EXHIBIT 10.33
SERVICING AGREEMENT
This Servicing Agreement, dated as of October 22, 1996, is between First
Investors Auto Receivables Corporation, a Delaware corporation ("FIARC"), and
General Electric Capital Corporation, as Servicer ("Servicer").
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
INTRODUCTION
Contemporaneously with the execution of this Agreement, (i) FIARC and
Enterprise Funding Corporation ("Enterprise") have entered into a Note Purchase
Agreement dated as of October 22, 1996 whereby FIARC has issued to Enterprise
its Note evidencing certain indebtedness on the terms and conditions set forth
therein (the "Indebtedness"); (ii) FIARC, Enterprise, Texas Commerce Bank
National Association (the "Collateral Agent"), NationsBank, N.A., MBIA Insurance
Corporation ("MBIA") and First Investors Financial Services, Inc. ("First
Investors") have entered into a Security Agreement dated October 22, 1996
("Security Agreement") whereby FIARC has granted to the Collateral Agent, for
the benefit of Enterprise and MBIA, a first priority security interest in the
Receivables as defined therein ("Receivables") and certain other properties and
rights as provided in the Security Agreement, to collateralize the Indebtedness;
and (iii) in accordance with the terms of the Security Agreement, the Collateral
Agent has agreed to administer the receipt and disbursement of funds generated
from the Receivables on the terms and conditions provided therein. In connection
therewith, the Servicer has agreed to service the Receivables on the terms and
conditions set forth below.
ARTICLE II
DEFINITIONS
SECTION 2.01. DEFINITIONS.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
"AGREEMENT" means this Servicing Agreement and all amendments and
supplements thereto; provided, however, that MBIA has given its prior
written consent to such amendments and supplements.
"AMOUNT FINANCED" with respect to a Receivable means the amount advanced
under the Receivable toward the purchase price of the Financed Vehicle and
any related costs.
"ANNUAL PERCENTAGE RATE" or "APR" of a Receivable means the annual rate of
finance charges stated in the Receivable.
"BUSINESS DAY" means a day on which banks are open for business in Xxx
Xxxx, Xxx Xxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx, and Houston, Texas.
"COLLECTION ACCOUNT" means the account referred to in Section 5.01.
"COLLATERAL AGENT" means Texas Commerce Bank National Association, as
collateral agent and any successor collateral agent acceptable to MBIA and
appointed pursuant to the provisions of the Security Agreement.
"COLLATERAL AGENT OFFICER" means the chairman or vice-chairman of the
board of directors, the chairman or vice-chairman of the executive
committee of the board or directors, the president, any vice president,
the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller and any assistant controller or
any other officer of the Collateral Agent customarily performing functions
similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"COLLECTION PERIOD" means a calendar month.
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"CORPORATE TRUST OFFICE" means the office of the Collateral Agent at which
its corporate trust business shall be administered, which office at the
date of this Agreement is located at:
Texas Commerce Bank National Association
000 Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Vice President,
Corporate Trust Department
"CREDIT INSURANCE" means VSI Insurance and any other insurance with
respect to the Receivables maintained in accordance with the Security
Agreement.
"DEALER" means the dealer who sold a Financed Vehicle and who originated
and assigned the related Receivable to First Investors under an existing
agreement between such dealer and First Investors.
"EFFECTIVE TIME" means the time at which the purchase of any Receivable by
FIARC from First Investors shall be effective in accordance with the terms
of the Purchase Agreement.
"ELIGIBLE SERVICER" means any established institution approved in writing
by MBIA and having a consolidated net worth of not less than $100,000,000
or the accounts of which are consolidated for financial accounting
purposes with any established institution having such a consolidated net
worth and whose regular business shall include the servicing of automotive
receivables.
"ENDING DATE" means the last day of each Collection Period.
"ENTERPRISE" means Enterprise Funding Corporation, a Delaware corporation.
"FACILITY" means the $105,000,000 revolving credit facility created and
evidenced by the Note Purchase Agreement and the Security Agreement.
"FINANCED VEHICLE" means an automobile or light truck, together with all
accessions thereto, securing an Obligor's indebtedness under the
respective Receivable.
"FIRST INVESTORS" means First Investors Financial Services, Inc., a
Texas corporation.
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"FIARC" means First Investors Auto Receivables Corporation, a Delaware
corporation.
"FIARC EVENT OF DEFAULT" means an event specified in Section 8.02.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the UCC
(other than any such financing statement filed for informational purposes
only) or comparable law of any jurisdiction to evidence any of the
foregoing.
"LIQUIDATED RECEIVABLE" means any Defaulted Receivable (as defined in the
Security Agreement) liquidated by the Servicer through sale of the
Financed Vehicle or otherwise.
"LIQUIDATION PROCEEDS" means (i) proceeds of any claim under any Credit
Insurance and (ii) all monies collected in connection with the disposition
of any Financed Vehicle relating to a Liquidated Receivable, from whatever
source, net of the sum of (x) any amounts reasonably expended by the
Servicer in connection with the liquidation of such Financed Vehicle for
the account of the Obligor and, (y) any such amounts required by law to be
remitted to the Obligor.
"MBIA" means MBIA Insurance Corporation, a New York stock insurance
company.
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement dated October
22, 1996 between FIARC and Enterprise.
"OBLIGOR" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle or any other Person who owes payments under the
Receivable.
"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 FIARC, First Investors, or a Servicing Employee of the
Servicer, as appropriate.
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"OPINION OF COUNSEL" means a written opinion of counsel who may but need
not be counsel to FIARC or the Servicer, which counsel shall be acceptable
to the Collateral Agent and MBIA and which opinion of counsel shall, in
addition to the addressee specified, be addressed to the Collateral Agent
and MBIA.
"PERSON" means an individual, a partnership, a corporation, (including a
business trust), a joint stock company, a trust, an unincorporated
association, a joint venture or other entity or a government or an agency
or political subdivision thereof.
"PRECOMPUTED RECEIVABLE" means any Receivable under which the portion of a
payment allocable to earned interest (which may be referred to in the
Receivable as an add-on finance charge) and the portion allocable to the
Amount Financed is determined according to the sum of periodic balances or
the sum of monthly balances or any equivalent method of calculating
monthly actuarial receivables.
"PURCHASE AGREEMENT" means the agreement dated as of October 22, 1996
relating to the purchase by FIARC from First Investors of the Receivables,
as the same may be amended, modified and supplemented from time to time in
accordance with the terms thereof and of the Security Agreement, but only
with the written consent of MBIA.
"PURCHASE AMOUNT" means the amount, as of an Ending Date, required to
prepay in full the respective Receivable under the terms thereof including
interest to the end of the month of purchase. In the event a Receivable is
repurchased by FIARC, the Purchase Amount shall include any out-of-pocket
expenses which are otherwise reimbursable hereunder.
"PURCHASED RECEIVABLE" means a Receivable purchased as of the respective
Ending Date by the Servicer pursuant to Section 4.07 or by FIARC pursuant
to Section 3.02.
"RECEIVABLE" means indebtedness owed to FIARC under a retail installment
sales contract pledged to secure the Facility pursuant to the Security
Agreement, whether constituting an account, chattel paper, instrument,
mortgage, deed of trust or general intangible, arising out of or in
connection with the sale of new or used cars, or new or used light trucks
including the rendering of services by the Dealer in connection therewith,
and includes the right of payment of any finance charges and other
obligations of the Obligor with
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respect thereto. Notwithstanding the foregoing, once the Collateral Agent
has released its security interest in a Receivable and FIARC shall have
given notice thereof to the Servicer pursuant to Section 3.03, it shall no
longer constitute a Receivable hereunder.
"RECEIVABLE FILES" means the documents specified in Section 3.04.
