissory Note and all other Obligations are paid in full each Borrower and each Servicer, as applicable, agrees that, unless at any time CSFB shall otherwise expressly consent in writing, it will comply with the following covenants. SECTION 9.1. Liens. Neither Borrower shall, except as otherwise provided in the Related Agreements, sell, assign (by operation of law or otherwise) or otherwise dispose of any Receivable or create or permit to exist any Lien with respect to any Collateral now or hereafter existing or acquired. SECTION 9.2. Impairment of Rights. Neither any Servicer nor any Borrower shall take any action, or fail to take any action, if such action or failure to take action may (i) interfere with the enforcement of any rights under the Related Agreements that affect the rights, benefits or obligations of CSFB, (ii) result in an adverse effect in respect of the Receivables or (iii) impair the ability of such Servicer or such Borrower to perform its obligations under the Related Agreements, including any consolidation, merger with any Person or any transfer of all or any material amount of such Servicer's or such Borrower's assets to any other Person if such consolidation, merger or transfer would impair the net worth of such Servicer or such Borrower or any successor Person obligated, after such event, to perform such Servicer's or such Borrower's obligations under the Related Agreements. SECTION 9.3. Waiver, Amendments, Etc. Neither each Servicer nor each Borrower shall waive, modify or amend, or consent to any waiver, modification or amendment of, any of the provisions of any of the Related Agreements or, if such waiver, modification or amendment would adversely affect CSFB, such Borrower's or such Servicer's respective articles of incorporation, certificate of incorporation or bylaws, unless CSFB shall have consented thereto in writing. SECTION 9.4. No Mergers. (a) Neither Borrower shall consolidate with or merge into any Person or transfer all or substantially all of its assets to any Person or liquidate or dissolve; and (b) neither Servicer shall consolidate with or merge into any Person or transfer all or substantially all of its assets to any Person or liquidate or dissolve other than in accordance with Section 11.3 of this Agreement; provided, however, that either Borrower may merge or consolidate with or into (x) any of its Affiliates or (y) any other Person so long as (i) neither the validity nor enforceability of this Agreement or the Related Agreements shall be adversely affected thereby, (ii) the surviving entity (if other than such Borrower) shall assume in writing or by operation of law the due and punctual performance of all terms and conditions of the Related Agreements to which such Borrower is a party and all liabilities and obligations of such Borrower thereunder, and (iii) the net worth of the surviving entity immediately after such merger or consolidation is not less than the net worth of the applicable Borrower immediately prior thereto; provided, further, that CSFB has consented to such merger or consolidation prior thereto. 40 SECTION 9.5. Insolvency. Neither any Servicer nor any Borrower shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to the bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, corporation or other relief with respect to it or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or make a general assignment for the benefit of its creditors. Neither any Servicer nor any Borrower shall take any action in furtherance of, or indicating the consent to, approval of, or acquiescence in any of the acts set forth above. Neither Borrower shall admit in writing its inability to pay its debts. SECTION 9.6. Extension or Amendment of Receivables. Except as otherwise permitted hereunder, neither Borrower shall extend, amend or otherwise modify the terms of any Receivable, except for not more than one extension of the due date for any Scheduled Payment on such Receivable for a period of not more than one month during any twelve (12) month period; provided, however, in no event shall the aggregate of all extensions with respect to a Receivable (including extensions granted prior to the applicable Advance Date) exceed three (3) months. SECTION 9.7. Change in Business, Credit Policy or Servicing Policies. Neither Borrower shall make any change in the character of its business if such change would be reasonably likely to have a material adverse effect on such Borrower. Neither Borrower shall make any change to its respective Credit Policy without obtaining the prior written consent of CSFB. Neither Servicer shall make any change to its respective Servicing Policies without the prior written consent of CSFB. SECTION 9.8. Investments. Neither Borrower shall, except in the ordinary course of business, (i) make, incur or suffer to exist an investment in or equity contribution to, any Person; (ii) make any loan or advance to any Person; or (iii) create any direct or indirect subsidiary or otherwise acquire direct or indirect ownership of any equity interest in any other Person. This Section 9.8 shall not limit a Borrower's right to organize, capitalize, make a loan or an equity contribution to, or otherwise acquire an equity interest in a special purpose subsidiary in connection with a securitization of any Receivables. SECTION 9.9. Negative Pledges. Neither Borrower shall enter into or assume any agreement (other than this Agreement and the other Related Agreements) prohibiting the creation or assumption of any Lien upon any Receivables, whether now owned or hereafter acquired by such Borrower, as contemplated by the Related Agreements, or otherwise prohibiting or restricting any transaction contemplated hereby or by the other Related Agreements. 41 ARTICLE X EVENTS OF DEFAULT SECTION 10.1. Events of Default. Each of the following shall constitute an Event of Default under this Agreement: Section 10.1.1 Non-Payment of Advances. Failure of any Borrower to pay or repay when due principal or interest on any Advance which failure is not cured on the next Business Day after the occurrence thereof. Section 10.1.2 Non-Payment of Other Amounts. Failure of any Borrower and continuance thereof for one (1) Business Day after notice thereof by CSFB to the applicable Borrower, in the payment when due of any amount payable hereunder (other than any amount described in Section 10.1.1), including, but not limited to payments or transfer of cash or Eligible Receivables required pursuant to Section 4.3 and Section 4.4 and payments pursuant to Section 2.7(a). Section 10.1.3 Events of Bankruptcy. The occurrence of an Event of Bankruptcy with respect to any Borrower. Section 10.1.4 Non-Compliance With Provisions. Failure by any Borrower to comply with or to perform any provision of this Agreement or any Related Agreement (which failure does not constitute an Event of Default under any of the provisions of this Section 10.1) which failure, in the judgment of CSFB, materially adversely affects the ability of the Borrower to perform under this Agreement and the Custodial Agreement or the rights of CSFB and which failure shall not have been cured by the applicable Borrower within thirty (30) days of the earlier of discovery of such failure by the applicable Borrower or notification by CSFB to the applicable Borrower of same. Section 10.1.5 Representations and Warranties. (a) Any representation or warranty made by any Borrower in this Agreement or any Related Agreement (other than a representation and warranty contained in Section 7.2 of this Agreement, except for the representations or warranty contained in clauses (c), (w), (y) and (aa) of Section 7.2) is incorrect or untrue in any material respect (to the extent that any such representation or warranty does not incorporate a materiality limitation in its terms) when made or repeated or when deemed to have been made or repeated and, which continues to be incorrect or untrue in any material respect (to the extent that any such representation or warranty does not incorporate a materiality limitation in its terms) for a period of thirty (30) days after the earlier of (i) the date on which written notice thereof shall have been given by CSFB to the applicable Borrower and (ii) the date on which such Borrower obtains knowledge thereof; (b) Any schedule, certificate, financial statement, report, notice, or other material writing furnished to CSFB by any Borrower, is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified and, which continues to be 42 incorrect in any material respect for a period of thirty (30) days after the earlier of (i) the date on which written notice thereof shall have been given by CSFB to such Borrower and (ii) the date on which the applicable Borrower obtains knowledge thereof, and such failure has an adverse effect on the interests of CSFB; (c) Any representation or warranty made by the applicable Borrower in clauses (c), (w), (y) and (aa) of Section 7.2 shall have been incorrect or untrue when made or repeated or when deemed to have been made or repeated; or (d) Any representation or warranty made by the applicable Borrower in Section 7.1 or any representation or warranty made the Guarantor in the Guaranty Agreement shall have been incorrect or untrue in any material respect (to the extent that any such representation or warranty does not incorporate a materially limitation in its terms) when made or repeated or when deemed to have been made or repeated and which materially and adversely affects the rights of CSFB or the ability of such Borrower to perform its obligations under this Agreement or the other Related Agreements, or the ability of the Guarantor to perform its obligations under the Guaranty Agreement. Section 10.1.6 Servicer Default. A Servicer Default shall occur and CSFB gives notice of an Event of Default. Section 10.1.7 Judgments. One or more final judgments shall be entered by any court or courts against a Borrower for the payment of money which, together with any judgment which shall be entered by any court or courts against the other Borrower for payment of money, exceed $500,000 in the aggregate which are not fully covered by insurance or by reserves shown on the financial statements of the applicable Borrower or each of the Borrowers, as the case may be, which have been delivered to CSFB in accordance herewith; or a warrant of attachment or execution or similar process shall be issued or levied against property of a Borrower which, together with all other such property of the applicable Borrower subject to other such process (and together with any warrant or execution or similar process which shall be issued or levied against property of the other Borrower, together with all other property of such other Borrower subject to other process), exceeds in value $500,000 in the aggregate, and within thirty (30) days after the entry, issue or levy thereof, such judgment(s), warrant(s) or process(es) shall not have been paid or discharged or stayed pending appeal, or if, after the expiration of any such stay(s), such judgment(s), warrant(s) or process(es) shall not have been paid or discharged. Section 10.1.8 Litigation. Any litigation (including, without limitation, derivative actions), arbitration proceedings or governmental proceedings is pending against any Borrower or any of its Affiliates, which, in the judgment of CSFB, if adversely determined, would have a material adverse effect on such Borrower. Section 10.1.9 Material Adverse Change. In the reasonable judgment of CSFB, a material adverse change shall have occurred in the business, operations, properties, prospects or condition (financial or otherwise) of any Borrower or the Guarantor. 43 Section 10.1.10 Notice of Lien. The Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the Internal Revenue Code with regard to any of the assets of any Borrower, or the Pension Benefit Guaranty Corporation shall file notice of a lien pursuant to Section 4068 of ERISA with regard to any of the assets of such Borrower, and in either such case such lien shall secure a liability in excess of $100,000 and shall not have been released within thirty (30) days. Section 10.1.11 Defaults on Other Indebtedness. A default shall have occurred and be continuing under any instrument, contract or agreement evidencing, securing or providing for the issuance of indebtedness for borrowed money in excess of $500,000 of, or guaranteed by, any Borrower which default, in the judgment of CSFB, could materially and adversely affect the financial condition of the Borrower (which defaults include, but are not limited to, (i) an Event of Bankruptcy, (ii) failure of the Borrower to make required payments under such instrument, contract or agreement as they become due or (iii) the acceleration of the maturity of such indebtedness). Section 10.1.12 Invalidity of Related Agreements. All or any portion of any Related Agreement (other than any Dealer Agreement or Dealer Assignment) shall at any time and for any reason be declared to be null and void, or a proceeding shall be commenced by any Borrower, or by any governmental authority having jurisdiction over any Borrower, seeking to establish the invalidity or unenforceability thereof (exclusive of questions of interpretation of any provision thereof). Section 10.1.13 Change of Control. With respect to any Borrower, a Change of Control shall have occurred. Section 10.1.14 Commitment. CSFB shall have determined that any Borrower is or will be unable to meet its commitments under this Agreement or any other Related Agreements or that the Guarantor is or will be unable to meet its commitments under the Guaranty Agreement and shall have notified the applicable Borrower or Guarantor, as applicable, of such determination and such Borrower or Guarantor, as applicable, shall not have responded with appropriate information to the contrary to the reasonable satisfaction of CSFB within one (1) Business Day following the date of such notice. Section 10.1.15 Effect on Security Interest. There shall exist any event or occurrence that has an adverse effect on the status, existence, perfection, priority or enforceability of CSFB's interest in the Collateral or this Agreement shall for any reason cease to create a valid, first priority security interest in the Collateral purported to be conveyed thereby. Section 10.1.16 Failure to Provide Assurance. CSFB shall not have received (a) written assurances as to the financial well-being of any Borrower or the Guarantor within one (1) Business Day of a request by CSFB therefor, or (b) a certificate, substantially in the form set forth in Section 8.4(b), within ten (10) days following the date the related annual or quarterly or monthly financial statement is required to be delivered. 44 Section 10.1.17 Default on Other Agreements. Any Borrower shall be in default with respect to any provision under any servicing agreement or subservicing agreement or any lease to which it is a party, which default, in the reasonable judgment of CSFB, could reasonably be expected to materially and adversely affect the financial condition of such Borrower (which defaults include, but are not limited to, an Event of Bankruptcy of such Borrower or the failure of such Borrower to make required payments under such lease or agreement as they become due). Section 10.1.18 Going Concern. AutoInfo, Inc.'s audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to AutoInfo, Inc.'s or any Borrower's status as a "going concern" or a reference of similar import. Section 10.1.19 Amendment to Credit Policy. Any Borrower shall have amended or modified its respective Credit Policy without obtaining the prior written consent of CSFB. Section 10.1.20 Amendment to Fee Agreement with Custodian. Any amendment, modification or change to the letter agreement between the Borrowers and Custodian relating to the Custodian Fee without the prior written consent of CSFB. Section 10.1.21 Failure to Obtain or Maintain Vendor's Single Interest Policy. Failure of any Borrower to obtain a vendor's single interest policy within fifteen (15) days of CSFB's request pursuant to Section 7.3 and to maintain such policy thereafter. SECTION 10.2. Effect of Event of Default. If any Event of Default described in Section 10.1.3 shall occur, the obligation of CSFB to make Advances to any of the Borrowers (if not theretofore terminated) shall immediately terminate and the Promissory Note and all other Obligations shall automatically become immediately due and payable. If any Event of Default other than one described in the immediately preceding sentence shall occur, (i) CSFB may declare its commitment to make Advances (if not theretofore terminated) to be terminated, whereupon such commitment shall immediately terminate, and may declare the Promissory Note and all other Obligations to be due and payable, whereupon the Promissory Note and all other Obligations shall become immediately due and payable and (ii) CSFB may terminate all of the rights and servicing obligations of the Servicers under this Agreement. SECTION 10.3. Remedies. (a) Upon the occurrence of any Event of Default, in addition to CSFB's rights and remedies under the Promissory Note, any Related Agreement or the UCC or any other applicable law, CSFB shall have any or all of the following rights and remedies, which may be exercised by CSFB: (i) CSFB may cause the disposition of all or any portion of the Collateral to be conducted immediately upon the occurrence of an Event of Default, or upon the expiration of any period of delay or notice required by law. Should CSFB decide to conduct more than one such sale or disposition, CSFB may at its option cause the same to be conducted simultaneously or successively on the same day or upon such different days or at such different times and in such order as CSFB may 45 deem to be in the best interests of the holder(s) of interests in the Promissory Note. Each Borrower waives, to the fullest extent permitted by law, any prejudice resulting to it from any such decision. (ii) CSFB shall have the right to sell the Collateral in one or more lots, at one or more times, at such place or places, at public or private sales and with or without notice of any kind, as CSFB may elect, at such prices and on such terms, as to cash or credit, as CSFB may deem proper. However, notwithstanding any provision of this Agreement to the contrary, not less than five (5) Business Days notice of all sales of all or any portion of the Collateral shall be given to the Borrowers. CSFB shall have the right to become a purchaser at any such sale that is open to the public and to apply all unpaid Obligations toward the purchase price of all or any portion of the Collateral sold to CSFB. If notice is given of a public sale, it is agreed that notice shall be satisfactorily given if such notice is published at least once in The Wall Street Journal not less than five (5) Business Days prior to such sale. The foregoing notice provisions shall not preclude CSFB's rights to foreclose upon the Collateral in any other manner permitted under the Uniform Commercial Code as in effect in the applicable jurisdiction. However, a sale of the Collateral in accordance with such notice requirements shall be deemed a disposal of the Collateral in a commercially reasonable manner. CSFB shall have the right to sell the Collateral, or to foreclose, sue upon or otherwise seek to enforce with respect thereto in its own name or in the name of applicable Borrower. Subject to the foregoing provisions of this paragraph, if an Event of Default shall have occurred and be continuing, CSFB shall have the right to renew, extend the time of payment of or otherwise modify, amend, supplement, settle or compromise in any manner any obligations for the payment of money included in the Collateral, any security therefor and any other agreements, instruments, claims or chooses in action of any kind, that may be included in the Collateral. In view of the nature of the Collateral, the parties agree (to the extent such an agreement is permitted by applicable law) that liquidation of the Collateral does not require a public sale and that one or more good faith private sales, including such private sales at which CSFB shall have the right to become a purchaser, is a commercially reasonable disposition of the Collateral. (iii) CSFB may take possession of all or any portion of the Collateral that is not already in its possession, and the applicable Borrower agrees to assemble and make available the Collateral to CSFB at a convenient location. CSFB may manage and protect the Collateral, do any acts that it, deems proper to protect the Collateral as security hereunder, and sue upon any contract or claim relating to the Collateral and receive any payments due thereon or any damages thereunder, and apply all sums received to the payment of the Obligations in accordance with the same order of priorities as set forth in Section 10.4 hereof. Any such actions of CSFB shall not, absent written ratification by CSFB, be deemed to impose upon CSFB any of the Borrowers' obligations under any contracts. 