"SCHEDULED PAYMENTS" on a Precomputed Receivable means that portion of the
payment required to be made by the Obligor during the respective
Collection Period sufficient to amortize the principal balance over the
term of the Receivable and to provide interest at the APR.
"SECURITY AGREEMENT" means the Security Agreement dated October 22, 1996
among Enterprise, FIARC, MBIA, First Investors, the Collateral Agent and
NationsBank N.A. in its capacity as Reserve Account Agent as defined
therein.
"SERVICER" means General Electric Capital Corporation as the servicer of
the Receivables, and each successor to General Electric Capital
Corporation (in the same capacity) approved by MBIA in writing pursuant to
Section 7.03 or 8.03.
"SERVICER EVENT OF DEFAULT" means an event specified in Section 8.01.
"SERVICER'S CERTIFICATE" means a certificate completed and executed on
behalf of the Servicer by a Servicing Employee of the Servicer pursuant to
Section 4.09.
"SERVICING EMPLOYEE" means any employee of the Servicer authorized to
execute documents on behalf of the Servicer, involved in, or responsible
for, the administration and servicing of the Receivables whose name
appears on a list of servicing employees furnished to FIARC, MBIA and the
Collateral Agent by the Servicer, as such list may from time to time be
amended.
"SERVICING FEE" means the fee payable to the Servicer for services
rendered during the respective Collection Period, determined pursuant to
Section 4.08.
"SIMPLE INTEREST METHOD" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the product of the fixed
rate of interest multiplied by the
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unpaid principal balance multiplied by the period of time elapsed since
the preceding payment of interest was made.
"SIMPLE INTEREST RECEIVABLE" means any Receivable under which the portion
of a payment allocable to interest and the portion allocable to principal
is determined in accordance with the Simple Interest Method.
"STATE" means any state or commonwealth of the United States of America,
or the District of Columbia.
"SUB-SERVICER" means any Person appointed by the Servicer as a
sub-servicer pursuant to Section 4.12.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the States of New York and Texas.
"VSI INSURANCE" means the blanket collateral protection insurance policy
or policies of insurance underwritten by Agricultural Excess and Surplus
Insurance Company (or any other insurance company acceptable to MBIA)
covering each of the installment sales contracts held by FIARC, including
the Receivables, in the form attached hereto as Exhibit "A".
SECTION 2.02. USAGE OF TERMS.
With respect to all terms in this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the other
genders; references to "writing" include printing, typing, lithography, and
other means of reproducing words in a visible form; references to agreements and
other contractual instruments include all subsequent amendments thereto or
changes therein entered into in accordance with their respective terms and not
prohibited by this Agreement; references to Persons include their permitted
successors and assigns; and the term "including" means "including without
limitation."
ARTICLE III
THE RECEIVABLES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF FIARC.
FIARC makes the following representations and warranties as to the
Receivables on which the Servicer may rely in accepting the responsibilities of
Servicer hereunder and on which MBIA may also
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rely. Such representations and warranties speak (i) as of the execution and
delivery of this Agreement, but shall survive such execution and delivery, and
(ii) as of the Effective Time of the sale of each Receivable to FIARC under the
Purchase Agreement.
(i) CHARACTERISTICS OF RECEIVABLES. Each Receivable (a) shall have
been originated in the United States of America, shall have been fully and
properly executed by the parties thereto, shall have been purchased by
FIARC from First Investors and shall have been validly assigned to FIARC;
(b) shall have created a valid, subsisting and enforceable first priority
security interest in favor of First Investors in the Financed Vehicle,
which security interest has been assigned by First Investors to FIARC, (c)
shall contain customary and enforceable provisions such that the rights
and remedies of the holder thereof shall be adequate for realization
against the collateral of the benefits of the security, (d) shall provide
for level monthly payments (provided that the payment in the first or last
month in the life of the Receivable may be different from the level
payment) that fully amortize the Amount Financed by maturity and yield
interest at the Annual Percentage Rate, (e) is an "Eligible Receivable" as
defined in the Security Agreement, and (f) in the case of a Precomputed
Receivable, shall provide for, in the event that such contract is prepaid,
a prepayment that fully pays the principal balance and includes a full
month's interest, in the month of prepayment, at the Annual Percentage
Rate.
(ii) COMPLIANCE WITH LAW. Each Receivable and the sale of the
Financed Vehicle 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 Reporting Act, the Fair Debt
CollectionPractices Act, the Federal Trade Commission Act, the
Xxxxxxxx-Xxxx Warranty Act, the Federal Reserve Board's Regulations B and
Z, the Texas Consumer Credit Code and 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.
(iii) BINDING OBLIGATION. Each Receivable shall represent the
genuine, legal, valid, and binding payment obligation in writing of the
Obligor, enforceable by the holder thereof in accordance with its terms.
(iv) NO GOVERNMENT OBLIGOR. None of the Receivables shall be due
from the United States of America or any State or
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from any agency, department, or instrumentality of the United States of
America or any State.
(v) SECURITY INTEREST IN FINANCED VEHICLE. Immediately prior to the
sale, assignment, and transfer thereof under the Purchase Agreement, each
Receivable shall be secured by a validly perfected first priority Lien and
security interest in the Financed Vehicle in favor of First Investors as
secured party or all necessary and appropriate actions shall have been
commenced that would result in the valid perfection of a first priority
security interest in the Financed Vehicle in favor of First Investors as
secured party.
(vi) RECEIVABLES IN FORCE. No Receivable shall have been satisfied,
subordinated, or rescinded, nor shall any Financed Vehicle have been
released from the lien granted by the related Receivable in whole or in
part.
(vii) NO WAIVER. No provision of a Receivable shall have been
waived.
(viii) NO AMENDMENTS. No Receivable shall have been amended such
that the number of the Obligor's Scheduled Payments in the case of a
Precomputed Receivable or the number of originally scheduled due dates in
the case of a Simple Interest Receivable shall have been increased.
(ix) NO DEFENSES. No right of rescission, cancellation, claim, set
off, counterclaim, or defense shall have been asserted or threatened with
respect to any Receivable, nor does any Obligor have any right or
rescission or cancellation, claim, defense, set off or counterclaim of any
kind with respect to any Receivable.
(x) NO LIENS. To the best of FIARC's knowledge, no liens or claims
shall have been filed for work, labor, or materials relating to a Financed
Vehicle that shall be liens prior to, or equal or coordinate with, the
security interest in the Financed Vehicle granted by the Obligor.
(xi) NO DEFAULT. Except for payment delinquencies permitted for
Eligible Receivables as defined in the Security Agreement, no default,
breach, violation, or event permitting acceleration under the terms of
such Receivable shall have occurred; and no continuing condition that with
notice or the lapse of time would constitute a default, breach, violation
or event permitting acceleration under the terms of such
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Receivable shall have arisen; and FIARC shall not waive any of the
foregoing.
(xii) INSURANCE. First Investors, in accordance with its customary
procedures, shall have determined that the Obligor has obtained or agreed
to obtain physical damage insurance.
(xiii) TITLE. It is the intention of FIARC that each transfer and
assignment contemplated by the Purchase Agreement constitute a sale of the
Receivables from First Investors to FIARC and that the beneficial interest
in and title to the Receivables shall not be part of the debtor's estate
in the event of the filing of a bankruptcy petition by or against First
Investors under any bankruptcy law. No Receivable has been sold,
transferred, assigned or pledged by First Investors or FIARC to any Person
other than the pledge to the Collateral Agent pursuant to the Security
Agreement. FIARC has good and marketable title to each Receivable free and
clear of all Liens, encumbrances, security interests, and rights of others
except for the security interest of the Collateral Agent under the
Security Agreement.
(xiv) LAWFUL ASSIGNMENT. No Receivable shall have been originated
in, or shall be subject to the laws of, any jurisdiction under which the
sale, transfer, and assignment of such Receivable from First Investors to
FIARC under the Purchase Agreement, or the pledge of such Receivable by
FIARC to the Collateral Agent under the Security Agreement, shall be
unlawful, void, or voidable.
(xv) ALL FILINGS MADE. All filings (including, without limitation,
UCC filings) necessary in any jurisdiction to give the Collateral Agent a
first perfected security interest in each Receivable shall have been made
as of the relevant Effective Time.
(xvi) ONE ORIGINAL. There shall be only one original executed copy
of each Receivable, which shall be delivered to the Servicer in accordance
with Section 3.03.
(xvii) CHATTEL PAPER. Each Receivable constitutes "chattel paper"
under the UCC.
(xviii) MATURITY. Each Receivable shall have an original maturity of
not more than 60 months.
(xix) LOCATION OF OFFICE. The principal executive office of FIARC is
located in Houston, Texas.
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(xx) AGENT FOR SERVICE. The agent for service for FIARC shall be CT
Corporation System, 000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxx 00000.
(xxi) NO INSOLVENT OBLIGORS. As of the Effective Time with respect
to any Receivable, no Obligor on such Receivable is shown on the
Receivable Files to be the subject of a bankruptcy proceeding.
SECTION 3.02. REPURCHASE UPON BREACH.
FIARC and the Servicer shall each promptly inform the other, in writing,
with a copy to the Collateral Agent, upon the discovery of any breach of FIARC's
representations and warranties made pursuant to Section 3.01. Unless the breach
shall have been cured by the second Ending Date following such written notice,
FIARC shall repurchase (or shall cause First Investors to repurchase pursuant to
its obligations under the Purchase Agreement) any Receivable materially and
adversely affected by the breach. In consideration of the purchase of the
Receivable, FIARC shall remit the Purchase Amount, in the manner specified in
Section 5.04. For purposes of this Section 3.02, the Purchase Amount of a
Receivable which is not consistent with the warranty pursuant to Section
3.01(i)(d) or (f) shall include such additional amount as shall be necessary to
provide the full amount of interest as contemplated therein. The sole remedy of
the Servicer with respect to a breach of any representation and warranty
pursuant to Section 3.01 shall be to require FIARC to repurchase Receivables
pursuant to this Section 3.02 or to enforce First Investors' obligation to FIARC
to repurchase such Receivables pursuant to the Purchase Agreement.
SECTION 3.03. DESIGNATION AND REMOVAL OF RECEIVABLES.
Prior to the transfer by FIARC of a security interest in Receivables to
the Collateral Agent pursuant to the Security Agreement, FIARC shall give
written notice of such transfer to the Servicer and MBIA (i) identifying all
such Receivables, and (ii) specifying the date on which such transfer is to be
effected. On or prior to such date, the Servicer shall clearly and unambiguously
xxxx all computer tapes, files and records to indicate that such security
interest has been transferred to the Collateral Agent as of the indicated date.
In the event that any Receivable should cease to be a Receivable by reason
of the release of the security interest of the Collateral Agent therein, FIARC
shall promptly give notice thereof to the Servicer and MBIA (i) identifying such
Receivable, and (ii) specifying the date as of which the same shall cease to be
a
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Receivable for purposes of this Agreement. The Servicer shall promptly modify
its computer tapes, files and records accordingly.
SECTION 3.04. CUSTODY OF RECEIVABLE FILES.
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, FIARC, upon the execution and delivery of this Agreement,
hereby revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act as the agent of the Collateral Agent as custodian (such
appointment being subject to revocation to the extent provided in Section 3.08)
of the following documents or instruments which shall be delivered to the
Servicer, as custodian for the Collateral Agent, with respect to each
Receivable:
1. Agreement of Obligor to provide physical damage insurance or binder
2. Original application for title with lien of First Investors
disclosed therein which has been presented, together with tender of
filing fee, to designated agent of the Texas Department of
Transportation in accordance with Section 501.113 of Texas
Certificate of Title Act (or equivalent documents under other
applicable state laws)
x. Xxxxx Slip or original certificate of title (or other title
documents under applicable state law)
b. Letter of Guaranty
3. Original sales contract/security agreement evidencing the
Receivable signed by Obligor and the original of any
assumption agreement or any modification, extension or
refinancing agreement
4. Factory invoice (new car) or loan to value evaluation
(used car)
5. Original credit application (signed by Obligor)
6. Credit Bureau reports
7. Insurance score sheet
8. GAP and VSI insurance certificate
9. Credit life & disability insurance certificate,
application or policy to the extent obtained by the
Obligor
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10. (a) Assignment and Power of Attorney, transferring title
from First Investors to FIARC
(b) Power of Attorney in favor of Servicer from First
Investors
11. Equifax report
12. Any and all other documents that Servicer shall maintain on file, in
accordance with customary servicing practices, pertaining to such
Receivable or the related Obligor or Financed Vehicle.
The Servicer shall not be responsible for the custody and maintenance of
any of the foregoing documents that have not been delivered to it or obtained by
the Servicer in the course of servicing the Receivables pursuant to this
Agreement.
SECTION 3.05. DUTIES OF SERVICER AS CUSTODIAN.
(a) SAFEKEEPING. The Servicer shall hold the Receivable Files
on behalf of the Collateral Agent and maintain such accounts,
records, and computer systems pertaining to each Receivable File in
a manner that is consistent with customary servicing practices. In
performing its duties as custodian the Servicer shall act with
reasonable care, using that degree of skill and attention that the
Servicer exercises with respect to the receivable files relating to
comparable automotive receivables that the Servicer services for
itself or others. The Servicer shall promptly report to the
Collateral Agent any material failure on its part to hold the
Receivable Files and maintain its accounts, records, and computer
systems as herein provided and promptly take appropriate action to
remedy any such failure, it being understood that the Servicer shall
have no responsibility with respect to Receivable Files (or any
portion thereof) not delivered to the Servicer. Nothing herein shall
be deemed to require an initial review or any periodic review by the
Collateral Agent of the Receivable Files.
(b) MAINTENANCE OF AND ACCESS TO RECORDS. The
Servicer shall maintain each Receivable File at one of
its offices specified in Exhibit "B" to this Agreement,
or at such other office in the United States as shall be
specified to FIARC and the Collateral Agent by written
notice delivered promptly, but in no event later than 20
days after any change in location. The Servicer may
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temporarily move individual Receivable Files or any portion thereof
without notice as necessary to conduct collection and other
servicing activities in accordance with its customary practices and
procedures. The Servicer shall make available to FIARC and the
Collateral Agent a list of locations of the Receivable Files, and
the related accounts, records and computer systems maintained by the
Servicer at such times as FIARC or the Collateral Agent shall
reasonably request.
(c) RELEASE OF DOCUMENTS. Upon written instruction from the
Collateral Agent, the Servicer shall release any Receivable File to
the Collateral Agent, the Collateral Agent's agent, or the
Collateral Agent's designee, as the case may be, at such place or
places as the Collateral Agent may designate, as soon as
practicable. The Servicer shall not be responsible for any
Receivable File so released until such time, if any, as it has been
returned to the Servicer.
SECTION 3.06. INSTRUCTIONS; AUTHORITY TO ACT.
To the extent that the Servicer is authorized or required under this
Agreement to act upon the instructions of the Collateral Agent with respect to
the custody of the Receivable Files, the Servicer shall be deemed to have
received proper instructions with respect to the Receivable Files upon its
receipt of written instructions signed by a Collateral Agent Officer.
SECTION 3.07. CUSTODIAN'S INDEMNIFICATION.