46 (iv) CSFB may direct the applicable Servicer to take such action with respect to the Collateral as CSFB determines is appropriate. (b) CSFB shall, without regard to the adequacy of the security for the Obligations, be entitled to the appointment of a receiver by any court having jurisdiction, without notice, to take possession of and protect, collect, manage, liquidate, and sell the Collateral or any portion thereof, collect the payments due with respect to the Collateral or any portion thereof, and do anything that CSFB is authorized hereunder to do. The Borrowers shall pay all costs and expenses incurred by CSFB in connection with the appointment and activities of such receiver. (c) CSFB may enforce its rights and remedies hereunder without prior judicial process or hearing, and each Borrower and each Servicer hereby expressly waives, to the extent permitted by law, any right such Borrower and such Servicer might otherwise have to require CSFB to enforce its rights by judicial process or hearing. Each Borrower and each Servicer also waives, to the extent permitted by law, any defense it might otherwise have to the Obligations arising from use of nonjudicial process, enforcement and sale of all or any portion of the Collateral or from any other election of remedies. Each Borrower and each Servicer recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity, and are the result of a bargain at arm's length. (d) Notwithstanding the foregoing, upon the occurrence of any Event of Default, CSFB shall have the right to exercise any of its rights and/or remedies without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrowers and the Servicers. SECTION 10.4. Application of Proceeds. The proceeds of any sale or disposition of each item of the Collateral pursuant to this Article shall be applied as follows: (a) First, to the payment of the costs and expenses of such sale or disposition, or any other enforcement action pursuant hereto, including reasonable attorney's fees and expenses, (including the reasonable expenses of internal counsel to CSFB), and all other expenses incurred in connection therewith, with a reasonable reserve for any liabilities incurred in connection therewith and full repayment with interest of all Advances made or incurred in connection therewith; (b) Second, to the payment in full, in such order as CSFB shall determine, of (i) the accrued interest on the Promissory Note and (ii) the outstanding principal on the Promissory Note; and (c) Finally, to the payment to the person or persons entitled thereto, or as a court of competent jurisdiction directs. 47 If the proceeds of any such sale are insufficient to cover the costs and expenses of such sale, as aforesaid, and the payment in full of the Promissory Note, including without limitation all Advances thereunder, including Accrued Interest thereon, and all other Obligations, the Borrowers shall remain jointly and severally liable for any deficiency. SECTION 10.5. Reimbursement. All reasonable sums expended by CSFB in connection with the exercise of any right or remedy provided for herein shall be and remain the joint and several obligation of the Borrowers. At the option of CSFB, all such sums may be paid from the Collateral, or may be advanced by CSFB, in which event they shall be deemed to have been advanced to the Borrowers and shall be reimbursed by the Borrowers to CSFB, with interest at the Late Payment Rate until reimbursement is made. During the continuance of an Event of Default, each Borrower waives, and shall not have, any right to restrict or control the expenditures by CSFB from any cash which constitutes Collateral. Each Borrower agrees to pay, with interest at the Late Payment Rate, the reasonable out-of-pocket expenses and reasonable attorneys' fees incurred by CSFB in connection with the administration and enforcement of the Related Agreements, including the taking of any action, including legal action, or in connection with any refinancing or restructuring. SECTION 10.6 Power of Attorney. (a) Each Borrower hereby irrevocably constitutes, designates and appoints CSFB and any employee, agent and officer thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority following an Event of Default in the place and stead of such Borrower and in the name of such Borrower or in its own name, from time to time in CSFB's discretion, for the purpose of carrying out the terms of this Agreement and any other Related Agreements and, without limiting the generality of the foregoing, such Borrower hereby gives CSFB the power and right, on behalf of such Borrower, without notice to or assent by such Borrower to do the following: (i) at such time or times hereafter as CSFB or its employees, officers or agents, in its sole discretion, may determine, in CSFB's or Borrower's name, to endorse such Borrower's name on any Receivable, checks, notes, drafts, instruments, documents or any other payment relating to the Collateral which come into the possession of CSFB or come under CSFB's control; (ii) to the extent permitted by law, to sign such Borrower's name on any document (including, without limitation, financing statements and continuations thereof and assignments) necessary or desirable for the purpose of maintaining or achieving the perfection of CSFB's security interest in the Collateral and such Borrower's interest in the Financed Vehicle and other collateral granted by the Obligor to such Borrower; (iii) to file any claim or take any other action or proceeding in any court of law or equity for the purpose of collecting any and all of the Collateral and Obligations due under this Agreement and any other Related Agreements; (iv) to remove from any premises where they may be located any and all documents, instruments, files and records relating to the Collateral; (v) to take or bring, in CSFB's name or in the name of such Borrower, all steps, actions, suits or proceedings deemed by CSFB necessary or desirable to effect collection of or to realize upon the Collateral; and (vi) following an Event of Default or Potential Event of Default, to direct the Servicers to make all payments of the Collateral to CSFB. 48 (b) Each Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof in the absence of gross negligence or willful misconduct. This power of attorney is a power coupled with an interest, shall be irrevocable and shall terminate only upon payment in full of the Promissory Note and all other Obligations and termination of this Agreement. The powers conferred on CSFB hereunder are solely to protect CSFB's interests in the Collateral and shall not impose any duty upon it to exercise any such powers. CSFB shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to any Borrower for any action taken or omitted to be taken in good faith or in reliance on the advice of counsel except for its own gross negligence or wilful misconduct. SECTION 10.7 Right of Set-off. In addition to its rights under this Agreement, CSFB shall have the right to proceed against any assets of any Borrower which may be in the possession of CSFB, including the right to liquidate such assets and to set-off the proceeds against monies owed by the Borrowers to CSFB pursuant to this Agreement. CSFB may set-off cash, the proceeds of the liquidation of the Receivables, any Collateral or its proceeds, and all other sums or obligations owed by CSFB to any Borrower against all of the Borrowers' obligations to CSFB, whether under this Agreement, any Related Agreement, or under any other agreement between the parties, or otherwise, whether or not such obligations are then due, without prejudice to CSFB's right to recover any deficiency. Any cash proceeds, or property in excess of any amounts due, or which CSFB reasonably believes may become due, to it from the Borrowers shall be returned to the applicable Borrower after satisfaction of all obligations of the Borrowers to CSFB. SECTION 10.8 Rights and Remedies Cumulative. The enumeration of the rights and remedies of CSFB set forth in this Agreement is not intended to be exhaustive and the exercise by CSFB of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder or under any other Related Agreements, as applicable, or that may now or hereafter exist in law or in equity or by suit or otherwise. 49 ARTICLE XI SERVICER SECTION 11.1. Representations and Warranties of each Servicer. To induce CSFB to enter into this Agreement and to make Advances hereunder, each Servicer makes the following representations and warranties to CSFB as of the execution and delivery of this Agreement and as of the making of each Advance (which representations and warranties shall survive the making of each Advance and shall continue until the termination of this Agreement): (a) Organization and Good Standing. Each Servicer has been duly organized and is validly existing as a corporation in good standing under the laws of the State of the jurisdiction of its incorporation, with power and authority to own its properties and to conduct its business as such properties shall be currently owned and such business is presently conducted, has all licenses necessary to carry on its business as presently conducted, and had at all relevant times, and shall have, power, authority and legal right to service the Receivables. (b) Due Qualification. Each Servicer is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Receivables as required by this Agreement) shall require such qualification, except where the failure to qualify will not have a material adverse effect on the business or properties of such Servicer. (c) Power and Authority. Each Servicer has the requisite corporate power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery, and performance of this Agreement and the other Related Agreements to which it is a party has been duly and validly authorized by such Servicer by all necessary corporate action. (d) Binding Obligation. This Agreement constitutes a legal, valid and binding obligation of each Servicer enforceable in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors' rights generally, and general equitable principles. (e) No Violation. The execution, delivery and performance by each Servicer of this Agreement and the consummation of the transactions contemplated hereby and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the articles of organization, regulations, articles of incorporation or by-laws of such Servicer, or any indenture, agreement, mortgage, deed of trust, or other instrument to which such Servicer is a party or by which it is bound or any of its properties are subject; nor result in the creation or imposition of any Lien upon any of its properties pursuant to 50 the terms of any indenture, agreement, mortgage, deed of trust, or other instrument (other than this Agreement); nor violate any law, order, rule, or regulation applicable to such Servicer of any court or of any Federal or State regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over such Servicer or its properties. (f) No Proceedings. Neither Servicer is a party to, bound by or in breach or violation of any indenture or other agreement or instrument, or subject to or in violation of any statute, order or regulation of any court, regulatory body, administrative agency or governmental body having jurisdiction over it, which materially and adversely affects, or may in the future materially and adversely affect, the ability of such Servicer to perform its obligations under this Agreement or the interest of CSFB; (g) No Litigation. There is no action, suit, proceeding or investigation pending or, to the knowledge of each Servicer threatened against such Servicer, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over such Servicer (A) asserting the invalidity of the Related Agreements to which it is a party, (B) seeking to prevent the consummation of any of the transactions contemplated by the Related Agreements to which it is a party, (C) seeking any determination or ruling that might adversely affect the ability of such Servicer to perform its obligations under, or the validity or enforceability of, the Related Agreements to which it is a party, or (D) that could have an adverse effect on the Receivables. (h) Approvals. Except as set forth in Schedule 11.1(h), neither Servicer is required to obtain the consent of any other party or obtain the consent, license, approval or authorization of, or make any filing, registration or declaration with, any person, corporation or other organization, or of any court or any governmental agency, authority or bureau in connection with the execution, delivery and performance, validity or enforceability of each of the Related Agreements and the making of the applicable Advance. (i) The principal place of business and chief executive office of each Servicer is located at: (a) For AutoInfo Finance of Virginia, Inc.: 863 Glenrock Road Norfolk, Virginia 23502 (b) For Car Loan Co., Inc.: 444 Westport Avenue Norwalk, Connecticut 06851 SECTION 11.2. Indemnities of Servicer. (a) Each Servicer shall indemnify, defend, and hold harmless CSFB from and against any and all reasonable costs, reasonable expenses, losses, claims, damages, and liabilities to the extent that such cost, reasonable expense, reasonable loss, 51 claim, damage, or liability was the result of the negligence, misfeasance or bad faith of such Servicer in the performance of its duties under this Agreement or any other Related Agreement or by reason of such Servicer's breach of its obligations and duties under this Agreement or any other Related Agreement. Indemnification under this Section 11.2 shall survive the termination of this Agreement and shall include reasonable fees and expenses of counsel and expenses of litigation. If any Servicer shall have made any indemnity payments pursuant to this Section 11.2 and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts to such Servicer, without interest. (b) For purposes of this Section, in the event of the termination of the rights and obligations of a Servicer (or any successor thereto pursuant to Section 11.3) as Servicer pursuant to Section 13.2, or a resignation by such Servicer pursuant to this Agreement, such Servicer shall be deemed to be the Servicer pending appointment of a successor Servicer pursuant to Section 13.2. The provisions of this Section 11.2(b) shall in no way affect the survival of the indemnification by the applicable Servicer provided by Section 11.2(a). SECTION 11.3. Merger or Consolidation of or Assumption of the Obligations of a Servicer. Any Person (i) into which a Servicer may be merged or consolidated, (ii) which may result from any merger or consolidation to which such Servicer shall be a party, or (iii) which may succeed to the properties and assets of such Servicer substantially as a whole, shall execute an agreement of assumption to perform every obligation of such Servicer hereunder, and whether or not such assumption agreement is executed, shall be the successor to such Servicer under this Agreement without further act on the part of any of the parties to this Agreement; provided, however, that (w) immediately after giving effect to such transaction, no Event of Default or Potential Event of Default shall have occurred and be continuing, (x) such Servicer shall have delivered to CSFB and Custodian forty-five (45) days prior written notice of any such merger or consolidation and shall have delivered to CSFB an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 11.3 and that all conditions precedent provided for in this Agreement relating to such transaction have been complied with, (y) such Servicer shall have delivered to CSFB an Opinion of Counsel either (A) stating that, in the opinion of such counsel, all financing statements and continuation statements and amendments thereto have been executed and filed that are necessary fully to preserve and protect the interest of CSFB in the Receivables and other Collateral and reciting the details of such filings, or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interest and (z) nothing herein shall be deemed to release such Servicer from any obligation. Notwithstanding anything herein to the contrary, the execution of the foregoing agreement or assumption and compliance with clause (w), (x) or (y) above shall be conditions to the consummation of the transactions referred to in clause (i), (ii) or (iii) above. SECTION 11.4. Servicer Not to Resign. Subject to the provisions of Section 11.3, neither Servicer shall resign from its respective obligations and duties hereby imposed on it as servicer of the applicable Receivables under this Agreement except upon determination that by reason of a change in legal requirements the performance of its duties under this Agreement would cause 52 it to be in violation of such legal requirements in a manner which would result in a material adverse effect on such Servicer, and CSFB does not elect to waive the obligations of such Servicer to perform the duties which render it legally unable to act or does not elect to delegate those duties to another Person. Notice of any such determination permitting the resignation of any Servicer shall be communicated to CSFB and the Custodian at the earliest practicable time (and, if such communication is not in writing, shall be confirmed in writing at the earliest practicable time) and any such determination shall be evidenced by an Opinion of Counsel to such effect delivered to and satisfactory to CSFB concurrently with or promptly after such notice. No such resignation of any Servicer shall become effective until a successor servicer acceptable to CSFB shall have assumed the responsibilities and obligations of such Servicer in accordance with Section 13.2. SECTION 11.5. Fidelity Bond, Errors and Omissions Insurance or Crime Coverage Insurance. Each Servicer shall maintain, at its own expense, either of the following types of insurance: (i) A blanket fidelity bond and an errors and omissions insurance policy, with broad coverage with responsible companies that would meet applicable requirements on all officers, employees or other persons acting in any capacity with regard to the Receivables to handle funds, money, documents and papers relating to the Receivables. Any such fidelity bond and errors and omissions insurance shall be in appropriate form in respect to the Receivable and shall protect and insure the applicable Servicer against losses, including forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of such persons. No provision of this Section 11.5(i) requiring such fidelity bond and errors and omissions insurance shall diminish or relieve such Servicer from its duties and obligations as set forth in this Agreement or any other Related Agreement to which it is a party. The minimum coverage under any such bond and insurance policy shall be in an amount which is customary and standard in the industry for servicers that service a similar portfolio of receivables and that are in accordance with the Accepted Servicing Standards. Upon request of the CSFB, the applicable Servicer shall cause to be delivered to CSFB a certified true copy of the fidelity bond and errors and omissions insurance policy and a statement from the surety and the insurer that such fidelity bond and errors and omissions insurance policy shall in no event be terminated or materially modified without thirty (30) days' prior written notice; or (ii) Crime coverage insurance which covers, among other things, employee dishonesty, money and securities, money order and counterfeit paper, depositor's forgery and computer fraud and which shall, in each case, be in an amount acceptable to CSFB and shall have a maximum deductible in the amount of $2,500. 53 ARTICLE XII ADMINISTRATION AND SERVICING OF RECEIVABLES SECTION 12.1. Duties of Servicer; Standard of Care. (a) Each Servicer shall for the benefit of CSFB (to the extent provided herein) have full power and authority to manage, service, administer and make collections on the Receivables with reasonable care, using that degree of skill and attention that such Servicer exercises with respect to all comparable automobile receivables that it services for itself or others. (b) Each Servicer's duties shall include collection and posting of all payments, responding to inquiries of Obligors on such Receivables, investigating delinquencies, sending payment statements to Obligors, accounting for collections, furnishing daily statements (if so requested) and monthly and annual statements to CSFB with respect to distributions. In performing its duties and obligations hereunder as servicer of the applicable Receivables, such Servicer shall comply with all applicable state and federal laws, shall follow its currently employed standards, policies and procedures, or such other standards, policies and procedures as such Servicer employs consistent with prudent and customary standards in the industry with respect to servicing similar receivables (the "Accepted Servicing Standards"), and shall exercise that degree of skill and care consistent with the highest degree of skill and care that such Servicer exercises with respect to similar receivables serviced by such Servicer for its own account or others. Without limiting the generality of the foregoing, and subject to the servicing standards set forth in this Agreement, each Servicer is authorized and empowered by the Borrowers and CSFB to execute and deliver, on behalf of itself, the Borrowers and CSFB or any of them, any and all instruments of satisfaction or cancellation, or partial or full release or discharge, and all other comparable instruments, with respect to such Receivables or to the Financed Vehicles securing such Receivables and/or the certificates of title with respect to such Financed Vehicles. (c) If any Servicer shall commence a legal proceeding to enforce a Receivable, the applicable Borrower shall thereupon be deemed to have automatically assigned, solely for the purpose of collection, such Receivable to such Servicer. If in any enforcement suit or legal proceeding it shall be held that any Servicer may not enforce a Receivable on the ground that it shall not be a real party in interest or a holder entitled to enforce such Receivable, the applicable Borrower shall, at such Servicer's expense and direction, take steps to enforce such Receivable, including bringing suit in its name or the name of such Borrower. The applicable Servicer shall prepare and furnish and the applicable Borrower shall execute, any powers of attorney and other documents reasonably necessary or appropriate from time to time to enable such Servicer to carry out its servicing and administrative duties hereunder. (d) Each Servicer shall conduct quarterly and annual performance reviews of the Dealers and provide to CSFB the information with respect to such Dealers specified upon CSFB's request based on such reviews, including, without limitation, the Amount Financed of Receivables originated by each Dealer. In addition, each Servicer shall perform all administrative responsibilities relating to Dealers in respect of the Receivables. 