The Servicer as custodian shall indemnify FIARC, for any breach of its
obligations as custodian hereunder, to the extent specified in Section 7.02.
SECTION 3.08. EFFECTIVENESS AND TERMINATION.
The Servicer's appointment as custodian shall become effective as of the
date hereof and shall continue in full force and effect until such time as all
of the rights and obligations of the Servicer shall have been terminated in
accordance with the provisions of this Agreement.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.01. DUTIES OF SERVICER.
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The Servicer as agent for FIARC (to the extent provided herein) shall
manage, service, administer and make collections on the Receivables with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to automotive receivables that it services for itself or
others. The Servicer's duties shall include, to the extent specified herein,
collection and posting of payments, responding to inquiries of Obligors on such
Receivables, investigating delinquencies, sending payment coupons to Obligors,
accounting for collections, and furnishing monthly statements to FIARC and the
Collateral Agent as provided herein. Subject to the provisions of Section 4.02,
the Servicer shall follow its customary standards, policies, and procedures in
performing its duties as Servicer. Without limiting the generality of the
foregoing, and subject to the provisions of Section 4.06, the Servicer is
authorized and empowered to execute and deliver, on behalf of itself or FIARC
any and all instruments of satisfaction or cancellation, or partial or full
release or discharge, and all other comparable instruments, with respect to the
Financed Vehicles securing the Receivables. If the Servicer, in its sole
discretion, determines that it is necessary or desirable to commence a legal
proceeding to enforce a Receivable, the Servicer shall consult with FIARC to
determine whether to commence such a legal proceeding. If the Servicer and FIARC
agree to commence legal proceedings with respect to such Receivable, then (i)
the costs and expenses (including, without limitation, any legal fees) incurred
in connection with such legal proceeding shall be borne by FIARC, and (ii) the
Servicer may reimburse itself for its reasonable out-of-pocket expenses incurred
in connection with such legal proceedings prior to depositing any recoveries
received by the Servicer from such legal proceeding in the Collection Account
pursuant to Section 5.02. FIARC shall furnish the Servicer with any powers of
attorney, including any requisite power of attorney from First Investors, and
any other documents reasonably necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder.
SECTION 4.02. COLLECTION OF RECEIVABLE PAYMENTS.
The Servicer shall make reasonable 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 comparable automotive receivables that it services for itself or
others. The Servicer may in its discretion grant extensions, rebates or
adjustments on a Receivable or waive any late payment charge or any other fees
that may be collected in the ordinary course of servicing a Receivable
consistent with its customary servicing procedures. The foregoing
notwithstanding, no extension of a
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monthly payment shall be granted with respect to a Receivable unless the first
six consecutive monthly payments were made in accordance with the terms of such
Receivable, and in no event (i) shall more than two extensions of monthly
payments with respect to a Receivable be granted during any 12-month period, or
(ii) shall the total extensions of monthly payments granted over the term of a
Receivable exceed one such extension for every 12 months in the stated term of
such Receivable.
SECTION 4.03. REALIZATION UPON RECEIVABLES.
The Servicer shall use its reasonable best efforts, consistent with its
customary servicing procedures, to repossess or otherwise convert the ownership
of the Financed Vehicle securing any Receivable as to which the Servicer shall
have determined that no satisfactory arrangement can be made for collection of
payments, and in the case of the repossession of Financed Vehicles, the Servicer
shall use its best efforts to remarket the repossessed Financed Vehicles in the
same manner that the Servicer remarkets its own financed vehicles. The foregoing
shall be subject to the provision that, in any case in which the Financed
Vehicle shall have suffered damage, the Servicer shall not expend funds in
connection with the repair or the repossession of such Financed Vehicle unless
it shall determine in good faith and in its reasonable discretion that such
repair and/or repossession will increase the Liquidation Proceeds by an amount
greater than the amount of such expenses; provided, however, that the Servicer
shall incur no liability hereunder if such repair and/or possession does not, in
fact, increase the Liquidation Proceeds by an amount greater than the amount of
such expenses. Notwithstanding any provision of this Agreement to the contrary,
the Servicer shall not be obligated to institute any action for repossession
through judicial proceedings unless it shall determine in good faith and in its
reasonable discretion that such action would increase the Liquidation Proceeds
by an amount greater than the amount of expenses incurred by it in connection
with such proceeding; provided, however, that the Servicer shall incur no
liability hereunder if such proceeding does not, in fact, increase the
Liquidation Proceeds by an amount greater than the amount of expenses incurred
by it in connection with such proceeding. The Servicer may reimburse itself for
its reasonable out-of-pocket expenses incurred in connection with the
repossession or disposition of a Financed Vehicle prior to depositing any
Liquidation Proceeds with respect thereto in the Collection Account pursuant to
Section 5.02.
With respect to any Receivable, the Obligor of which has filed
bankruptcy, if it is not referred by the Servicer to outside legal
16
counsel the Servicer shall be entitled to receive a one time fee of $250 in
respect of such Receivable, and, if it is so referred, the Servicer shall be
entitled to reimbursement of the fees and expenses of such counsel. The Servicer
shall have no obligation under the Agreement to take any action to realize upon
any recourse to Dealers.
SECTION 4.04. INSURANCE AND TITLE TRACKING.
The Servicer, in accordance with its customary servicing procedures, shall
monitor the contractual requirement that each Obligor shall maintain physical
damage insurance covering the Financed Vehicle as of the execution date of the
Receivable. The Servicer shall track the expirations and cancellations of
insurance policies required to be maintained by Obligors and shall send reminder
notices to Obligors whose insurance policies have expired and default letters to
Obligors who fail to obtain or maintain required coverages. The Servicer shall
notify the Collateral Agent and FIARC on a monthly basis of Obligors who have
failed to obtain or maintain such coverages. The Servicer may subcontract such
insurance services to a third party.
FIARC shall undertake to cause the proper Certificates of Title issued by
the Texas Department of Transportation, or the equivalent certificates or
registrations issued by the appropriate authorities of other States, if
applicable, to reflect FIARC (or First Investors) as the lienholder thereon with
respect to any Financed Vehicle covered by a Receivable. The Servicer shall
establish procedures to track and verify the receipt of proper Certificates of
Title issued by the Texas Department of Transportation, or the equivalent
certificates or registrations issued by the appropriate authorities of other
States if applicable, reflecting FIARC (or First Investors) as the lienholder
thereon with respect to any Financed Vehicle covered by a Receivable. In the
event that the Servicer does not receive such documentation with respect to any
Receivable, within 120 days after the Servicer enters such Receivable into its
tracking system, the Servicer shall promptly notify FIARC and the Collateral
Agent by delivery of a Notice of Title Discrepancy in the form attached hereto
as Exhibit "C". The Servicer shall have no obligations hereunder to cause any
such Certificate or Title or equivalent certificates to reflect FIARC (or First
Investors) as the lienholder thereon with respect to any Financed Vehicle
covered by a Receivable.
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SECTION 4.05. MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES.
The Servicer shall, in accordance with its customary servicing procedures,
cooperate with FIARC in taking such steps as are necessary to maintain
perfection of the security interest created by each Receivable in the related
Financed Vehicle. FIARC hereby authorizes the Servicer to take such steps as are
necessary to reperfect such security interest on behalf of FIARC in the event of
the relocation of a Financed Vehicle or for any other reason. Without limiting
the foregoing, the Servicer shall take such steps as are necessary to assure
that any remarketing of repossessed Financed Vehicles under consignment
arrangements with dealers or other third parties are effected in such manner as
to assure that the priority of the security interest of FIARC therein is not
impaired.
Notwithstanding the foregoing or any other provision of this Agreement, the
Servicer shall have no obligation to effect any change in the notation of First
Investors as the lienholder on any title documents relating to the Financed
Vehicles or to cause any such title documents to be endorsed or delivered to
FIARC.
SECTION 4.06. COVENANTS OF SERVICER.
Except as may otherwise be required by any applicable law, rule,
regulation, order or decree, the Servicer shall not (i) impair FIARC's ownership
of the Receivables, or (ii) release the Financed Vehicle securing any such
Receivable from the security interest granted by such Receivable, in whole or in
part, except upon the expiration of twenty days following (a) payment in full by
the Obligor thereunder, (b) repossession, or (c) payment of final settlement
with a physical damage insurance carrier.
SECTION 4.07. PURCHASE OF RECEIVABLES UPON BREACH.
The Servicer and FIARC shall promptly inform the other, in writing (with a
copy to the Collateral Agent), upon the discovery of any breach of Section 4.06.
Unless the breach shall have been cured by the second Ending Date following such
discovery (or, at the Servicer's election, the first following Ending Date), the
Servicer shall purchase the related Receivable. In consideration of the purchase
of such Receivable, the Servicer shall remit the Purchase Amount in the manner
specified in Section 5.04. The sole remedy of FIARC with respect to a breach of
Section 4.06 shall be to require the Servicer to repurchase Receivables pursuant
to this Section 4.07.
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SECTION 4.08. SERVICING COMPENSATION.
The Servicing Fee with respect to each Collection Period, which shall be
withheld by the Servicer from collections on Receivables prior to remittance to
the Collection Account as provided in Section 5.02, shall equal (i) $12.45 for
each Receivable being serviced by the Servicer as of the tenth day of such
Collection Period, plus (ii) $75.00 for each Financed Vehicle repossessed and
remarketed.
SECTION 4.09. SERVICER'S MONTHLY REPORTS.
On or before the tenth day after each Ending Date, the Servicer shall
deliver to FIARC and the Collateral Agent the following reports with respect to
the preceding Collection Period: (i) a Servicer's Certificate substantially in
the form of Exhibit "D" hereto (on which the "principal portion of amount
collected", the "interest portion of amount collected" and the "aggregate
principal balance of the Receivables as of the Ending Date" shall be computed in
accordance with the Simple Interest Method), (ii) a Trial Balance and
Collections Report substantially in the form of Exhibit "D-1" hereto, and (iii)
a Monthly Delinquency Report substantially in the form of Exhibit "D-2" hereto.
Such reports shall be presumed correct and accurate unless, within thirty days
after receipt thereof, FIARC or the Collateral Agent delivers to the Servicer by
registered or certified mail, written objection specifying the error or errors
contained in such reports, in which event the Servicer's sole liability shall be
to make appropriate adjustments correcting such error.
SECTION 4.10. NOTICE OF DEFAULT.
The Servicer shall deliver to FIARC and the Collateral Agent promptly
after having obtained knowledge thereof, but in no event later than two business
Days thereafter, written notice in an Officer's Certificate of any event which
with the giving of notice or lapse of time, or both, would become a Servicer
Event of Default under Section 8.01. FIARC shall deliver to the Collateral Agent
and the Servicer, promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a FIARC Event of Default under Section 8.02.
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SECTION 4.11. SERVICER EXPENSES.
Except as otherwise reimbursable hereunder, the Servicer shall be required
to pay all expenses incurred by it in connection with its activities hereunder,
including taxes imposed on the Servicer.
SECTION 4.12. APPOINTMENT OF SUB-SERVICER.
The Servicer may at any time appoint a Sub-servicer to perform any of the
duties or obligations of the Servicer hereunder; provided, however, that such
appointment shall not relieve the Servicer of its responsibility with respect to
such duties and obligations. All Sub-servicing arrangements will be upon such
terms and conditions as are not inconsistent with this Agreement. The fees and
expenses of the Sub-servicer shall be as agreed between the Servicer and its
Sub-servicer from time to time and FIARC shall have no responsibility therefor.
SECTION 4.13. PROCESSING OF CLAIMS UNDER CREDIT INSURANCE.
The Servicer will administer the filings of claims under the policies of
Credit Insurance by filing the appropriate notices related to claims as well as
claims with the respective carriers or their authorized agents all in accordance
with the terms of such policies. The Servicer shall use reasonable efforts to
file such notices and claims on a timely basis after obtaining knowledge of the
events giving rise to such claims, subject to the servicing standard set forth
in Section 4.01; provided, however, that the Servicer shall have no
responsibility in connection with the resolution of any dispute that may arise
between FIARC and such carriers with respect to the settlement of any such
claims.
The Servicer shall not be required to pay any premiums or, other than
administering the filing of claims and performing reporting requirements
specified in the insurance policies, in connection with filing such claims
perform any obligations of the named insured under any of the foregoing
insurance policies, and shall not be required to institute any litigation or
proceeding or otherwise enforce the obligations of any insurer thereunder.
Notwithstanding any provision to the contrary in this Agreement, the Servicer
shall not be responsible to FIARC (i) for any act or omission to act done in
order to comply with the requirements or satisfy any provisions of any of the
foregoing insurance policies or (ii) for any act, absent willful misconduct or
gross negligence, or omission to act done in compliance with this Agreement. In
the case of any inconsistency between this Agreement and the terms of any
insurance policy, the Servicer shall comply with the latter.
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SECTION 4.14. AGENCY STATUS.
The parties hereto agree and acknowledge that to the extent General
Electric Capital Corporation is named in any title document, UCC financing or
continuation statement, insurance policy, Receivable document or court document
as a lienholder, secured party, loss payee, owner of a Financed Vehicle or
agent, or in another similar capacity, General Electric Capital Corporation is
acting in such capacity as agent of FIARC for the sole purpose of facilitating
the servicing of the Receivables and has no equitable interest in the
Receivables, except such as it may have by virtue of its purchase of a
Receivable pursuant to this Agreement.
SECTION 4.15. INSPECTION.
At the request of FIARC or MBIA and upon reasonable notice, the Servicer
shall make available to authorized representatives of FIARC or MBIA for
inspection and copying, during regular business hours, the computer disks, tapes
or other records reflecting the payment status and history, and related
information maintained by the Servicer in accordance with its customary
servicing procedures, with respect to the Receivables.
ARTICLE V
DISTRIBUTIONS
SECTION 5.01. COLLECTION ACCOUNT.
FIARC represents to the Servicer that, contemporaneously with the execution
of this Agreement, the Collateral Agent shall establish the Collection Account
in accordance with the requirements of Section 4.1(b) of the Security Agreement.
SECTION 5.02. COLLECTIONS.
The Servicer shall remit, within ten Business Days (but in no event more
than 14 calendar days) after each Ending Date, to the Collection Account all
payments by or on behalf of the Obligors (other than Purchased Receivables), and
all Liquidation Proceeds, both as collected during the Collection Period. The
Servicer shall remit such collections to the Collection Account in immediately
available funds and from the time of receipt of any of the amounts specified in
this paragraph until deposit thereof in the Collection Account, the Servicer
shall not be required to segregate such amounts from other funds held by it.
Except as otherwise provided in Section 5.04, the foregoing requirements for
deposit in the
21
Collection Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, the Servicer shall withhold
from the Collection Account, (a) the Servicing Fee as provided in Section 4.08
and (b) any reimbursable expenses incurred by the Servicer in repossessing a
Financed Vehicle pursuant to Section 4.03 or commencing a legal proceeding to
enforce a Receivable pursuant to Section 4.01. Moreover, the Servicer may
instruct the Collateral Agent to withdraw from the Collection Account and
deliver to the Servicer (a) amounts deposited in error, and (b) chargebacks
attributable to errors in posting, returned checks, or rights of offset for
amounts that should not have been paid or that must be refunded as a result of a
successful claim or defense under bankruptcy or similar laws.