54 SECTION 12.2. Collection and Allocation of Receivable Payments. Each Servicer shall make all reasonable and diligent efforts to collect all payments called for under the terms and provisions of the Receivables as and when the same shall become due and shall follow such collection procedures as it follows with respect to all comparable automobile receivables that it services for itself or others and the Accepted Servicing Standards. Each Servicer shall direct the applicable Obligors to make payments directly to the applicable Lock-Box. Each Servicer shall be responsible for identifying any payments it or any Borrower receives from the Obligors and transferring these payments to the applicable Settlement Account in accordance with Section 6.2. Each Servicer shall allocate collections between principal and interest in accordance with applicable law and the customary servicing procedures it follows with respect to all comparable automobile receivables that it services for itself or others and the Accepted Servicing Standards. Each Servicer shall also allocate collections between Receivables and other Collateral securing the Advances. Each Servicer shall not agree to any alteration of the interest rate on any Receivable or of the amount of any Scheduled Payment on a Receivable and may not make any extension on a Receivable without the prior written consent of CSFB, except as required by law or order of a court, or permitted by this Agreement or the Related Agreements. Each Servicer may in its discretion waive any late payment charge or any other fees that may be collected in the ordinary course of servicing a Receivable. SECTION 12.3. Realization Upon Receivables. Each Servicer shall, on behalf of the Borrowers and CSFB, use all reasonable efforts, consistent with the Accepted Servicing Standards, to repossess or otherwise convert the ownership of the Financed Vehicle securing any Receivable as to which such Servicer shall have determined that payments thereunder are not likely to be resumed, as soon as is practicable after default on such Receivable. The Servicer shall use reasonable efforts consistent with its customary servicing procedures to liquidate such Financed Vehicle. Each Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of automobile receivables, which may include reasonable efforts to realize upon any recourse to Dealers and selling the Financed Vehicle at public or private sale. The foregoing shall be subject to the provision that, in any case in which the Financed Vehicle shall have suffered damage, each Servicer shall not expend funds in connection with the repair or the repossession of such Financed Vehicle unless it shall determine in its discretion that such repair and/or repossession will increase the proceeds ultimately recoverable with respect to such Receivable by an amount greater than the amount of such expenses. SECTION 12.4. Physical Damage Insurance; Other Insurance. (a) Each Servicer, in accordance with the Accepted Servicing Standards, shall verify (i) that each Obligor shall have obtained insurance covering the Financed Vehicle, as of the date of the execution of the Receivable, insuring against loss and damage due to fire, theft, collision and other risks generally covered by comprehensive and collision coverage and that each Receivable requires the Obligor to maintain such physical loss and damage insurance naming the applicable Borrower and its successors and assigns as a loss payee, (ii) that each Receivable that finances the cost of premiums for vendor's single interest insurance, credit life and credit accident and health insurance is covered by an insurance policy or certificate naming the applicable Borrower as policyholder (creditor), and (iii) as to each Receivable that finances the cost of an extended service contract, 55 the respective Financed Vehicle which secures the Receivable is covered by an extended service contract. (b) To the extent applicable, each Servicer shall not take any action which would result in noncoverage under any of the insurance policies referred to in Section 12.4(a) which, but for the actions of such Servicer, would have been covered thereunder. Each Servicer, on behalf of CSFB, shall take such reasonable action as shall be necessary to permit recovery under any of the foregoing insurance policies. Any amounts collected by each Servicer under any of the foregoing insurance policies shall be deposited into the applicable Settlement Account pursuant to Section 6.2. Each Servicer shall use reasonable efforts to cause each Obligor to maintain on the related Financed Vehicle insurance coverage referred to in Section 12.4(a)(i) in an amount specified in Section 7.2(n). The parties hereto acknowledge that the Servicers shall not be required to force place any insurance coverage referred to in Section 12.4(a)(i) above, or any other insurance coverage. SECTION 12.5. Maintenance of Security Interests in Financed Vehicles. (a) Each Servicer shall take such steps as are required by applicable law to maintain perfection of (i) the security interest created by each Receivable in the related Financed Vehicle and (ii) the security interest of CSFB in the Collateral created by this Agreement, including, but not limited to, (to the extent necessary under applicable law) obtaining the execution by the Obligors and the recording, registering, filing, re-recording, re-registering and refiling of all security agreements, financing statements and continuation statements or instruments as are necessary to maintain the security interest granted by Obligors under the respective Receivables. The Borrowers and CSFB hereby authorize each Servicer to take such steps as are necessary to re-perfect or continue the perfection of such security interest on behalf of CSFB in the event of the relocation of a Financed Vehicle or for any other reason. SECTION 12.6. Additional Covenants of Servicer. Neither Servicer shall release the Financed Vehicle securing each Receivable from the security interest granted by such Receivable in whole or in part except in the event of payment in full by the Obligor thereunder or repossession and resale, neither Servicer shall impair the rights of CSFB in such Receivables, and neither Servicer shall amend a Receivable, except that extensions may be granted in accordance with Section 12.2. SECTION 12.7. Monthly Servicing Fee. The Monthly Servicing Fee with respect to each Servicer for each Distribution Date shall be an amount equal to the sum of (a) the product of (i) one-twelfth of the Servicing Rate and (ii) the average aggregate Principal Balance of the respective Receivables during the Related Collection Period plus (b) all late fees, prepayment charges and other administrative fees or similar charges allowed by applicable law with respect to such Receivables, collected (from whatever source) on such Receivables during the Related Collection Period. SECTION 12.8. Monthly Servicing Report. Not later than 12:00 p.m., New York City time on each Determination Date, each Servicer shall deliver to CSFB a Monthly Servicing Report 56 containing all the information specified in Exhibit C to this Agreement relating to their respective Receivables. SECTION 12.9. Semi-Annual Statement as to Compliance; Notice of Default. (a) Each Servicer shall deliver to CSFB on or before January 31, 1997, and June 30, 1997, an Officer's Certificate, stating that a review of such Servicer's performance under this Agreement has been made under such officer's supervision and to the best of such officer's knowledge, based on such review, such Servicer has fulfilled all its obligations under this Agreement in all respects throughout such period or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officer and the nature and status thereof. (b) Each Servicer shall deliver to CSFB promptly after having obtained knowledge thereof, but in no event later than five (5) Business Days thereafter, written notice in any Officer's Certificate of the existence of any Potential Event of Default. SECTION 12.10. Independent Certified Public Accountant's Report. Each Servicer shall cause a firm of independent nationally recognized certified public accountants, who may also render other services to such Servicer or to the Borrowers, to deliver to CSFB on or before the last day of the third calendar month after the end of the fiscal year of such Servicer, a report dated as of the end of the fiscal year of such Servicer and addressed to the Board of Directors of such Servicer and to the effect that such firm has examined the financial statements of such Servicer and issued its report therefor and that such examination was made in accordance with generally accepted auditing standards (except as otherwise noted therein), and accordingly included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances. The reports will also indicate that the firm is independent of the Servicers within the meaning of Code of Professional Ethics of the American Institute of Certified Public Accountants. Notwithstanding the foregoing in this Section 12.10, for so long as the Borrowers are also Servicers, the delivery of the annual Financial Statements of AutoInfo, Inc. and its consolidated subsidiaries pursuant to Section 8.4(a)(i) shall satisfy the requirements of this Section 12.10. SECTION 12.11. Interim Certified Public Accountant's Reports. Each Servicer shall cause a firm of independent nationally recognized certified public accountants, who may render other services to such Servicer or to the Borrowers, (a) to deliver to CSFB on or before the fourth (4th) Distribution Date after the initial Advance a report addressed to CSFB and to the effect that (i) a review in accordance with agreed upon procedures reasonably acceptable to CSFB was made of the Receivables and the Monthly Servicing Report issued with respect to each of the first three Distribution Dates after the initial Advance Date, (ii) except as disclosed in the report, no exceptions or errors in such Monthly Servicing Report were found, (iii) the collections, balances, delinquency and loss information relating to the Receivables, as well as the calculations, contained in such Monthly Servicing Report was found to be accurate and (b) to deliver to CSFB on or before the seventh and tenth Distribution Dates after the initial Advance, a report addressed to CSFB to the effect that (i) a review in accordance with agreed upon procedures reasonably 57 acceptable to CSFB was made of the Receivables and the Monthly Servicing Report issued with respect to one randomly selected Distribution Date during the preceding 3-month period; (ii) except as disclosed in the report, no exceptions or errors in such Monthly Servicing Report was found, (iii) the collections, balances, delinquency and loss information relating to the Receivables contained in such Monthly Servicing Report, well as the related calculations, were found to be accurate. The reports will also indicate that the firm is independent of the Servicers within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants. SECTION 12.12. Servicer Expenses. Each Servicer shall be required to pay all expenses incurred by it in connection with its activities hereunder, including fees and disbursements of independent accountants, taxes imposed on such Servicer, and expenses incurred in connection with distributions and reports to CSFB and Custodian and fees and expenses of any successor Servicer and any other subcontractor. SECTION 12.13. Access to Certain Documentation and Information Regarding Receivables. Each Servicer shall provide to representatives of CSFB and Custodian reasonable access to documentation and computer systems and information regarding the Receivables. In each case, such access shall be afforded without charge upon at least two (2) Business Days' prior notice and during normal business hours. Nothing in this Section 12.13 shall derogate from the obligation of each Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors, and the failure of such Servicer to provide access as provided in this Section 12.13 as a result of such obligation shall not constitute a breach of this Section 12.13. SECTION 12.14. Documents Maintained by Servicer. Except for those documents in the Receivables File, each Servicer shall retain possession of all documents and files relating to the Receivables and hold such documents and files relating to the Receivables as custodian for CSFB. 58 ARTICLE XIII SERVICER DEFAULT SECTION 13.1. Servicer Default. If any one of the following events (each, a "Servicer Default") shall occur and be continuing: (a) Any failure by any Servicer to deposit into the applicable Settlement Account or other account as required in this Agreement any proceeds or payment required to be so delivered under the terms of this Agreement that shall continue unremedied for a period of one (1) Business Day; or (b) Any failure by any Servicer to deliver any certificate or Monthly Servicing Report within one (1) Business Day after the date such certificate or Report, as the case may be, is required to be delivered; or (c) Failure on the part of any Servicer duly to observe or to perform in any respect any other covenants or agreements of such Servicer set forth in this Agreement or any Related Agreement, which failure shall continue unremedied for a period of fifteen (15) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to such Servicer by any Borrower or Custodian or CSFB; or (d) A breach of any representation or warranty of any Servicer hereunder that continues unremedied for a period of one (1) Business Day after the earlier of the date on which such Servicer obtains knowledge thereof or on which written notice of such failure thereof shall have been given to such Servicer; (e) The occurrence of an Event of Bankruptcy with respect to any Servicer; or (f) Any assignment by any Servicer of its duties or rights hereunder except as specifically permitted hereunder, or any attempt to make such an assignment; then, and in each and every case, so long as a Servicer Default shall not have been remedied, CSFB, in addition to any other remedies it may have, may terminate all of the rights and obligations of such Servicer as servicer of the applicable Receivables under this Agreement. Each Servicer shall be entitled to its pro rata share of its respective Monthly Servicing Fee for the number of days in the Collection Period prior to the effective date of its termination. On or after the receipt by a Servicer and the effective date of written notice of termination from CSFB, all authority and power of such Servicer under this Agreement, whether with respect to the Receivables or otherwise, shall, without further action, pass to and be vested in a successor Servicer as may be appointed under Section 13.2; provided, however, that such successor Servicer shall have no liability with respect to any obligation which was required to be performed by the predecessor Servicer prior to the date such successor Servicer becomes Servicer or any claim of a third party based on any alleged action or inaction of such predecessor Servicer as Servicer; and, 59 without limitation, CSFB is hereby authorized and empowered to execute and deliver, on behalf of such predecessor Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of the applicable Receivables and related documents, or otherwise. The predecessor Servicer shall cooperate with the successor Servicer and CSFB in effecting the termination of the responsibilities and rights of such predecessor Servicer as servicer of the applicable Receivables under this Agreement, including (x) the transfer to such successor Servicer for administration by it of all funds that shall at the time be held or should have been held by such predecessor Servicer for deposit, or shall thereafter be received with respect to the applicable Receivables and all funds in an account related to such Receivables and the related documents and statements held by it hereunder and (y) the delivery to such successor Servicer all files and records concerning and relating to the applicable Receivables and a computer tape in readable form containing all information necessary to enable such successor Servicer to service the applicable Receivables and the related Receivable Files in such predecessor Servicer's possession. All reasonable costs and expenses (including attorneys' fees) incurred in connection with transferring the Receivable Files and any other related documents and instruments to any successor Servicer and amending this Agreement to reflect such succession as Servicer pursuant to this Section 13.1 shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs and expenses. In addition, any successor Servicer shall be entitled to payment from the immediate predecessor Servicer for reasonable transition expenses incurred in connection with acting as successor Servicer, and to the extent not so paid, such payment shall be made pursuant to the Custodial Agreement. The predecessor Servicer shall grant CSFB and the successor Servicer reasonable access to such predecessor Servicer's premises at such predecessor Servicer's expense. If requested by CSFB the successor Servicer shall modify or terminate any arrangements relating to (i) the applicable Lock-Box with the Lock-Box Bank or (ii) the Lock-Box Agreement, and direct the applicable Obligors to make all payments under the applicable Receivables directly to such successor Servicer at the predecessor Servicer's expense (in which event such successor Servicer shall process such payments directly, or, through a lock-box with a lock-box bank at the direction of CSFB.) SECTION 13.2. Appointment of Successor Servicer. (a) Upon any Servicer's receipt of notice of termination pursuant to Section 13.1 or, if such Servicer resigns, in accordance with the terms of this Agreement, the predecessor Servicer shall continue to perform its functions as servicer of the applicable Receivables under this Agreement only until the date specified in such termination notice or, if no such date is specified in a notice of termination, until receipt of such notice and, in the case of resignation, until the later of (x) the date ninety (90) days from the delivery to CSFB and the Custodian of written notice of such resignation (or written confirmation of such notice) in accordance with the terms of this Agreement and (y) the date upon which such predecessor Servicer shall become legally unable to act as Servicer, as specified in the notice of resignation and accompanying Opinion of Counsel. 60 (b) On and after the date any Servicer receives a notice of termination pursuant to Section 13.1 and Section 13.3, CSFB shall (i) succeed to and assume all of such Servicer's responsibilities, rights, duties and obligations under this Agreement with respect to servicing of the applicable Receivables, unless CSFB is prohibited by law from so acting, or (ii) appoint as successor Servicer any established financial institution having a net worth of not less than $20,000,000 and whose regular business shall include the servicing of receivables similar to the Receivables subject to this Agreement and such successor Servicer shall succeed to all rights and assume all of the responsibilities, duties and liabilities of such Servicer under this Agreement with respect to servicing of the applicable Receivables prior to the termination of such Servicer's responsibilities, duties, liabilities and obligations with respect to servicing of the applicable Receivables under this Agreement in accordance with the terms of this Agreement. In the event that a successor Servicer has not been appointed at the time when the predecessor Servicer has ceased to act as Servicer in accordance with this Section 13.2, then CSFB shall appoint itself as successor Servicer, or petition a court of competent jurisdiction to appoint a successor to such Servicer under this Agreement. (c) Upon such appointment, the successor Servicer shall be the successor Servicer in all respects to the predecessor Servicer and shall be subject to all the responsibilities, duties, and liabilities arising thereafter relating thereto placed on the predecessor Servicer as servicer of the applicable Receivables, and shall be entitled to the respective Monthly Servicing Fee and all of the rights granted to the predecessor Servicer, by the terms and provisions of this Agreement. SECTION 13.3. Action Upon Certain Failures of the Servicer. In the event that CSFB shall have knowledge of any Servicer Default or event which, with notice or lapse of time or both, would unless cured or waived, become a Servicer Default, CSFB shall give notice thereof to the Borrowers, the Servicers and the Custodian. For all purposes of this Agreement, in the absence of actual knowledge by CSFB, CSFB shall not be deemed to have knowledge of any failure of any Servicer as specified in Section 13.1 unless notified thereof in writing by such Servicer. CSFB shall be under no duty or obligation to investigate or inquire as to any potential failure of any Servicer specified in Section 13.1. 