SECTION 5.03. APPLICATION OF COLLECTIONS.
All collections for the Collection Period shall be applied by the Servicer
as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied first, in the case of
Precomputed Receivables, to the Scheduled Payment and, in the case of Simple
Interest Receivables, to be applied to interest and principal in accordance with
the Simple Interest Method. With respect to Precomputed Receivables, any
remaining excess shall be applied to prepay the Precomputed Receivable.
SECTION 5.04. ADDITIONAL DEPOSITS.
The Servicer and FIARC, as the case may be, shall deposit or cause to be
deposited in the Collection Account the aggregate Purchase Amount required to be
paid by it pursuant to Section 4.07 or 3.02, respectively, with respect to
Purchased Receivables. All such deposits shall be made in immediately available
funds on the Business Day next following the purchase of the Purchased
Receivable.
SECTION 5.05. NET DEPOSITS.
As an administrative convenience, the Servicer will be permitted to make
the deposit of collections on the Receivables for or with respect to the
Collection Period net of distributions to be made to the Servicer, in accordance
with the express terms hereof, with respect to the Collection Period or amounts
payable to or withdrawable by the Servicer pursuant to this Agreement. The
Servicer, however, will account to FIARC and the Collateral Agent
22
as if all deposits, distributions and transfers were made individually.
ARTICLE VI
FIARC
SECTION 6.01. REPRESENTATIONS OF FIARC.
FIARC makes the following representations on which the Servicer may rely
in accepting the responsibilities of Servicer hereunder and on which MBIA may
also rely. The representations speak as of the execution and delivery of the
Agreement and shall survive such execution and delivery.
(i) ORGANIZATION AND GOOD STANDING. FIARC is duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, 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, and had at all relevant times, and has, power, authority,
and legal right to acquire and own the Receivables.
(ii) DUE QUALIFICATION. FIARC is duly qualified to do business as a
foreign corporation and is in good standing under the laws of, and shall have
obtained all necessary licenses and approvals in, all jurisdictions in which the
ownership or lease of property or the conduct of its business shall require such
qualifications, licenses or approvals.
(iii) POWER AND AUTHORITY. FIARC has the power and authority to execute
and deliver this Agreement and to carry out its terms, and the execution,
delivery, and performance of this Agreement has been duly authorized by FIARC by
all necessary corporate action.
(iv) BINDING OBLIGATION. This Agreement constitutes a legal, valid, and
binding obligation of FIARC enforceable in accordance with its terms, subject as
to the enforcement of remedies (x) to applicable bankruptcy, insolvency,
reorganization, moratorium, and other similar laws affecting creditors' rights
generally and (y) to general principles of equity (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity or at law).
(v) NO VIOLATION. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof will not conflict with,
result in any breach of any of the terms and provisions of, nor constitute (with
or without notice or
23
lapse of time) a default under, the certificate of incorporation or bylaws of
FIARC, or any indenture, agreement, or other instrument to which FIARC is a
party or by which it shall be bound; nor result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such indenture,
agreement, or other instrument (other than as contemplated by this Agreement);
nor violate any law or any order, rule, or regulation applicable to FIARC of any
court or of any federal or state regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over FIARC or its
properties and no consent, approval, authorization, order, registration or
qualification of or with any court, regulatory authority or other governmental
agency or body is required for the execution and delivery of this Agreement, or
the consummation of the transactions contemplated thereby.
(vi) NO PROCEEDINGS. There are no proceedings or investiga- tions pending,
or, to FIARC's best knowledge, threatened, before any court, regulatory body,
administrative agency, or other governmental instrumentality having jurisdiction
over FIARC or its properties: A) asserting the invalidity of this Agreement; B)
seeking to prevent the consummation of any of the transactions contemplated by
this Agreement, or C) seeking any determination or ruling that might materially
and adversely affect the performance by FIARC of its obligations under, or the
validity or enforceability, of this Agreement.
SECTION 6.02. LIABILITY OF FIARC; INDEMNITIES.
FIARC shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by FIARC under this Agreement.
(i) FIARC shall indemnify, defend and hold harmless the Servicer and its
respective officers, directors, agents and employees from and against any taxes
that may at any time be asserted against the Servicer with respect to the
Receivables, including any sales, gross receipts, general corporation, tangible
personal property, privilege, or license taxes and costs and expenses in
defending against the same.
(ii) FIARC shall indemnify, defend and hold harmless the Servicer, its
parents, subsidiaries, affiliates and the directors, officers, employees,
partners, agents, successors and assigns of each of such companies from and
against any claim, action, loss, damage, penalty, fine, cost, expense or other
liability, including all court costs and reasonable attorneys' fees incurred in
enforcing this indemnity or defending any claim or action, directly or
indirectly resulting from or arising out of the transactions
24
contemplated by this Agreement or FIARC's performance of its duties under this
Agreement, including without limitation, any misrepresentation or breached
warranty under this Agreement.
(iii) FIARC shall indemnify, defend and hold harmless the Servicer and any
director, officer, employee or agent of the Servicer from and against any and
all costs, expenses, losses, claims, damages and liabilities incurred in
connection with any legal action or proceeding relating to this Agreement, other
than any such cost, expense, loss, claim, damage or liability for which the
Servicer provides an indemnity pursuant to Section 7.02 or for which the
Servicer is otherwise entitled to reimbursement under this Agreement.
Indemnification and rights of reimbursement under this Section 6.02 shall
survive the termination of this Agreement and shall include, without limitation,
reasonable fees and expenses of counsel and any other expenses incurred in
connection with preparing for, investigating or defending any such claims,
damages, losses or liabilities, which FIARC shall reimburse as incurred by the
indemnified party. If FIARC shall have made any indemnity payments pursuant to
this Section and the recipient thereafter shall collect any of such amounts from
others, the recipient shall repay such amounts to FIARC, without interest.
SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF FIARC.
Any Person (a) into which FIARC may be merged or consolidated, (b) which
may result from any merger or consolidation to which FIARC shall be a party, or
(c) which may succeed to the properties and assets of FIARC substantially as a
whole, which Person in any of the foregoing cases executes an agreement or
assumption to perform every obligation of FIARC under this Agreement, shall be
the successor to FIARC hereunder without the execution or filing of any document
or any further act by any of the parties to this Agreement; provided, however,
that (i) MBIA has consented in writing to such consolidation, merger or
succession, (ii) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 3.01 shall have been
breached and no FIARC Event of Default, and no event that, after notice or lapse
of time, or both, would become a FIARC Event of Default shall have happened and
be continuing, (iii) FIARC shall have delivered to the Collateral Agent and MBIA
an Officer's Certificate and an Opinion of Counsel, addressed to the Collateral
Agent and MBIA, each stating that such consolidation, merger, or succession and
such agreement or assumption comply with this Section 6.03 and that all
conditions precedent, if any, provided
25
for in this Agreement relating to such transaction have been complied with and
(iv) FIARC shall have delivered to the Collateral Agent and MBIA an Opinion of
Counsel, addressed to the Collateral Agent and MBIA, 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 security interest of the Collateral
Agent in the Receivables, 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. Notwithstanding anything herein to the
contrary, the execution of the foregoing agreement or assumption and compliance
with clauses (i), (ii), (iii) and (iv) above shall be conditions to the
consummation of the transactions referred to in clauses (a), (b) or (c) above.
SECTION 6.04. LIMITATION ON LIABILITY OF FIARC AND OTHERS.
FIARC and any director or officer or employee or agent of FIARC may rely in
good faith on the advice of counsel or on any document of any kind, PRIMA FACIE
properly executed and submitted by any Person respecting any matters arising
hereunder. FIARC shall not be under any obligation to appear in, prosecute, or
defend any legal action that shall not be incidental to its obligations under
this Agreement, and that in its opinion may involve it in any expense or
liability.