61 ARTICLE XIV THE LENDER SECTION 14.1. CSFB's Authority. Each Borrower hereby irrevocably appoints CSFB, and any successor or assigns to CSFB, its true and lawful attorney, with full power of substitution, in the name of such Borrower, at the expense of such Borrower, to the extent permitted by law to exercise, at any time and from time to time, any or all of the following powers with respect to all or any of the Collateral: (i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof, (ii) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto, (iii) to sell, transfer, assign or otherwise deal with the same or the proceeds thereof as fully and effectively as if CSFB were the absolute owner thereof, and (iv) to extend the time of payment of any or all thereof and to make any allowance or other adjustments with respect thereto. SECTION 14.2. Degree of Care. Notwithstanding any term or provision of this Agreement, CSFB shall incur no liability to the Borrowers except for a material breach of the terms of this Agreement or for gross negligence, bad faith or willful misconduct in carrying out its duties, if any, to the Borrowers. CSFB shall be protected and shall incur no liability to any such party in relying upon the accuracy, acting in reliance upon the contents and assuming the genuineness of any notice, demand, certificate, signature, instrument or other document believed by CSFB to be genuine and to have been duly executed by the appropriate signatory, and (absent manifest error or actual knowledge to the contrary) CSFB shall not be required to make any independent investigation with respect thereto. CSFB shall, at all times, be free independently to establish to its reasonable satisfaction the existence or nonexistence, as the case may be, of any fact the existence or nonexistence of which shall be a condition to the exercise or enforcement of any right or remedy under this Agreement or any of the Related Agreements. 62 ARTICLE XV GENERAL SECTION 15.1. Survival. Except as otherwise expressly provided herein, all covenants, agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, the Promissory Note and the Custody Agreement, the making of each Advance hereunder, and the termination of this Agreement. SECTION 15.2. Waiver; Amendments. No delay or failure to take any action on the part of CSFB or the holder of the Promissory Note or other Obligations in the exercise of any right, power, privilege or remedy shall operate as a waiver thereof and hereof, nor shall any single or partial exercise by any of them of any such right, power, privilege or remedy preclude other or further exercise thereof or the exercise of any other right, power, privilege or remedy shall be construed to be a waiver of any Event of Default or Potential Event of Default. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Promissory Note or any Related Agreement shall in any event be effective unless the same shall be in writing and signed and delivered by CSFB and the Borrower. SECTION 15.3. Confirmations. Each of the Borrowers and CSFB (or the holder of the Promissory Note) agrees from time to time, upon written request received by it from the other, to confirm to the other in writing the aggregate unpaid principal amount of the Advances then outstanding under the Promissory Note. SECTION 15.4. Notices. All notices, amendments, waivers, consents and other communications provided to any party hereto under this Agreement shall be in writing and addressed, delivered or transmitted to such party at its address or facsimile number set forth in Schedule II at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted upon receipt of electronic confirmation of transmission. SECTION 15.5. Costs, Expenses and Taxes. The Borrowers further agree to pay all out-of-pocket costs and expenses (including reasonable attorneys' fees and legal expenses and reasonable accountant fees and expenses) incurred by CSFB in connection with entering into this Agreement and the administration, enforcement, waiver or amendment of this Agreement, and any other Related Agreement. In addition, the Borrowers agree to pay, and to save CSFB harmless from all liability for, any document, stamp, filing, recording, or other taxes (other than net income taxes of CSFB) which may be payable in connection with the borrowings hereunder or the execution, delivery, recording or filing of this Agreement or of any other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith. All obligations provided for in this Section 15.5 shall be the joint and several obligations of the Borrowers and shall survive any termination of this Agreement. In the event that either party commences a lawsuit or proceeding against the other in connection with this Agreement or 63 any other Related Agreement, any and all reasonable attorneys' fees and costs incurred by CSFB in connection with such lawsuit or proceeding shall be paid by the Borrowers. All amounts payable by the Borrowers under this Section 15.5 and Section 15.6 and under the other provisions of this Agreement and any other Related Agreement shall, except as otherwise expressly provided, be immediately due upon request for the payment thereof. SECTION 15.6. Indemnification. In consideration of CSFB's execution and delivery of this Agreement and CSFB's extension of its commitment pursuant to this Agreement, each Borrower hereby agrees to indemnify, defend, exonerate and hold CSFB and its officers, directors, stockholders and employees (herein collectively called "Lender Parties" and individually called a "Lender Party") free and harmless from and against any and all claims, demands, actions, causes of action, suits, losses, costs (including, without limitation, all documentary, recording, filing, or other stamp taxes or duties), charges, liabilities, damages, and expenses in connection therewith (irrespective of whether such Lender Party is a party to the action for which indemnification hereunder is sought), and including, without limitation, reasonable attorneys' fees and disbursements (called in this paragraph the "Indemnified Obligations"), incurred by Lender Parties or any of them as a result of, or arising out of, or relating to (i) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Advance or involving any Advance, or (ii) the execution, delivery, performance or enforcement of this Agreement, the other Related Agreements and any instrument, document or agreement executed pursuant hereto or thereto by any of the Lender Parties, or (iii) the ownership, operation, maintenance, leasing, or titling of the Receivables, except in each case for any such Indemnified Obligations arising on account of the relevant Lender Party's gross negligence or willful misconduct, and each Borrower agrees to the payment and satisfaction of each of the Indemnified Obligations which is permissible under applicable law; provided that the Indemnified Obligations shall not include recourse for Defaulted Receivables or losses suffered by stockholders as a result of a decline in the value of their investment in CSFB. SECTION 15.7. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, ANY RELATED AGREEMENT OR THE PROMISSORY NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF CSFB, ANY SERVICER OR ANY BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING - -------- ------- ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT CSFB'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE BORROWERS AND EACH OF THE SERVICERS HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ALL FEDERAL AND STATE COURTS OF THE STATE OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. EACH OF THE BORROWERS AND EACH OF THE SERVICERS FURTHER 64 IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH OF THE BORROWERS AND EACH OF THE SERVICERS HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT A BORROWER OR A SERVICER HAVE OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT, ANY RELATED AGREEMENT AND THE PROMISSORY NOTE. SECTION 15.8. Governing Law; Severability. THIS AGREEMENT AND THE PROMISSORY NOTE SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or unenforceable or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition, unenforceability or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. All obligations of the Borrowers and rights of CSFB and the holder of the Promissory Note or other Obligations shall be in addition to and not in limitation of those provided by applicable law or in any other written instrument or agreement relating to any of the Obligations. SECTION 15.9. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE PROMISSORY NOTE OR ANY OTHER RELATED AGREEMENT TO WHICH IT IS A PARTY, OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT OR ANY RELATED TRANSACTION, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. SECTION 15.10. Successors and Assigns. This Agreement shall be binding upon the Borrowers, the Servicers and CSFB and their respective successors and assigns, and shall inure to the benefit of the Borrowers, the Servicers and CSFB and their respective successors and assigns; provided, however, that the Borrowers and the Servicers shall not have the right to assign their respective rights, obligations or delegate their respective duties under this Agreement or any 65 other Related Agreement without CSFB's prior written consent. CSFB may from time to time, without the consent of the Borrowers and the Servicers, assign all or a portion of its rights under the Related Agreements, including rights to receive payments of principal and interest in respect of all or a portion of the Advances, and such assignee shall be entitled to all rights in respect of such assigned interest which are provided to CSFB under the Related Agreements. This Agreement and the other Related Agreements contain the entire agreement of the parties hereto with respect to the matters covered hereby. SECTION 15.11. Headings. Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 66 IN WITNESS WHEREOF, the Borrowers and CSFB have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. AUTOINFO FINANCE OF VIRGINIA, INC., as Borrower and Servicer By:____________________________________________ Name: Scott J. Zecher Title: Chief Executive Officer CAR LOAN CO., INC., as Borrower and Servicer By:____________________________________________ Name: Scott J. Zecher Title: Chief Executive Officer CS FIRST BOSTON MORTGAGE CAPITAL CORP., as Lender By:___________________________________________ Name: Title: EX-10.U 11 CUSTODY AGREEMENT ================================================================================ CUSTODY AGREEMENT by and among CS FIRST BOSTON MORTGAGE CAPITAL CORP., Lender and AUTOINFO FINANCE OF VIRGINIA, INC., Borrower and Servicer and CAR LOAN CO., INC., Borrower and Servicer and CRESTAR BANK, Custodian Dated as of December 9, 1996 ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS; APPOINTMENT........................ 1 Section 1.1. General................................................. 1 Section 1.2. Certain Defined Terms................................... 1 Section 1.3. Incorporation of Certain Definitions.................... 3 Section 1.4. Reference to Time....................................... 3 Section 1.5. Appointment of the Custodian............................ 3 ARTICLE II RECEIVABLE INFORMATION LIST...................... 4 Section 2.1. Receivable Information List; Computer File.............. 4 Section 2.2. Documents Maintained by Servicer........................ 4 ARTICLE III CUSTODIAL ARRANGEMENT.......................... 5 Section 3.1. Deposit of Collateral................................... 5 Section 3.2. Transfer of Receivables; Delivery of Documents.......... 5 Section 3.3. Borrowing Request and Review of Receivable Files........ 6 Section 3.4. Trust Receipt and Certification......................... 7 Section 3.5. Release of Receivable Files............................. 8 Section 3.6. Return.................................................. 9 Section 3.7. Custodial Register...................................... 9 Section 3.8. Power of Attorney....................................... 9 Section 3.9. No Service Charge for Sale or Transfer of Receivables... 9 Section 3.10. The Lender May Reject Receivables....................... 9 Section 3.11. Affidavit of Lost Receivable File....................... 10 ARTICLE IV DISTRIBUTION DATE PAYMENTS; SETTLEMENT ACCOUNTS...... 11 Section 4.1. Distribution Date Payments.............................. 11 Section 4.2. Settlement Account...................................... 11 Section 4.3. Distributions........................................... 11 Section 4.4. Payments of Shortfalls.................................. 12 Section 4.5. Investments............................................. 12 Section 4.6. Simultaneous Transfers.................................. 12 Section 4.7. Transfer of Receivables ................................ 12 ARTICLE V CUSTODIAN................................ 14 Section 5.1 Representations, Warranties and Covenants of Custodian.. 14 Section 5.2 Custodian of Documents.................................. 15 Section 5.3 Charges and Expenses.................................... 15 Section 5.4 No Adverse Interests.................................... 16 Section 5.5 Inspections............................................. 16 Section 5.6 Insurance............................................... 16 Section 5.7 Limitation of Liability................................. 16 Section 5.8 Indemnification......................................... 16 Section 5.9 Removal of Custodian.................................... 17 Section 5.10 Termination of Custodian................................ 17 Section 5.11 Reliance of Custodian................................... 17 Section 5.12 Transmission of Receivable Files........................ 17 Section 5.13 Authorized Representatives.............................. 18 Section 5.14 Merger or Consolidation of or Assumption of the Obligations of the Custodian........................ 18 ARTICLE VI MISCELLANEOUS PROVISIONS...................... 19 Section 6.1 Amendment............................................... 19 Section 6.2 Governing Law and Jurisdiction; Waiver of Jury Trial.... 19 Section 6.3 Notices................................................. 19 Section 6.4 Severability of Provisions.............................. 20 Section 6.5 No Partnership.......................................... 20 Section 6.6 Counterparts............................................ 20 Section 6.7 Assignment.............................................. 20 Section 6.8 Headings................................................ 20 EXHIBIT A Form of Trust Receipt and Certification................... A-1 EXHIBIT B Request for Release of Documents.......................... B-1 EXHIBIT C Authorized Officers of the Lender......................... C-1 EXHIBIT D Authorized Officers of AutoInfo Finance of Virginia, Inc.. D-1 EXHIBIT E Authorized Officers of Car Loan Co., Inc.................. E-1 EXHIBIT F Authorized Officers of Custodian.......................... G-1 ii CUSTODY AGREEMENT ----------------- This Custody Agreement ("Agreement"), dated as of December 9, 1996, is by and among AutoInfo Finance of Virginia, Inc., a Virginia corporation ("AutoInfo Finance"), Car Loan Co., Inc., a Connecticut corporation ("Car Loan Co.") (AutoInfo Finance and Car Loan Co. are referred to herein collectively as the "Borrowers" and each a "Borrower"), CS First Boston Mortgage Capital Corp., a New York corporation ("Lender"), and Crestar Bank, a Virginia banking corporation ("Custodian"). PRELIMINARY STATEMENT --------------------- A. Pursuant to the Loan, Security and Servicing Agreement dated as of December 9, 1996 (the "Loan Agreement") among the Lender and the Borrowers, the Lender may from time to time make Advances to the Borrowers. B. In order to secure repayment of the Advances, each Borrower has transferred, assigned, pledged and granted, and will from time to time transfer, assign, pledge and grant, to the Lender and its successors and assigns a security interest in and lien on all of such Borrower's right, title and interest in and to the Collateral. C. The Lender and the Borrowers desire to provide for the custody and management of the Receivable Files relating to the Receivables. D. The Lender and the Borrowers have requested that the Custodian act as custodian to hold all Receivable Files relating to the Receivables and the proceeds thereof as bailee of, and agent for the benefit of the Lender. The Custodian is willing and able to perform the duties and obligations of a custodian and bailee as set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Lender, the Borrowers and the Custodian agree as follows: ARTICLE I DEFINITIONS; APPOINTMENT Section 1.1. General. For the purpose of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, the terms defined in this Article include the plural as well as the singular, the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision, and Section references refer to Sections of this Agreement. 1 Section 1.2. Certain Defined Terms. Whenever used in this Agreement, unless the context otherwise requires, the following words shall have the meanings set forth below: "Agreement": This Custody Agreement, including all exhibits hereto, and all amendments hereof and supplements hereto. "Assignment": With respect to a Receivable, collectively the original instrument of assignment of such Receivable and all other documents securing such Receivable made by the Person originating such Receivable to the applicable Borrower, which is in a form sufficient under the laws of the jurisdiction in which the related Financed Vehicle is located to permit the assignee to exercise all rights granted by the Obligor under such Receivable and such other documents and all rights available under applicable law to the obligee under such Receivable and which, in each case, may, to the extent permitted by the laws of the state in which the related financed vehicle is located, be a blanket instrument of assignment covering other Receivables as well. "Authorized Representative": As defined in Section 5.13 hereof. "Available Funds": With respect to any Distribution Date, all collections and other amounts received in respect of the Receivables and deposited to the Settlement Accounts during the related Collection Period. "Borrowing Request": As defined in the Loan Agreement and in the form attached thereto. "Collateral Value Deficiency Notice": As defined in the Loan Agreement. "Collection Period": As defined in the Loan Agreement. "Confirmation": As defined in the Loan Agreement. "Delivery Date": The date on which the Receivables and related Receivable Files are delivered to the Custodian by the applicable Borrower. "Lender's Account": The account designated in writing by the Lender to Custodian, as Lender may so designate from time to time. "Monthly Servicing Fee": As defined in the Loan Agreement. "Receivable": As defined in the Loan Agreement. "Receivable Files": As defined in Section 3.2 hereof. "Receivable Information List": As defined in the Loan Agreement. 2 "Servicer": AutoInfo Finance of Virginia, Inc. or Car Loan Co., Inc., as applicable, or any successor thereto. "Settlement Account": An account established pursuant to Section 4.2 hereof and the Loan Agreement. Section 1.3. Incorporation of Certain Definitions. All capitalized terms used herein and not otherwise defined shall have the meanings assigned in the Loan Agreement, unless the context clearly indicates otherwise. Section 1.4. Reference to Time. All references to time herein shall be deemed to refer to New York City time unless otherwise provided. Section 1.5. Appointment of the Custodian. The Lender and the Borrowers hereby appoint the Custodian, and the Custodian hereby accepts its appointment, to act as the bailee of and agent for the Lender and its successors and assigns for the purpose of taking custody of the documents contained in the Receivable Files and the proceeds thereof and to act on behalf of the Lender under this Agreement and, in the absence of other written instructions from the Lender, to exercise such powers hereunder as are specifically delegated to or required of the Custodian by the terms hereof. With respect to each Receivable, the Custodian's appointment as the bailee and agent shall terminate upon such time as such Receivable is not subject of the Loan Agreement or upon notice from the Lender. 3 ARTICLE II RECEIVABLE INFORMATION LIST Section 2.1. Receivable Information List; Computer File. (a) Custodian shall maintain, as an attachment to its executed copy of this Agreement or otherwise in its records or possession, the most recent version of the Receivable Information List, as such list may be amended from time to time. Custodian shall receive a printed copy of the amended Receivable Information List with each revised copy of the Computer File. If a Computer File received by Custodian is not accompanied by such amended Receivable Information List, Custodian shall immediately produce such a printed list from the related Computer File. The Receivable Information List in the custody of Custodian shall be the definitive Receivable Information List for all purposes under this Agreement. (b) On or before (i) each Delivery Date and (ii) each Distribution Date the applicable Borrower shall provide to the Custodian and to the Lender a Computer File for each Receivable, as of a date not earlier than the Business Day prior to such Delivery Date or Distribution Date. With respect to any Collateral Value Deficiency Notice, the applicable Borrower shall, along with the delivery of any additional Receivables as required pursuant to the terms of the Loan Agreement, provide to the Custodian and the Lender a Computer File for such Receivables. Each Computer File shall clearly indicate Defaulted Receivables in a manner acceptable to the Custodian and the Lender and, when delivered, shall be accompanied by a printed copy of the amended Receivable Information List. Section 2.2. Documents Maintained by Servicer. Except as delivered to the Custodian hereunder, all other documents and files relating to the Receivables shall be retained and held by the applicable Servicer pursuant to the terms of the Loan Agreement. 4 ARTICLE III CUSTODIAL ARRANGEMENT Section 3.1. Deposit of Collateral. Each Borrower shall deposit with the Custodian, and the Custodian agrees to hold in pledge as bailee of and as agent for the Lender and its successors and assigns, such Collateral that may be so deposited hereunder from time to time. The Custodian shall maintain such Collateral so deposited in separate records and files. Section 3.2. Transfer of Receivables; Delivery of Documents. A Borrower shall, prior to the delivery of or with the Borrowing Request relating to each Advance, deliver, or cause to be delivered, to the Custodian the following documents: (i) the Receivable Information List, as amended; (ii) an executed Assignment, if applicable; (iii) the original certificate of title or title guaranty issued by the related Dealer or a copy of an application for title if no certificate of title has yet been issued; provided, however, that, with respect to any Advances to AutoInfo Finance within 90 days after the date of this Agreement, such certificate of title, title guaranty or application for title need not be delivered to the Custodian prior to or with the delivery of the Borrowing Request; provided, further, that for any Receivable subject to such Advance and for which any such certificate of title, title guaranty or application for title is not so delivered prior to or with such Borrowing Request, AutoInfo Finance shall cause the original certificate of title to be delivered to the Custodian prior to the earlier of (x) 90 days after the applicable Advance Date and (y) 180 days after the date of origination of the related Receivable; (iv) the fully executed original of the Receivable signed by the applicable Borrower in the following form: "Assigned to [the Lender or, if requested by the Lender, in blank], without recourse" together with all intervening endorsements showing a complete chain of title from originator to the Borrower; (v) a copy of the credit application executed by the Obligor; (vi) the originals of any assumption, modification, written assurance, substitution agreement, extension or guaranty agreement and any assignment thereof; 5 (vii) the original of any security agreement or equivalent document executed in connection with the Receivable and any assignment thereof; (viii) if any Receivable was originated in a state in which the filing of a financing statement under the UCC is required to perfect an interest in motor vehicles, copies of the filed statements (as well as a consent to file additional UCC-1s or UCC-3s as required); provided that the Custodian has no obligation to determine whether such financing statements are required to perfect an interest in motor vehicles; (ix) such other documents as may be in existence evidencing the security interest of the Lender in the Receivable; provided, however, that the Custodian has no obligation to determine the existence of or necessity for such other documents; and (x) such other documents as the Lender may require after notice to the Borrowers and the Custodian which the Custodian has consented to review. All documents held by Custodian with respect to a Receivable, including those delivered to the Custodian pursuant to Section 3.2, are referred to herein as the "Receivable File." Each Borrower represents and warrants to the Lender and the Custodian that, with respect to such Borrower's Receivables, (i) each of such documents which is required to be signed by the Obligor has been signed by the Obligor in the appropriate spaces; and (ii) all blanks on any form have been properly filled in and each form has otherwise been correctly prepared. Each Borrower shall, upon execution of this Agreement, deliver to the Custodian the following: With respect to Receivables that are chattel paper, evidence of filing with the appropriate office in the following jurisdictions of the following UCC-1 financing statements, each indicating the Receivables as collateral: (a) UCC-1 financing statement executed by the applicable Borrower as debtor, naming the Lender as secured party, and filed in the State of Virginia or the State of Connecticut, as applicable; and (b) such other filings under the UCC as may be required by the Lender; Section 3.3. Borrowing Request and Review of Receivable Files. (a) Upon receipt of a Borrowing Request from a Borrower, the Custodian shall review the Receivable Files which such Borrower has deposited with the Custodian in connection with such Borrowing Request to determine whether the Custodian has received a Receivable File with respect to each Receivable listed on the Schedule of Receivables attached to such Borrowing 6 Request. Custodian shall immediately advise the Lender and such Borrower by telephone or by facsimile transmission if it determines that such Receivables and other documents in the related Receivable File are not so deposited. (b) The Custodian shall review the Receivable Files: (i) with respect to the Receivables subject to Advances referred to in the first and second provisos in Section 3.2(iii) hereof and for which no original certificate of title, title guaranty or copy of an application for title is delivered prior to or with a Borrowing Request, within 90 days after the applicable Advance Date; and (ii) with respect to any other Receivables not subject to clause (i) in this Section 3.3(b), within 120 days after the applicable Advance Date, in each case to verify that original certificates of title have been delivered to the Custodian. The Custodian shall immediately notify the applicable Borrower and the Lender by telephone or facsimile transmission if it determines that any such original certificate of title has not been delivered to the Custodian. Section 3.4. Trust Receipt and Certification. (a)(i) Within two (2) Business Days following receipt of the Receivable Files, the Computer File and the Borrowing Request, the Custodian shall, with respect to the Receivables referenced in such Borrowing Request, execute and deliver to the Lender (with a copy to the related Borrower which shall be clearly marked as a copy and non-transferable) one or more certifications (each, a "Trust Receipt and Certification") in the form set forth in Exhibit A hereto. (ii) In the event of delivery by the Lender to the Borrowers and the Custodian of a Collateral Value Deficiency Notice pursuant to the Loan Agreement the Custodian shall, upon receipt of such Notice and the Receivables and the related Receivable Files delivered to Custodian by such Borrower(s) pursuant to such Notice, execute and deliver to the Lender (with a copy to the applicable Borrower which shall be clearly marked as a copy and non-transferrable) one or more Trust Receipt(s) and Certification(s) in the form attached hereto as Exhibit A with respect to such Receivable or Receivables. (b) The Custodian shall, in each Trust Receipt and Certification, certify and confirm as to each Receivable listed on the Schedule of Receivables attached to the Borrowing Request (or in the case of a Collateral Value Deficiency Notice the Receivables delivered to it) that, except as noted on the schedule of exception report attached to the related Trust Receipt and Certification: (i) all documents required to be delivered to it pursuant to Section 3.2 hereof are in the Custodian's possession; (ii) such documents have been reviewed by the Custodian and appear regular on their face and relate to such applicable Receivables and neither the Receivables nor the Assignments contains any notations on their face which appear to evidence any claims, liens, security interests, encumbrances or other restrictions or transfers; 7 (iii) each Receivable bears an original signature or signatures purporting to be the signature or signatures of the person or persons named as the maker or Obligor under the Receivable; (iv) if the Receivable does not name "[the related Borrower]" as the holder or payee, the Receivable bears the original endorsements that complete the chain of ownership from the original holder or payee to "[the related Borrower]"; (v) the original of the Assignment of the Receivable required under Section 3.2 and any intervening assignment of such Receivable bear the original signature purporting to be the signature of the named obligee or beneficiary (and any other necessary party including subsequent assignors) and that such Assignment and any such intervening assignment complete the chain of title from the originator to the "[the related Borrower]"; (vi) each Receivable has been endorsed as noted in Section 3.2 hereof; and (vii) based on its review of the Receivable File with respect to each such Receivable, the information set forth on the Schedule of Receivables attached to the Borrowing Request or in the Computer File, as applicable, accurately reflects the information contained in each Receivable Files. (c) If, on each Distribution Date, a Receivable is released from the lien of the Loan Agreement or is rejected by the Lender, the Lender shall cause the applicable Trust Receipt and Certification to be delivered via overnight courier to Custodian for cancellation. In the event that any Receivables covered by such surrendered Trust Receipt(s) and Certification(s) are still subject of an Advance and the lien of the Loan Agreement, the Custodian shall issue and deliver to the Lender via overnight courier a replacement Trust Receipt and Certification covering such Receivables which are still subject to an Advance and the lien of the Loan Agreement. Section 3.5. Release of Receivable Files. From time to time and as appropriate for the repossession of or foreclosure on the collateral securing any of the Receivables, pay off, full prepayment and repurchase, or in the event that the Receivable has been rejected, is a Liquidated Receivable or is a Defaulted Receivable, Custodian is hereby authorized, upon written request of the applicable Borrower in the form annexed hereto as Exhibit B, to release to such Borrower or such Borrower's designee the related Receivable Files or the documents set forth in such request. All documents so released to such Borrower or such Borrower's designee shall be held by it in trust for the benefit of the Lender. Such Borrower shall return or cause to be returned to the Custodian the Receivable Files, or such other documents which have been released to such Borrower or such Borrower's designee, when such Borrower's need therefor in connection with such foreclosure or repossession no longer exits, unless the Receivable shall be liquidated, in which case, upon receipt of a certification to this effect from such Borrower to Custodian in the form annexed hereto as Exhibit B, the related Receivable Files shall be released by Custodian to such Borrower and the Custodian shall thereupon reflect any such liquidation on the Receivable Information List. 8 The foregoing provision respecting release of the Receivable Files by Custodian upon request by a Borrower shall be operative only to the extent that at any time Custodian shall not have released Receivable Files or any part thereof or documents (including those requested) pertaining to no more than 100 of the total number of Receivables being maintained by Custodian hereunder at the time of such request. Any additional Receivable Files or documents requested to be released by a Borrower may be released only upon written authorization of the Lender. The limitation of this paragraph shall not apply to release of the Receivable Files to a Borrower under Section 3.6 or Section 3.10 below. Section 3.6. Return. Upon the return of any Receivable pursuant to this Agreement, the Loan Agreement or the payment in full of any Receivable, which shall be evidenced by Custodian's receipt of the applicable Borrower's request for release in the form annexed hereto as Exhibit B, Custodian shall promptly release the related Receivable Files to such Borrower or such Borrower's designee. Section 3.7. Custodial Register. Custodian shall cause such books and records at its corporate trust office or other registry maintained with respect to the Receivables to reflect that such records and books or other registry and the Receivables which are the subject of such records and books or other registry are owned by the applicable Borrower and pledged to the Lender. Section 3.8. Power of Attorney. Each Borrower and the Lender hereby grant to the Custodian a power of attorney, with full power of substitution, to take in the name of such Borrower and the Lender all steps which are necessary or appropriate to endorse, negotiate, deposit or otherwise realize on any instrument or writing of any kind held or transmitted by such Borrower or the Lender or transmitted or received by Custodian in connection with any Receivable. The power of attorney that each Borrower and the Lender have granted to the Custodian pursuant to this Section 3.8 may be revoked by the Lender at any time. Section 3.9. No Service Charge for Sale or Transfer of Receivables. No service charge shall be made for any sale or transfer of Receivables, but the Custodian may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any sale or transfer of Receivables. Notwithstanding the foregoing, the Custodian may charge a reasonable fee in connection with the release of the Receivable Files or any document contained therein pursuant to Section 3.5, which fee shall be paid by the Borrowers. Section 3.10. The Lender May Reject Receivables. (a) The Lender may refuse any Receivable offered by a Borrower under the Loan Agreement or may, by notice to Custodian, require an immediate transfer of any Receivable back to such Borrower, in each case under the circumstances provided in the Loan Agreement. The Borrowers shall have no right to object to such rejection or transfer. (b) If a Receivable is not accepted by the Lender on an Advance Date because of a defect in the related Receivable File, or if the Lender gives written notice to the Custodian 9 that it will not be accepting a specific Receivable for any other reason, the Custodian will return the related Receivable File to the related Borrower (or such other person as such Borrower shall indicate in writing), at such Borrower's expense, within two (2) Business Days of such Advance Date unless otherwise instructed in writing by the Lender or, after such Advance Date, by such Borrower. Section 3.11. Affidavit of Lost Receivable File. In the event the Custodian loses or misplaces any Receivable File or any portion thereof, or if any instruments, documents, or certificates therein are destroyed, then, in addition to any other liability the Custodian may have in respect thereof pursuant to the terms of this Custody Agreement or otherwise, the Custodian agrees to execute and deliver to the Lender, upon the Lender's written request, an affidavit stating that such instrument, document, or certificate has been lost or destroyed, as applicable, and, if necessary, such other affidavits or certificates as may be reasonably necessary to obtain replacement certificates of title or other instruments. 10 ARTICLE IV DISTRIBUTION DATE PAYMENTS; SETTLEMENT ACCOUNTS Section 4.1. Distribution Date Payments. One (1) Business Day prior to each Distribution Date, the Lender shall inform Custodian via facsimile of the amounts payable by the Borrowers to Lender on such Distribution Date pursuant to the Loan Agreement and Custodian shall, on such Distribution Date, transfer such amounts from the Settlement Accounts to the Lender's Account in accordance with Section 4.3. Section 4.2. Settlement Account. (a) Each Borrower shall establish and maintain a separate Settlement Account with Crestar Bank, which shall be an Eligible Account; provided, however, if such account shall cease to be an Eligible Account, then within five (5) Business Days thereafter, the Custodian, with the consent of the Lender, shall cause such account to be moved to an institution so that such account meets the definition of an Eligible Account. One Settlement Account shall be entitled "Crestar Bank as Custodian for CS First Boston Mortgage Capital Corp. (regarding AutoInfo Finance of Virginia, Inc.)" and the other Settlement Account shall be entitled "Crestar Bank, as Custodian for CS First Boston Mortgage Capital Corp. (regarding Car Loan Co., Inc.)". All amounts paid into each Settlement Account under this Agreement and pursuant to the Loan Agreement shall be held in trust for the Lender until payment of any such amounts is authorized hereunder. (b) On each Business Day, pursuant to the applicable Lock-Box Agreement, the applicable Lock-Box Bank shall transfer any payments from Obligors and other payments in respect of the Collateral received in such Lock-Box to the applicable Settlement Account. In addition, each Servicer shall, in accordance with the terms of the Loan Agreement, remit, and shall cause each Borrower to remit, directly into the applicable Settlement Account all payments by or on behalf of the Obligors received by such Servicer or such Borrower, as applicable, with respect to the Receivables and other Collateral, and all Liquidation Proceeds and other recoveries as soon as practicable after receipt thereof (but in any event no later than one (1) Business Day following receipt thereof.) Section 4.3. Distributions. (a) On each Distribution Date the Custodian, in accordance with the written instructions of the Lender delivered to it on or prior to such Distribution Date, shall make the following payments in the following order from amounts on deposit in the Settlement Accounts which have been allocated to the payment thereof: (i) an amount equal to the Monthly Servicing Fee due on such Distribution Date plus any unpaid Servicing Fee due on a prior Distribution Date shall be distributed to the applicable Servicer; 11 (ii) the amount specified by the Lender pursuant to Section 4.1 shall be distributed to the Lender's Account; (iii) if a Borrowing Base Deficiency exists as of the related Determination Date, an amount equal to such Borrowing Base Deficiency shall be distributed to the Lender's Account; (iv) any amount deposited in each Settlement Account that was not required to be deposited by the applicable Borrower or the applicable Servicer therein shall be returned to such Borrower; and (v) all amounts remaining in the Settlement Account after payments pursuant to clauses (i) through (v) in this Section 4.3 shall be distributed to the applicable Borrower. (b) The Custodian shall make all distributions by check or by wire transfer of immediately available funds, as directed by the party to whom such distribution is payable. Section 4.4. Payments of Shortfalls. If the Custodian determines that the amounts in the Settlement Accounts are insufficient to pay amounts payable pursuant to Section 4.3, the Custodian shall notify Lender and the Borrowers of such circumstance by telephone or telecopy, and the Borrowers shall immediately deposit to such Settlement Accounts in immediately available funds the amount of such deficiency. If, notwithstanding the application of funds in such Settlement Accounts, there are still insufficient funds available to make any such payment or distribution required to be made on such day, then, in addition to any other rights Lender may have, interest shall, to the extent permitted by law, accrue on the portion of such due and unpaid amount owing to Lender, commencing on the due date until paid in full, at the Late Payment Rate. Section 4.5. Investments. The Custodian shall, in the name of Custodian, as custodian, upon written direction from the applicable Borrower, invest the amounts in the applicable Settlement Account in Eligible Investments. Such investment shall mature not later than one (1) Business Day prior to the next succeeding Distribution Date. No investment may be sold prior to its maturity, unless otherwise instructed by the applicable Borrower. All net income and gain from such investments shall be deposited in the related Settlement Account and any losses on reinvestment of funds shall be reimbursed by the related Borrower and deposited into such Settlement Account. Section 4.6. Simultaneous Transfers. The Advances to a Borrower and the transfer of the related Receivables pursuant to any provision of this Agreement and the Loan Agreement shall be deemed to occur simultaneously. Section 4.7. Transfer of Receivables . (a) Upon Custodian receiving written certification from the Lender of a Potential Event of Default, Custodian shall (x) follow the instructions of the Lender including 12 instructions regarding the release of the related Receivables from this Agreement and the transfer of such Receivables and shall do such other acts and execute such other documents as may be deemed reasonably necessary by such non-defaulting party to comply with such instructions and (y) follow the instructions of such nondefaulting party with respect to payment of related amounts from the Settlement Accounts. (b) Upon (i) receipt by Custodian of a written certification of the Lender of a breach of a representation or warranty by Custodian, or the failure of Custodian to perform a covenant, under this Agreement, and any applicable cure period has elapsed, or (ii) the termination of the Custodian pursuant to Section 5.9 hereof, Custodian shall (x) follow the instructions of the Lender regarding the release from this Agreement and the transfer of such Receivables and shall do such other acts and execute such other documents as may be deemed reasonably necessary to comply with such instructions and (y) follow the instructions of the Lender with respect to payment of related amounts from the Settlement Accounts. 