ARTICLE VII
THE SERVICER
SECTION 7.01. REPRESENTATIONS OF SERVICER.
The Servicer makes the following representations to FIARC as of the
execution and delivery of this Agreement, which representations shall survive
such execution and delivery:
(i) ORGANIZATION AND GOOD STANDING. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the state
of its incorporation, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and shall have, power,
authority, and legal right to service the Receivables and to hold the Receivable
Files as custodian as provided herein.
26
(ii) DUE QUALIFICATION. The Servicer is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary material
licenses and approvals in all jurisdictions in which the servicing of the
Receivables as required by this Agreement shall require such qualifications.
(iii) POWER AND AUTHORITY. The Servicer shall have the power and authority
to execute and deliver this Agreement and to carry out its terms; and the
execution, delivery, and performance of this Agreement shall have been duly
authorized by the Servicer by all necessary corporate action.
(iv) BINDING OBLIGATION. This Agreement shall constitute a legal, valid,
and binding obligation of the Servicer enforceable in accordance with its terms
subject as to the enforcement of remedies (x) to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights generally and (y) to general principles of equity (regardless
of whether the enforcement of such remedies is considered in a proceeding in
equity or at law).
(v) NO VIOLATION. The consummation by the Servicer of the transactions
contemplated by this Agreement and the fulfillment by the Servicer of the terms
hereof shall 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
material default under, the articles of incorporation or bylaws of the Servicer,
or any indenture, agreement, or other instrument to which the Servicer is a
party or by which it shall be bound; nor violate any law or any order, rule, or
regulation applicable to the Servicer of any court or of any federal or state
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over the Servicer or its properties, which conflict, breach,
default or violation would have a material and adverse affect on the ability of
the Servicer to perform its obligations hereunder.
(vi) NO PROCEEDINGS. There are no proceedings or investiga- tions relating
to the Servicer pending, or to the Servicer's knowledge, threatened, before any
court, regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Servicer or its properties: A)
asserting the invalidity of this Agreement, B) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement, or C)
seeking any determination or ruling that might materially and adversely affect
the performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement.
27
SECTION 7.02. INDEMNITIES OF SERVICER.
The Servicer shall indemnify, defend, and hold harmless FIARC, its
directors, officers, employees, agents, successors and assigns, respectively,
from and against any claim, action, loss, damage, penalty, fine, cost, expense
or other liability, including all court costs and reasonable attorneys' fees
incurred in enforcing this indemnity or defending any claim or action, directly
resulting from any breach of any representation or warranty made by the Servicer
in this Agreement or directly resulting from the Servicer's willful misconduct,
bad faith or gross negligence. The right of indemnification provided hereby
shall survive the termination of this Agreement. If the Servicer shall have made
any indemnity payments pursuant to this Section and the recipient thereafter
collects any of such amounts from others, the recipient shall promptly repay
such amounts to the Servicer, without interest.
SECTION 7.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SERVICER.
Any Person (a) into which the Servicer may be merged or consolidated (b)
which may result from any merger or consolidation to which the Servicer shall be
a party, or (c) which may succeed to the properties and assets of the Servicer
substantially as a whole, which Person executed an agreement of assumption to
perform every obligation of the Servicer hereunder, shall be the successor to
the Servicer under this Agreement without further act on the part of any of the
parties to this Agreement; provided however, that immediately after giving
effect to such transaction, no Servicer Event of Default specified in clauses
(iii) or (iv) of Section 8.01, and no event which, after notice or lapse of
time, or both, would become such a Servicer Event of Default shall have happened
and be continuing.
SECTION 7.04. LIMITATION ON LIABILITY OF SERVICER AND OTHERS.
The Servicer shall be liable in accordance herewith only to the extent of
the obligations specifically undertaken by the Servicer under this Agreement.
Neither the Servicer nor any of the directors or officers or employees or
agents of the Servicer shall be under any liability to FIARC, except as
expressly provided under this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement or any action taken in
good faith or for errors in judgment; provided, however, that this provision
shall not protect the Servicer or any such person against any liability
28
that would otherwise be imposed by reason of willful misconduct, bad faith or
gross negligence in the performance of duties under this Agreement. The Servicer
and any director or officer or employee or agent of the Servicer may rely in
good faith on any document of any kind PRIMA FACIE properly executed and
submitted by any Person respecting any matters arising under this Agreement. The
Servicer shall not be liable for an error of judgment made in good faith by a
Servicing Employee, unless it shall be proved that the Servicer shall have been
grossly negligent in ascertaining the pertinent facts. The Servicer and any
director, officer, employee or agent of the Servicer may consult with counsel
respecting any matters arising under this Agreement and shall be protected in
relying in good faith on the advice of such counsel.
Except as expressly provided in this Agreement, the Servicer shall not be
under any obligation to appear in, prosecute, or defend any legal action that
shall not be incidental to its duties to service the Receivables in accordance
with this Agreement; provided, however, that the Servicer may undertake any
reasonable action that it may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties to this Agreement. In such
event, the reasonable legal expenses and costs of such action and any liability
resulting therefrom shall be expenses, costs, and liabilities of FIARC and the
Servicer shall be entitled to be reimbursed therefor. Rights of reimbursement
under this Section 7.04 shall survive the termination of this Agreement.
ARTICLE VIII
DEFAULT
SECTION 8.01. SERVICER EVENTS OF DEFAULT.
If any one of the following events ("Servicer Events of Default") shall
occur and be continuing:
(i) Any failure by the Servicer to deposit or transfer into the Collection
Account any proceeds or payment, required to be so deposited or transferred
under the terms of this Agreement that shall continue unremedied for a period of
three Business Days after written notice of such failure is received by the
Servicer from FIARC or the Collateral Agent; or
(ii) Failure on the part of the Servicer duly to observe or to perform in
any material respect any other covenants or agreements of the Servicer set forth
in this Agreement, or the material breach by the Servicer or any of its
representations and warranties set
29
forth in this Agreement, which failure or breach shall (a) materially and
adversely affect the rights of FIARC and (b) continue unremedied for a period of
30 days after the date on which written notice of such failure or breach,
requiring the same to be remedied, shall have been given to the Servicer by
FIARC or the Collateral Agent; or
(iii) The entry of a decree or order by a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator, receiver, or liquidator for the Servicer in any insolvency,
readjustment of debt, marshalling of assets and liabilities, or similar
proceedings, or for the winding up or liquidation of its affairs; or
(iv) The consent by the Servicer to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings of or relating to the Servicer or
of or relating substantially to all of its property; or the Servicer shall admit
in writing its inability to pay its debts generally as they become due, file a
petition to avail itself of any applicable insolvency or reorganization statute,
make an assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations;
then, and in each and every case, so long as a Servicer Event of Default shall
not have been cured, FIARC may with the written consent of MBIA and shall at the
written direction of MBIA, terminate all of the rights and obligations of the
Servicer under this Agreement, subject to accrued compensation, rights of
reimbursement and the survival of indemnity and limitation on liability
provisions, by notice in writing to the Servicer sent by certified mail, postage
prepaid, or by hand delivery. Upon the Servicer's receipt of notice of
termination pursuant to this Section 8.01, the Servicer shall continue to
perform its functions as Servicer under this Agreement until the earlier of (i)
the appointment of a successor Servicer pursuant to Section 8.03, and (ii) 45
days from its receipt of such notice of termination.
SECTION 8.02. FIARC EVENTS OF DEFAULT.