13 ARTICLE V CUSTODIAN Section 5.1 Representations, Warranties and Covenants of Custodian. With respect to each Trust Receipt and Certification, Custodian hereby represents and warrants to, and covenants with the Lender that as of the date such Trust Receipt and Certification is provided, which representations and warranties shall survive delivery of such Trust Receipt and Certification: (a) Custodian is duly organized, validly existing and in good standing under the laws of the United States; (b) Custodian has the full power and authority to hold each Receivable (whether acting alone or through an agent) and to execute, deliver and perform, and to enter into and consummate all transactions contemplated by this Agreement, has duly authorized the execution, delivery and performance of this Agreement, has duly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of Custodian, enforceable against it in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies; (c) Neither the execution and delivery of this Agreement, the filing of a financing statement indicating that the Lender is the secured party with respect to certain Receivables, the delivery of Receivables, the issuance of the Trust Receipt and Certification, the consummation of the transactions contemplated hereby or thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement will conflict with or result in a breach of any of the terms, conditions or provisions of Custodian's charter or by-laws or any legal restriction or any agreement or instrument to which Custodian is now a party or by which it is bound, or constitute a default or result in an acceleration under any of the foregoing, or result in the violation of any law, rule, regulation, order, judgment or decree to which Custodian or its property is subject; (d) Custodian does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in this Agreement; (e) There is no litigation pending or threatened, which if determined adversely to Custodian, would adversely affect the execution, delivery or enforceability of this Agreement, or any of the duties or obligations of Custodian thereunder, or which would have an adverse effect on the financial condition of Custodian; (f) No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by Custodian of or compliance by Custodian with this Agreement or the consummation of the transactions contemplated hereby; 14 (g) Custodian is a separate and independent entity from any of the Borrowers, Custodian does not own a controlling interest in any of the Borrowers either directly or through affiliates, and no director or officer of the Custodian is also a director or officer of any of the Borrowers; (h) Upon written request of the Lender, Custodian shall take such steps as requested by the Lender to protect or maintain any interest in the Financed Vehicle or other collateral securing the Receivable owned by the Lender and any insurance applicable thereto. (i) Custodian is not a party to, bound by or in breach or violation of any indenture or other agreement or instrument, or subject to or in violation of any statute, order or regulation of any court, regulatory body, administrative agency or governmental body having jurisdiction over it, which adversely affects, or may in the future adversely affect, the ability of the Custodian to perform its obligations under this Agreement or the interest of the Lender in any respect; (j) There are no actions, suits, proceedings or investigations pending or threatened against the Custodian, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (A) asserting the invalidity of this Agreement, (B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, and (C) seeking any determination or ruling that might adversely affect the performance by the Custodian of its obligations under, or the validity or enforceability of, this Agreement; and (k) Custodian shall monitor the financing statements filed with respect to the Receivables naming the Lender as the secured party and shall cause each Borrower to file or, if a Borrower shall fail to file in a timely manner, shall itself file such amendments and continuation statements with respect thereto necessary in order to maintain the perfected security interest of the Lender in the Receivables. Section 5.2 Custodian of Documents. Custodian, either directly or by acting through an agent, shall hold all documents relating to any Receivable that comes into its possession for the exclusive use and benefit of the Lender on and after the related Advance Date and shall make disposition thereof only in accordance with the instructions furnished to it by the Lender. Custodian shall segregate and maintain continuous custody of all such documents received by it in secure facilities in accordance with customary standards for such custody and shall not release such documents or transfer such documents to any other party, including any subcustodian, without the express written consent of the Lender, except as provided in Section 3.5 hereof. Section 5.3 Charges and Expenses. The Borrowers shall pay all fees and reasonable expenses of Custodian in connection with the performance of its duties hereunder in accordance with written agreements entered into from time to time between Custodian and the Borrowers, including reasonable fees and expenses of counsel incurred by Custodian in the performance of its duties hereunder; provided, however, that (i) Custodian shall in no event acquire and hereby agrees not to assert (x) any lien upon any Receivable deposited under this Agreement or (y) any claim against the Lender, by reason of the failure of the Borrowers to pay 15 any of such fees, charges or expenses, and (ii) in the event the Borrowers fail to pay the fees and expenses of Custodian as set forth in such written agreements, Custodian shall have no obligation to take actions or incur costs in connection with this Agreement unless the Lender, the Borrowers or another Person has made adequate provision for payment of Custodian's fees and expenses. Section 5.4 No Adverse Interests. Custodian covenants and warrants to the Lender and the Borrowers that: (i) as of the related date on which Custodian receives evidence of the perfection of the Lender's interest in the related Receivables, it holds no adverse interest, by way of security or otherwise, in any Receivable; and (ii) the execution of this Agreement and the creation of the custodial relationship hereunder does not create any interest, by way of security or otherwise of Custodian in or to any Receivable, other than Custodian's rights as custodian hereunder. Section 5.5 Inspections. Upon no less than one (1) Business Day's prior written notice to Custodian, the Lender and the Lender's agents, accountants, attorneys and auditors will be permitted during normal business hours to examine Custodian's documents, records and other papers in possession of or under the control of Custodian relating to the Receivables. Section 5.6 Insurance. Custodian shall, at its own expense, maintain at all times during the existence of this Agreement and keep in full force and effect, (1) fidelity insurance, (2) theft of documents insurance, (3) forgery insurance subject to deductibles, all in amounts customary and standard in the industry and with insurance companies reasonably acceptable to the Lender. A certificate of the respective insurer as to each such policy or a blanket policy for such coverage shall be furnished to the Lender, upon request, containing the insurer's statement or endorsement that such insurance shall not terminate prior to receipt by such party, by registered mail, of ten (10) days advance notice thereof. Section 5.7 Limitation of Liability. Custodian assumes no obligation, and shall be subject to no liability, under this Agreement to the Lender, except that Custodian agrees to use its best judgment and good faith in the performance of such obligations and duties as are specifically set forth herein. Custodian shall not be liable for any action or non-action by it in reliance on advice of counsel believed by it in good faith to be competent to give such advice. Custodian may rely and shall be protected in acting upon any written notice, order, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. Section 5.8 Indemnification. The Borrowers agree to indemnify Custodian against, and to hold it and its employees, officers and directors harmless from, any liabilities, and any related out-of-pocket expenses, which it may incur in connection with this Agreement or the Trust Receipt and Certification, other than any liabilities and expenses arising out of Custodian's negligence or bad faith or misconduct. Custodian agrees to indemnify each of the Lender and the Borrowers and their respective employees, officers and directors against out-of-pocket expenses which either the Lender or the Borrowers or their respective employees, officers or directors may incur in connection with this Agreement and any Trust Receipt and Certification and which is 16 caused by Custodian's negligence or bad faith or misconduct. Such indemnifications shall survive the removal or resignation of the Custodian hereunder and the termination of this Agreement. Section 5.9 Removal of Custodian. The Lender, with or without cause, may upon at least thirty (30) days' notice remove and discharge Custodian from the performance of its duties under this Agreement by written notice from the Lender to Custodian, with a copy to the Borrowers. Having given notice of such removal, the Lender promptly shall appoint a successor custodian to act on behalf of the Lender and the Borrowers, as their respective rights appear herein, by written instrument, original counterparts of which instrument shall be delivered to the Lender and the successor Custodian, with a copy to the Borrowers. In the event of any such removal, Custodian shall promptly transfer to the successor Custodian, as directed, and at the expense of the Borrowers, all Custodian's Receivable Files and all funds in the Settlement Accounts and any other accounts in connection with this Agreement and all related documents. In the event of any such removal, the Borrowers shall promptly pay the Custodian its outstanding fees and expenses incurred in connection with this Agreement. In the event of any such appointment the Borrowers shall be responsible for the fees and reasonable expenses of the existing and successor Custodian in accordance with Section 5.3 hereof. Section 5.10 Termination of Custodian. Custodian may terminate its obligations under this Agreement upon at least 120 days' prior notice to the Borrowers and the Lender. In the event of such termination, the Lender shall appoint a successor Custodian, subject to approval by the Borrowers. The payment of such successor Custodian's fees and expenses shall be solely the responsibility of the Borrowers in accordance with Section 5.3 hereof. Upon such appointment, Custodian shall promptly transfer to the successor Custodian, as directed, all Receivable Files and all funds in the Settlement Accounts and any other accounts in connection with this Agreement and all related documents being administered under this Agreement. If the endorsements on the Receivables have been completed in the name of Custodian, Custodian shall execute such endorsements on the Receivables as the Lender shall request. In the event of any such appointment the Borrowers shall be responsible for the fees and reasonable expenses of the existing and successor Custodian in accordance with Section 5.3 hereof. Section 5.11 Reliance of Custodian. The Custodian may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any request, instructions, certificate, opinion or other document furnished to the Custodian, reasonably believed by the Custodian to be genuine and to have been signed or presented by the proper party or parties and conforming to the requirements of this Agreement; but in any case of any document or other request, instruction, document or certificate which by any provision hereof is specifically required to be furnished to the Custodian, the Custodian shall be under a duty to examine the same to determine whether or not it conforms to the requirements of this Agreement. Section 5.12 Transmission of Receivable Files. Written instructions as to the method of shipment and shipper(s) which the Custodian is directed to utilize in connection with transmission of Receivable Files in the performance of the Custodian's duties hereunder shall be delivered by the Borrowers to the Custodian prior to any shipment of any Receivable Files hereunder. In the event the Custodian does not receive written instructions as provided for in the 17 preceding sentence, the Custodian is hereby authorized and shall be indemnified as provided herein to utilize a nationally recognized courier service. The Borrowers shall arrange for the provision of such services at its sole cost and expense (or, at the Custodian's option, reimburse the Custodian for all costs and expenses incurred by the Custodian consistent with such instructions) and will maintain such insurance against loss or damage to Receivable Files as the Borrowers deem appropriate. Without limiting the generality of the provisions of Section 5.8 above, it is expressly agreed that in no event shall the Custodian have any liability for any losses or damages to any person, including, without limitation, the Borrower, arising out of actions of the Custodian consistent with instructions of the Borrower. Section 5.13 Authorized Representatives. Each individual designated as an authorized representative of the Lender, each of the Borrowers and the Custodian, respectively (an "Authorized Representative"), is authorized to give and receive notices, requests and instructions and to deliver certificates and documents in connection with this Agreement on behalf of the Lender or a Borrower or the other Borrower or the Custodian, as the case may be, and the specimen signature for each such Authorized Representative of the Lender, each such Authorized Representative of one Borrower, each such Authorized Representative of the other Borrower, and each such Authorized Representative of the Custodian, initially authorized hereunder, is set forth on Exhibits C, D, E and F hereof, respectively. From time to time, the Lender, each Borrower and the Custodian may, by delivering to each other a revised exhibit, change the information previously given pursuant to this Section 5.13, but each of the parties hereto shall be entitled to rely conclusively on the then current exhibit until receipt of a superseding exhibit. Section 5.14 Merger or Consolidation of or Assumption of the Obligations of the Custodian. Any Person (i) into which the Custodian may be merged or consolidated, (ii) which may result from any merger or consolidation to which the Custodian shall be a party, or (iii) which may succeed to the properties and assets of the Custodian substantially as a whole, shall execute an agreement of assumption to perform every obligation of the Custodian hereunder, and whether or not such assumption agreement is executed, shall be the successor to the Custodian under this Custody Agreement without further act on the part of any of the parties to this Custody Agreement; provided, however, that nothing herein shall be deemed to release the predecessor Custodian from any obligation. 18 ARTICLE VI MISCELLANEOUS PROVISIONS Section 6.1 Amendment. This Agreement may be amended from time to time by Custodian, the Lender and the Borrower by written agreement signed by such parties. Section 6.2 Governing Law and Jurisdiction; Waiver of Jury Trial. This Agreement shall be construed in accordance with the laws of the State of New York governing agreements made and to be performed therein, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. The parties hereto agree to submit to personal jurisdiction in the State of New York in any action or proceeding arising out of this Agreement. The parties hereto each hereby waive the right to trial by jury in any litigation arising hereunder. Section 6.3 Notices. All demands, notices and communications hereunder, except as otherwise provided herein, shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by registered mail, postage prepaid, or sent by facsimile transmission to: (a) in the case of Custodian: Crestar Bank 919 E. Main Street, 10th Floor Richmond, Virginia 23219 Attention: J. Lee Judy Telephone: 804-782-5170 Telecopy: 804-782-7855 (b) in the case of the Lender: CS First Boston Mortgage Capital Corp. 11 Madison Avenue, 4th Floor New York, New York 10055-0186 Attention: Chris LaVallee Telephone: (212) 325-4910 Telecopy: (212) 325-8040 Any and all legal notices are to be sent to: CS First Boston Mortgage Capital Corp. 11 Madison Avenue, 7th Floor New York, New York 10010 Attention: Walter Fekula, Director of Credit Telephone: (212) 325-3063 Telecopy: (212) 325-8219 19 (c) in the case of the Borrowers: AutoInfo Finance of Virginia, Inc. 863 Glenrock Road Norfolk, Virginia 23502 Attention: Chief Executive Officer Telephone: (804) 466-3400 Telecopy: (804) 466-3388 Car Loan Co., Inc. 444 Westport Avenue Norwalk, Connecticut 06851 Attention: Chief Executive Officer Telephone: (203) 750-1212 Telecopy: (203) 750-1228 Section 6.4 Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement. Section 6.5 No Partnership. Nothing herein contained shall be deemed or construed to create a co-partnership or joint venture between the parties hereto and the services of Custodian shall be rendered as an independent contractor and not as agent for the Lender or the Borrowers. Section 6.6 Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall constitute but one and the same instrument. Section 6.7 Assignment. No party hereto shall sell, pledge, assign or otherwise transfer this Agreement without the prior written consent of the other parties hereto. Section 6.8 Headings. Section headings are for reference purposes only and shall not be construed as a part of this Agreement. 20 IN WITNESS WHEREOF, the Lender, the Borrowers and the Custodian have caused their names to be signed hereto by their respective authorized officers as of the day and year first above written. CS FIRST BOSTON MORTGAGE CAPITAL CORP., as Lender By__________________________________________ Name: Title: AUTOINFO FINANCE OF VIRGINIA, INC., as Borrower and Servicer By__________________________________________ Name: Scott J. Zecher Title: Chief Executive Officer CAR LOAN CO., INC., as Borrower and Servicer By_________________________________________ Name: Scott J. Zecher Title: Chief Executive Officer CRESTAR BANK, as Custodian By_________________________________________ Name: Title: EX-10.V 12 COMMON STOCK PURCHASE WARRANT AGREEMENT CONFORMED COPY COMMON STOCK PURCHASE WARRANT Warrant No. M - 1 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. Void after 5:00 p.m. Eastern Standard Time, on November 30, 2001. WARRANT TO PURCHASE COMMON STOCK OF AUTOINFO, INC. FOR VALUE RECEIVED, AUTOINFO, INC., a Delaware corporation, (the "Company"), hereby certifies that CS First Boston Mortgage Capital Corp., or its permitted assigns, (the "Holder") is entitled to purchase from the Company, at any time, or from time to time, commencing on the date hereof, and prior to 5:00 p.m., Eastern Standard Time, on November 30, 2001, a total of 125,000 (subject to adjustment as provided herein) fully paid and nonassessable shares of the Common Stock, par value $.01 per share, of the Company for an aggregate purchase price of $375,000 (based upon $3.00 per share). (Hereinafter, (i) said Common Stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "Common Stock", (ii) the shares of the Common Stock purchasable hereunder are referred to as the "Warrant Shares", (iii) the aggregate purchase price payable hereunder for the Warrant Shares is referred to as the "Aggregate Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares is referred to as the "Per Share Warrant Price", (v) this Warrant, and all warrants hereafter issued in exchange or substitution for this Warrant, are referred to as the "Warrant" and (vi) the holder of this Warrant is referred to as the "Holder"). The Per Share Warrant Price is subject to adjustment as hereinafter provided. Except as otherwise provided in Section 3, in the event of any such adjustment, the number of Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment. 1. Exercise of Warrant. This Warrant may be exercised, in whole at any time or in part from time to time, commencing on the date hereof (the "Commencement Date") and prior to 5:00 p.m., Eastern Standard Time, on November 30, 2001, by the Holder of this Warrant by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set forth in Subsection 10 (a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part. Payment for Warrant Shares shall be made (i) in cash, by certified or official bank check or wire transfer payable to the order of the Company, (ii).by Net-Issue Exercise (as hereinafter -1- defined), or (iii) by any combination of (i) or (ii). A "Net-Issue Exercise" means a "cashless" exercise by a holder by delivery of a subscription form instructing the Company to retain, in payment of the Aggregate Warrant Price (or portion thereof), a number of Warrant Shares (the "Payment Shares") equal to the quotient of the Aggregate Per Share Warrant Price of the Warrant Shares issuable in respect of Warrants then being exercised by Net-Issue Exercise divided by the Market Price (as hereinafter defined) of such shares as of the date of exercise, and to deduct the number of Payment Shares from the Warrant Shares to be delivered to such holder. If this Warrant is exercised in part, this Warrant must be exercised for a minimum of 1,000 shares of the Common Stock, and the Holder is entitled to receive a new Warrant covering the number of Warrant Shares in respect of which this Warrant has not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such remaining Warrant Shares. Upon such surrender of this Warrant, the Company will issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled and, (a) in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, cash equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), or (b) deliver a new Warrant for the proportionate part thereof in respect of which this Warrant has not been exercised, if this Warrant is exercised in part, pursuant to the provisions of this Warrant. 2. Reservation of Warrant Shares. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times have authorized and in reserve, free from preemptive rights, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the shares of the Common Stock as from time to time shall be receivable upon the exercise of the Warrant. The Company covenants and agrees that all shares of Common Stock which are issuable hereunder will, upon issuance, be duly authorized and issued, fully paid and non-assessable. 3. Anti-Dilution Provisions. (a) In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Common Stock, including options and other securities convertible into, or exchangeable for Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the Per Share Warrant Price in effect immediately prior to such action shall be adjusted so that if the Holder surrendered this Warrant for exercise immediately thereafter the Holder would be entitled to receive the number of shares of Common Stock or other capital stock of the Company which he would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this subsection (a), the Holder of this Warrant shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of this Warrant promptly after such adjustment) shall in good faith determine the allocation of the adjusted Per Share Warrant Price between or among shares of such classes of capital stock or shares of Common Stock and other capital stock; provided that the effect thereof does not materially adversely affect the value of this Warrant. -2- (b) In case of any reorganization, consolidation or merger to which the Company is a party, other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder shall have the right thereafter to convert this Warrant into the kind and amount of securities, cash or other property which he would have owned or have been entitled to receive immediately after such reorganization, consolidation, merger, statutory exchange, sale or conveyance had such Warrant been converted immediately prior to the effective date of such reorganization, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the conversion of this Warrant. The above provisions of this subsection (b) shall similarly apply to successive reorganizations, consolidations, mergers, statutory exchanges, sales or conveyances. Notice of any such reorganization, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holder not less than 20 days prior to such event. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (c) If the Company shall, at any time after the date hereof issue any shares of Common Stock, other than Excluded Shares (as defined in subsection (h) below), for a consideration per share less than the Market Price in effect immediately prior to such issuance, then (i) the Per Share Warrant Price in effect immediately prior to each such instance shall forthwith be adjusted to a price equal to the Per Share Warrant Price then in effect multiplied by the quotient obtained by dividing (a) an amount equal to the sum of (1) the total number of shares of Common Stock outstanding immediately prior to such issuance multiplied by the Market Price in effect immediately prior to such issuance, plus (2) the consideration received by the Company upon such issuance, by (b) the total number of shares of Common Stock outstanding immediately after such issuance multiplied by the Market Price in effect immediately prior to such issuance, and (ii) the number of shares of Common Stock then issuable upon the exercise of Warrant shares outstanding immediately prior to each such issuance shall forthwith be adjusted by adding a number of shares of Common Stock equal to the product of (a) the number of shares of Common Stock issuable upon the exercise of Warrant Shares outstanding immediately prior to such issuance, times (b) the quotient obtained by dividing (1) an amount equal to the Per Share Warrant Price in effect immediately prior to such issuance less the Per Share Warrant Price in effect immediately after such issuance, by (2) the Per Share Warrant Price in effect immediately after such issuance. (d) For the purpose of any adjustment of the Per Share Warrant Price and the number of shares of Common Stock issuable upon exercise of the Warrants pursuant to the clause (c), the following provisions shall be applicable: (i) In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of cash received by the Company therefor. -3- (ii) In the case of the issuance of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the "fair value" of such consideration as determined in the good faith judgment of the Board of Directors of the Company. (iii) In the case of the issuance of (x) options to purchase or rights to subscribe for Common Stock, (y) securities by their terms convertible into or exchangeable for Common Stock or (z) options to purchase or rights to subscribe for such convertible or exchangeable securities: (1) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subdivisions (i) and (ii) above), if any, received by the Company upon the issuance of such options or rights plus the minimum purchase price provided in such options or rights for the Common Stock covered thereby; (2) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration received by the Company for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum amount of additional consideration, if any, to be received by the Company upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subdivisions (i) and (ii) above); (3) on any change in the number of shares or exercise price of Common Stock deliverable upon exercise of any such options or rights or conversions of or exchange for such convertible or exchangeable securities, other than a change resulting from the antidilution provisions thereof, the Per Share Warrant Price and the number of shares of Common Stock issuable upon exercise of the Warrants shall forthwith be readjusted to such Per Share Warrant Price and to such number of shares as would have obtained had the adjustment made at the time of the issuance of such options, rights or securities not converted prior to such change been made upon the basis of such change; and (4) on the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Per Share Warrant Price and the number of shares -4- of Common Stock issuable upon exercise of the Warrants shall forthwith be readjusted to such Per Share Warrant Price and to such number of shares as would have obtained had such options, rights, securities, or options or rights related to such securities (as have not theretofore been converted, exchanged or exercised) not been issued. (e) Whenever the Per Share Warrant Price is adjusted as provided in this Section 3 and upon any modification of the rights of the Holder of this Warrant in accordance with this Section 3, the Company shall promptly prepare a certificate of an officer of the Company, setting forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause a copy of such certificate to be mailed to the Holder. (f) If the Board of Directors of the Company shall declare any dividend or other distribution in cash or property (including securities other than Common Stock) with respect to the Common Stock, the Company shall mail notice thereof to the Holder not less than 15 days prior to the record date fixed for determining shareholders entitled to participate in such dividend or other distribution. (g) the Company will not, by amendment of its Certificate of Incorporation or by-laws or through any reorganization, transfer of assets, reclassification, merger, dissolution, issue or sale of securities or otherwise, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company hereunder but will at all times in good faith assist in the carrying out of all the provisions hereof and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the holders of the Warrants against impairment. (h) For purposes of this Section 3, "Excluded Shares" shall mean (i) all shares issued upon (a) exercise or conversion of any other warrants outstanding on the date hereof, (b) exercise of any options outstanding on the date hereof, and (c) the issuance of shares of Common Stock or options to purchase such shares, to officers, employees or directors of the Company and its subsidiaries pursuant to any bonafide equity incentive plan, or other incentive arrangement. (i) Definition of Market Price. "Market Price" shall mean either: (1) if shares of the Common Stock are listed or admitted to trading on any exchange or quoted through NASDAQ or any similar organization, the average of the daily closing prices per share of the Common Stock for the 20 consecutive trading days immediately preceding the date of public announcement of the event giving rise to adjustment under this Section 3 or, if no such public announcement is made with respect to such event, the average of the daily closing prices per share of the Common Stock for the 20 consecutive trading days immediately preceding the day as of the which "Market Price" is being determined. The closing price of each day shall be the last sale price regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case on the New York Stock -5- Exchange, or, if shares of the Common Stock are not listed or admitted to trading on the New York Stock Exchange, on the principal national securities exchange or national market on which the shares are listed or admitted to trading or quoted, or if the shares are not so listed or admitted to trading or quoted, the average of the highest reported bid and lowest reported asked prices as furnished by the National Association of Securities Dealers, Inc. through NASDAQ or through a similar organization if NASDAQ is no longer reporting such information; or (2) if such shares of common Stock are not listed or admitted to trading on any exchange or quoted through NASDAQ or any similar organization, such value shall be determined by the Board of Directors of the Company, in good faith and in the exercise of reasonable business judgment, without taking into consideration any premium for share representing control of the Company, any discount for any minority interest therein or any restrictions on transfer under Federal and applicable state securities laws or otherwise, which determination shall be conclusive, and which determination of valuation shall be sent in writing by the Board of Directors to the registered holders of Warrants outstanding. 4. Fully Paid Stock; Taxes. The Company agrees that the shares of the Common Stock represented by each and every certificate for Warrant Shares delivered on the exercise of this Warrant shall, at the time of such delivery, be duly and properly authorized, validly issued and outstanding, fully paid and non-assessable, and not subject to preemptive rights, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all times equal to or less than the then Per Share Warrant Price. The Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp or similar taxes that may be payable in respect of the issue of any Warrant Share or certificate therefor. 5. Transfer. (a) Securities Laws. Neither this Warrant nor the Warrant Shares issuable upon the exercise hereof have been registered under the Securities Act of 1933, as amended (the "Securities Act"), or under any state securities laws, and unless so registered, may not be transferred, sold, pledged, hypothecated or otherwise disposed of unless an exemption from such registration is available. In the event the Holder desires to transfer this Warrant or any of the Warrant Shares issued, the Holder must give the Company prior written notice of such proposed transfer including the name and address of the proposed transferee. Such transfer may be made only (i) upon receipt by the Company of an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer will not violate the provisions of the Securities Act, or the rules and regulations promulgated under either such act; or (ii) if the Warrant or Warrant Shares to be sold or transferred have been registered under the Securities Act and there is in effect a current prospectus meeting the requirements of Subsection 10(a) of the Securities Act, which is being or will be delivered to the purchaser or transferee at or prior to the time of delivery of the certificates evidencing the Warrant or Warrant Shares to be sold or transferred. -6- (b) Conditions to Transfer. Prior to any such proposed transfer, and as a condition thereto, if such transfer is not made pursuant to an effective registration statement under the Securities Act, the Holder will, if requested by the Company, deliver to the Company (i) an investment covenant signed by the proposed transferee, (ii) an agreement by such transferee to the impression of the restrictive investment legend set forth herein on the certificate or certificates representing the securities acquire by such transferee and (iii) an agreement by such transferee that the Company may place a "stop transfer order" with its transfer agent or registrar. (c) Transfer. Except as restricted hereby, this Warrant and the Warrant Shares issued may be transferred by the Holder in whole or in part at any time or from time to time. Upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with assignment documentation duly executed and funds sufficient to pay any transfer tax, and upon compliance with the foregoing provisions, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment, and this Warrant shall promptly be canceled. Any assignment, transfer, pledge, hypothecation or other disposition of this Warrant attempted contrary to the provisions of this Warrant, or any levy of execution, attachment or other process attempted upon the Warrant, shall be null and void and without effect. (d) Legend and Stop Transfer Orders. Unless the Warrant Shares have been registered under the Securities Act, or the Company shall have received an opinion of counsel satisfactory to the Company to the effect that it is not required, upon exercise of any part of the Warrant and the issuance of any of the shares of Warrant Shares, the Company shall instruct its transfer agent to enter stop transfer orders with respect to such shares, and all certificates representing Warrant Shares shall bear on the face thereof substantially the following legend, insofar as is consistent with Delaware law: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL TO THE HOLDER HEREOF IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO COUNSEL TO THE COMPANY, IS EXEMPT FROM REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS." 6. Listing of Common Stock. The Company covenants and agrees for the benefit of the Holders and each other holder of any Common Stock issued upon exercise of the Warrants, that at the time of and in connection with the listing of Common Stock on any national securities exchange, it will, at its expense, use its best efforts to cause the shares of Common Stock issuable form time to time upon exercise of the Warrants to be approved for listing, subject to notice of issuance, and will provide prompt notice to each such exchange of the issuance thereof from time to time. 7. Registration Rights. The Holder has been granted certain registration rights with respect to the Common Stock underlying this Warrant as more fully described in that certain Registration Rights Agreement of even date herewith between the Holder and the Company. -7- 8. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 9. Warrant Holder Not Shareholder. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a shareholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a shareholder, prior to the exercise hereof. 10. Communication. No notice or other communication under this Warrant shall be effective unless the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at 1600 Route 208, Fair Lawn, New Jersey 07410, Attn.: President, or such other address as the Company has designated in writing to the Holder, or (b) the Holder at 55 East 52nd Street, New York, NY 10055-0186, Attn.: Emily Youssouf, or such other address as the Holder has designated in writing to the Company. 11. Headings. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 12. Applicable Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law thereof. 13. Gender and Number. As used in this Warrant, the masculine, feminine or neuter gender and the singular or plural number shall be deemed to include the others whenever the context so indicates or requires. IN WITNESS WHEREOF, AUTOINFO, INC., has caused this Warrant to be signed by its President and its corporate seal to be hereunto affixed and attested by its Secretary this 10th day of December, 1996. ATTEST: AUTOINFO, INC. /s/Kenneth S. Rose /s/Scott Zecher - ------------------------------- ---------------------------------- Kenneth S. Rose, Scott Zecher, Assistant Secretary President -8- SUBSCRIPTION The undersigned, _________________________, pursuant to the provisions of the foregoing Warrant agrees to subscribe for the purchase of ___________________ shares of the Common Stock of AUTOINFO, INC. covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated:___________________ Signature: _________________________ Address: _________________________ _________________________ ASSIGNMENT FOR VALUE RECEIVED _________________________, hereby sells, assigns and transfers unto _________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint __________________, attorney, to transfer said Warrant on the books of AUTOINFO, INC. Dated:___________________ Signature: _________________________ Address: _________________________ _________________________ PARTIAL ASSIGNMENT FOR VALUE RECEIVED _________________________ hereby assigns and transfers unto _______________ the right to purchase _________ shares of the Common Stock of AUTOINFO, INC. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced hereby, and does irrevocably constitute and appoint _________________, attorney, to transfer that part of said Warrant on the books of AUTOINFO, INC. Dated:___________________ Signature: _________________________ Address: _________________________ _________________________ -9- REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT ("Agreement") made as of the 10th day of December, 1996 by and between AutoInfo, Inc., a Delaware corporation (the "Company") and CS First Boston Mortgage Capital Corp. ("MCC"). WITNESSETH WHEREAS, MCC owns in the aggregate Warrants to purchase up to 125,000 shares of the Company's Common Stock, $.01 par value per share (the "Warrants"), pursuant to a Warrant Agreement by and between the Company and MCC dated the date hereof ( the "Warrant Agreement"); and WHEREAS, in connection with its issuance of the Warrant, the Company has agreed to grant to MCC certain registration rights with respect to the shares issuable upon exercise of the Warrant as set forth in this Registration Rights Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein contained, and other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "Commission" shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the "Securities Act" (as defined herein). "Common Stock" shall mean the Common Stock, $.01 par value per share, of the Company, as constituted as of the date of this Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Majority Holders" shall mean persons holding in the aggregate more than fifty percent (50%) of the total number of Registrable Shares. "Registrable Shares" shall mean the shares of Common Stock of the Company issued upon exercise of the Warrant. "Registration Expenses" shall mean the expenses so described in Section 4. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Selling Expenses" shall mean the expenses so described in Section 4. 1 2. Registration. (a) The Majority Holders may on one occasion make a written request for a registration under the Securities Act and state securities laws of all or part of the Registrable Shares (a "Demand Registration"). Such request will specify the number of Registrable Shares to be sold and will also specify the intended method of disposition thereof. The Company will use its best efforts (subject to the provisions of this Agreement) to effect, as soon as practicable after such request, all such registrations, qualifications and compliances under the Securities Act and state securities laws (including without limitation, filings required to effect a registration pursuant to the Securities Act if available or pursuant to any applicable exemption) of the Registrable Shares which the Company has been so requested to register by the Majority Holders. Such request will also specify the number of shares of Registrable Shares to be registered and the intended method of disposition thereof. The Company shall not for any reason be obligated to effect more than one Demand Registration pursuant to this Section 2(a). The Company shall be entitled to postpone the filing of any registration statement pursuant to this Section 2(a) otherwise required to be prepared and filed by it if (i) the Company is engaged in a material acquisition, reorganization, or divestiture which constitutes material non-public information with respect to the Company, (ii) the Company is currently engaged in a self-tender or exchange offer and the filing of a registration statement would cause a violation of Rule lOb-6 under the Securities Exchange Act of 1934, (iii) the Company is engaged in an underwritten offering and the managing underwriter has advised the Company in writing that such a registration statement would have a material adverse effect on the consummation of such offering, (iv) the Company is subject to an underwriter's lock-up as a result of an underwritten public offering and such underwriter has refused in writing, the Company's request to waive such lock-up, or (v) the Company is prohibited by law from proceeding with such filing. In the event of such postponement, the Company shall be required to file the registration statement pursuant to this Section 2(a), within sixty (60) days of the consummation or termination of the event requiring such postponement. If the Majority Holder requesting a Demand Registration so elects, the offering of the Registrable Shares pursuant to the Demand Registration may be in the form of an underwritten offering. The Company shall have the right to select the managing underwriter in connection with such offering; provided, however, that such managing underwriter and additional investment bankers and managers must be reasonably satisfactory to the Majority Holder. If the proposed sale by the Majority Holder is to be effected pursuant to an underwritten public offering, the right of any holder to registration pursuant to this Section 2(a) shall be conditioned upon such holder's participation in such underwriting and the inclusion of such holder's Registrable Shares in the underwriting to the extent requested, unless otherwise mutually agreed by the Company and the Majority Holder, to the extent provided herein. The Company and the holders proposing to distribute their securities through such underwriting shall enter into an agreement in customary form with the underwriter(s) selected for such underwriting, and shall execute powers of attorney and custodial agreements in customary form for selling stockholders. Notwithstanding the foregoing, the Majority Holder shall not have the right to make demand for registration of the Registrable Shares, if, in the reasonable opinion of counsel to the Company, reasonably satisfactory to the Majority Holder and addressed thereto that all of their Registrable Shares may be sold at the time of such demand in reliance upon Rule 144 under the Securities Act of 1933, as amended, or other similar provision during any six month period. The expense of any such legal opinion shall be borne by the Company. (b) If the Company at any time proposes to register any of its securities under the Securities Act for sale to the public, whether for its own account or for the account of other 2 security holders or both (except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Registrable Shares for sale to the public), then at each such time it will give written notice to holders of outstanding Registrable Shares of its intention to do so. Upon the written request of any such holder, received by the Company within ten (10) business days after the giving of any such notice by the Company, to register any of such holder's Registrable Shares, the Company will use its best efforts to cause the Registrable Shares as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by the holder (in accordance with its written request) of such Registrable Shares so registered ("Piggy-Back Registration Rights"). The foregoing provisions notwithstanding, (i) the Company may withdraw any registration statement referred to in this Section 2(b) without thereby incurring any liability to the holders of Registrable Shares, and (ii) the inclusion of shares of Registrable Shares under such Piggy-Back Registration Rights is subject to the cut back provisions of Section 2(c) below. (c) If the managing underwriter of an offering described in Section 2(b) above advises the Company that the size of the offering that the Majority Holder, the Company and any other persons intend to make, is such that the success of the offering could be adversely affected by inclusion of all or part of the Registrable Shares requested to be included, then the amount of Registrable Shares to be offered shall be reduced to the extent necessary to reduce the total number of shares of Registrable Shares to be included in such offering to the amount recommended in good faith by the managing underwriter, for the accounts of the selling shareholders, provided that any such reductions shall be made in the following priorities: First, the number of shares of Common Stock requested to be registered by the holders requesting Piggy-Back Registration and any holders of Common Stock whose rights are pari passu with the registration rights of such holders requesting Piggy-Back Registration shall be reduced as required; Second, the number of shares of Common Stock to be registered by the holders of registration rights having priority over the registration rights of the holders having Piggy-Back Registration shall be reduced as required; and then Third, the number of shares of Common Stock requested to be registered for the account of any person requesting Demand Registration, if any, shall be reduced as required. Within the categories set forth above for reductions of the number of shares of Common Stock to be registered, the reductions shall be pro rata in relation to the number of shares of Common Stock to be registered, unless other rights exist among such persons. (d) The Company will not grant to any person on or after the date hereof, and prior to the registration of all of the Registrable Securities, a piggy-back registration right which by its terms is senior in any respect as it relates to cut-back provisions to the Piggy-Back Registration Rights. 3. Registration Procedures. If and whenever the Company is required by the provisions of Section 2 above to use its best efforts to effect the registration of Registrable Shares under the Securities Act, the Company will, as expeditiously as possible, or in any event no later than ninety (90) days after the end of the period within which request for registration may be given to the Company: 3 (a) prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby, determined as hereinafter provided; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in subsection (a) above and comply with the provisions of the Securities Act with respect to the disposition of all Registrable Shares covered by such registration statement in accordance with the sellers' intended method of disposition set forth in such registration statement for such period; (c) furnish to each seller of Registrable Shares, and to each underwriter such number of copies of the registration statement and the prospectus included therein, including each preliminary prospectus, as such persons reasonably may request in order to facilitate the public sale or other disposition of the Registrable Shares covered by such registration statement; (d) use its best efforts to register or qualify the Registrable Shares covered by such registration statement under the securities or "blue sky" laws of such jurisdictions as the sellers of Registrable Shares or, in the case of an underwritten public offering, the managing underwriter reasonably shall request; provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (e) use its best efforts to list the Registrable Shares covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed; (f) immediately notify each seller of Registrable Shares and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; and (g) immediately notify each seller of Registrable Shares and each underwriter under such registration statement, at any time when a stop order is issued effecting the Registrable Securities. For purposes of Sections 3(a) and 3(b) above, the period of distribution of Registrable Shares in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Registrable Shares in any other registration shall be deemed to extend until the earlier of the sale of all Registrable Shares covered thereby and 180 days after the effective date thereof. In connection with each registration hereunder, the sellers of Registrable Shares will furnish to the Company in writing such information with respect to themselves and the proposed distribution by them as shall be reasonably necessary in order to assure compliance with federal and applicable state securities laws. 4 In connection with each registration pursuant to Section 2 above covering an underwritten public offering, the Company and each seller agree to enter into a written agreement with the managing underwriter selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company's size and investment stature. 4. Expenses. All expenses incurred by the Company in complying with Section 2 above, including without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company and independent public accountants for the Company, fees and expenses incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs of insurance are called "Registration Expenses." All underwriting discounts and selling commissions applicable to the sale of Registrable Shares and fees and disbursements of counsel to the sellers of Registrable Shares are called "Selling Expenses." The Company will pay all Registration Expenses in connection with each registration statement relating to the Demand Registration and each Piggy-Back Registration under Section 2 above. All Selling Expenses in connection with each Demand and Piggy-Back Registration under Section 2 above shall be borne by the participating sellers in proportion to the number of shares sold by each. 5. Indemnification and Contribution. (a) In the event of a registration of any of the Registrable Shares under the Securities Act pursuant to Section 2 above, the Company will indemnify and hold harmless each seller of such Registrable Shares thereunder, each underwriter of such Registrable Shares thereunder and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities, or actions in respect thereof, arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Shares was registered under the Securities Act pursuant to Section 3 above, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such seller, any such underwriter or any such controlling person in writing specifically for use in such registration statement or prospectus. (b) In the event of a registration of any of the Registrable Shares under the Securities Act pursuant to Section 2 above, each seller of such Registrable Shares thereunder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities, or actions in respect thereof, arise out of or are based upon any untrue statement or alleged untrue statement of any material fact 5 contained in the registration statement under which such Registrable Shares was registered under the Securities Act pursuant to Section 2 above, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that such seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished in writing to the Company by such seller specifically for use in such registration statement or prospectus; and provided further, however, that the liability of each seller hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the shares sold by such seller under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the proceeds received by such seller from the sale of Registrable Shares covered by such registration statement. (c) Promptly after receipt by a party indemnified hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 5 and shall only relieve it from any liability which it may have to such indemnified party under this Section 5 if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 5 for any legal expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified parties shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. (d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Registrable Shares exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section 5 but it is judicially determined, by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal, that such indemnification may not be enforced in such case, the fact that this Section 5 provides for indemnification in such case notwithstanding, or (ii) contribution under the Securities Act may be required on the part of any such selling holder or any such controlling person in circumstances for which indemnification is provided 6 under this Section 5, then and in each such case, the Company and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject, after contribution from others, in such proportion so that such holder is responsible for the portion represented by the percentage that the public offering price of its Registrable Shares offered by the registration statement bears to the public offering price of all securities offered by such registration statement, and the Company is responsible for the remaining portion; provided, however, that in any such case, (x) no such holder will be required to contribute any amount in excess of the public offering price of all such Registrable Shares offered by it pursuant to such registration statement; and (y) no person or entity guilty of fraudulent misrepresentation, within the meaning of Section 11(f) of the Securities Act, will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 6. Changes in Common Stock. If, and as often as, there is any change in the Common Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization where the Company is the surviving entity, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby to the holders of Registrable Shares shall continue with respect to the Common Stock as so changed. 7. Representations and Warranties of the Company. The Company represents and warrants to each other party to this Agreement as follows: (a) The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Certificate of Incorporation or by-laws of the Company or any provision of any indenture, agreement or other instrument to which it or any or its properties or assets is bound, conflict with, result in a breach of or constitute, with due notice or lapse of time or both, a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company; and (b) This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms. 8. Rule 144. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company will file the reports required to be filed by it, and in the manner required to be filed by it, under the Securities Act and the Exchange Act (or, if the Company is not required to file such reports, will, upon the request of any holder of Registrable Shares, make publicly available other information) and will take such further action as any holder of Registrable Shares may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Shares without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time (b) any similar rule or regulation hereafter adopted by the Commission ("Rule 144"). Upon the reasonable request of any holder of Registrable Shares, the Company will deliver to such holder written statement as to whether it has complied with such requirements. 7 9. Miscellaneous. (a) All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not; provided, however, that registration rights conferred herein on the holders of Registrable Shares shall only inure to the benefit of a transferee of Registrable Shares if such transferee agrees to be bound by the provisions of the Warrant and this Agreement. (b) Except as otherwise expressly provided herein, any notice required or desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered upon the earlier of (i) personal delivery to the address set forth below, (ii) in the case of mailed notice, three (3) days after deposit in the United States mails, with proper postage for certified mail, return receipt requested, prepaid, or (iii) in the case of notice by Federal Express or other reputable overnight courier service, one (1) business day after delivery to such courier service, addressed to the party to be notified as follows: if to the Company or MCC , at the address of such party set forth in the Warrant Agreement to which it is a party; if to any subsequent holder of Registrable Shares, to it at such address as may have been furnished to the Company in writing by such holder; or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Registrable Shares) or to the holders of Registrable Shares (in the case of the Company) in accordance with the provisions of this paragraph. (c) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflict-of-laws principles which would require the application of the laws of another jurisdiction. (d) This Agreement may not be amended or modified, and no provision hereof may be waived, without the written consent of the Company and the Majority Holders. (e) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (f) The obligations of the Company to register shares of Registrable Shares under Section 2 above shall terminate on November 30, 2001. (g) If requested in writing by the underwriters for any underwritten public offering of securities of the Company, each holder of Registrable Shares who is a party to this Agreement shall agree not to sell publicly any shares of Registrable Shares or any other shares of Common Stock (other than shares of Registrable Shares or other shares of Common Stock being registered in such offering), without the consent of such underwriters, for a period of not more than 45 days following the effective date of the registration statement relating to such offering. (h) The provisions of Section 3 above to the contrary notwithstanding, the Company's obligation to file a registration statement, or cause such registration statement to become and remain effective, shall be suspended (i) for a period not to exceed 90 days in any 12-month period if there exists at the time material non-public information relating to the Company which, in the reasonable opinion of the Company, should not be disclosed; and (ii) 8 for such period commencing on the one hundred thirty fifth day fiollowing the end of the Company's third fiscal quarter and ending on the fifth business day following the Company's filing of its Annual Report on Form 10-K. (i) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. (j) As used in this Agreement, the masculine, feminine or neutral gender and the singular or plural number shall be deemed to include the others whenever the context so indicates or requires. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by a duly authorized officer as of the date first written above. AutoInfo, Inc. By: _____________________________________ Scott Zecher, President CS First Boston Mortgage Capital Corp. By: _____________________________________ Emily Youssouf, Authorized Agent -----END PRIVACY-ENHANCED MESSAGE-----