If any one of the following events ("FIARC Events of Default") shall occur
and be continuing:
(i) FIARC fails to timely remit to the Servicer any Servicing Fees
due and payable and such failure continues for a period of 30 days from
the date of the mailing or delivery of an invoice from the Servicer to
FIARC and the Collateral Agent; or
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(ii) If any representation or warranty of FIARC in this Agreement is
false, incorrect or misleading in any material respect, or if any
representation or warranty contained in any reports, documents,
certificates or other papers delivered to the Servicer from time to time
is false, incorrect or misleading in any material respect, and is not
cured within 30 days of written notice thereof to FIARC; or
(iii) If FIARC breaches or fails to perform or observe any
obligation or condition to be performed or observed by it under this
Agreement in any material respect and such breach or default is not cured
within 30 days after the Servicer has given FIARC written notice demanding
that such breach or default be cured;
then, and in each and every case, so long as such FIARC Event of Default shall
not have been cured, the Servicer may terminate all of its rights and
obligations as Servicer under this Agreement by notice in writing to FIARC and
the Collateral Agent sent by certified mail, postage prepaid, or by hand
delivery. Upon FIARC's and the Collateral Agent's receipt of notice of
termination pursuant to this Section 8.02, the Servicer shall not be required to
accept for servicing any new Receivables created thereafter (although the
Servicer shall accept Receivables which were, at the time such notice was
received, in transit to the Servicer), but the Servicer shall continue to
perform its functions as Servicer under this Agreement until the earlier of (i)
the appointment of a successor Servicer (approved in writing by MBIA) pursuant
to Section 8.03 and (ii) 120 days from the delivery of notice of termination to
FIARC in accordance with the preceding sentence; provided, however, that if the
Servicer has exercised its termination right hereunder on the basis of a FIARC
Event of Default not involving the failure by FIARC to timely pay Servicing Fees
or expenses reimbursable to the Servicer hereunder, then the Servicer shall,
after the expiration of such 120 day period, continue (for so long as the
Servicing Fees and reimbursable expenses are being timely paid) to service
Receivables then being serviced until (a) the appointment of a successor
Servicer acceptable to MBIA, or (b) such Receivables are fully paid or otherwise
liquidated; and, provided further, that the Servicer shall not be obligated to
continue to service any such Receivables to the extent such FIARC Event of
Default impairs or prevents the Servicer from performing its obligations
hereunder.
SECTION 8.03. APPOINTMENT OF SUCCESSOR.
(a) In the event that FIARC (with the written consent or at the written
direction of MBIA) should exercise its rights of
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termination under Section 8.01, or the Servicer should exercise its rights of
termination under Section 8.02, FIARC (with the consent of MBIA and the
Collateral Agent, which will not be unreasonably withheld) shall appoint a
successor Servicer, which shall accept its appointment by a written assumption
in form acceptable to FIARC, MBIA and the Collateral Agent; provided, however,
that if a Termination Event shall have occurred under the Security Agreement and
the indebtedness secured thereby shall have been accelerated pursuant to the
terms thereof, the Collateral Agent shall have the right to appoint a successor
Servicer (with the written consent of MBIA).
(b) Upon appointment, the successor Servicer shall be the successor 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, and shall be entitled to the Servicing Fee
and all of the rights granted to the predecessor Servicer hereunder. Upon the
appointment of a successor Servicer in accordance herewith, all authority and
power of the Servicer under this Agreement, whether with respect to the
Receivables or otherwise, shall, without further action, pass to and be vested
in such successor Servicer; and, without limitation, FIARC is hereby authorized
and empowered to execute and deliver, on behalf of the 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 Receivables and related documents, or otherwise. The
predecessor Servicer shall cooperate with the successor Servicer and FIARC in
effecting the termination of the responsibilities and rights of the predecessor
Servicer under this Agreement, including the transfer to the successor Servicer
for administration by it of all cash amounts that shall at the time be held by
the predecessor Servicer for deposit, or shall thereafter be received with
respect to a Receivable, and delivery of the Receivable Files. All reasonable
costs and expenses (including attorneys' fees) incurred in connection with
transferring the Receivable Files to the successor Servicer and amending this
Agreement to reflect such succession as Servicer shall be paid by (i) the
predecessor Servicer in the case of termination under Section 8.01, or (ii)
FIARC in the case of termination under Section 8.02.
SECTION 8.04. PAYMENT OF COMPENSATION; REPAYMENT OF ADVANCES.
If the identity of the Servicer shall change, the predecessor Servicer
shall be entitled to receive all accrued unpaid Servicing Fees, and other
accrued and unpaid compensation described in Section 4.08 hereof, in each case
through the date it performs its
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duties hereunder. The predecessor Servicer shall also be entitled to receive
reimbursement for all outstanding reimbursable expenses.
SECTION 8.05. WAIVER OF PAST DEFAULTS.
FIARC (with the written consent of MBIA) may waive any default by the
Servicer in the performance of its obligations hereunder and its consequences,
except a default in making any required deposits to the Collection Account in
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.01. AMENDMENT.
This Agreement may be amended, modified or supplemented only by a written
instrument executed by FIARC (with the written consent of MBIA) and the
Servicer. Both FIARC and the Servicer shall promptly notify the Collateral Agent
in writing of any such amendment, modification or supplement.
SECTION 9.02 TERM.
The term of this Agreement shall begin on the date hereof and shall end on
October 31, 2000; provided, however, that the Servicer may terminate the
acceptance of new Receivables upon written notice to FIARC (with a copy to the
Collateral Agent, MBIA and all others entitled to notice under the Security
Agreement) between January 1 and June 30, 1997, or, upon a failure of the
parties to reach agreement on or before October 31 of any year as to the terms
of Section 4.08 hereof, which may be the subject of annual negotiation during
the term hereof upon the written request of either party on or before June 30 of
any year. Upon the expiration of the term of this Agreement on October 31, 2000,
or upon the earlier exercise by the Servicer of its right to terminate the
acceptance of new Receivables as above provided, (i) the Servicer's obligation
to accept new Receivables shall terminate on the December 31 next following, and
(ii) Servicer shall be obligated to service only the Receivables being serviced
hereunder as of such December 31 until the same are fully paid or otherwise
liquidated whereupon, after payment of all Servicing Fees and other amounts due
Servicer hereunder, this Agreement shall terminate.
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In the event that the Servicer exercises its right to terminate the
acceptance of new Receivables pursuant to this Section 9.02 prior to the
expiration of the term of this Agreement, within 30 days thereafter FIARC, at
its discretion (with the written consent of the Collateral Agent and MBIA), may
terminate this Agreement upon written notice to the Servicer, such termination
to be effective on the December 31 next following. If notice of termination is
given by FIARC pursuant to the preceding sentence, (i) the Servicer shall
cooperate with FIARC and any successor servicer (acceptable to MBIA) in
effecting the termination of the responsibilities and rights of the Servicer
under this Agreement, including the transfer to FIARC or the successor servicer
for administration by it of all cash amounts that shall at the time be held by
the Servicer for deposit, or shall thereafter be received with respect to a
Receivable, and delivery of the Receivable Files, and (ii) upon payment of all
Servicing Fees and other amounts due Servicer hereunder, this Agreement shall
terminate.
SECTION 9.03. PROTECTION OF THE RECEIVABLES.
(a) FIARC shall execute and file such financing statements and cause to be
executed and filed such continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain, and protect the
first priority security interest of the Collateral Agent (for the benefit of
Enterprise and MBIA) in the Receivables. FIARC shall deliver (or cause to be
delivered) to the Collateral Agent and MBIA file stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
(b) In the event FIARC or the Servicer shall change its name, identity, or
corporate structure in any manner that would, could, or might make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of Section 9.402 of the UCC, it shall
give the Servicer, MBIA and the Collateral Agent (in the case of FIARC) or
FIARC, MBIA and the Collateral Agent (in the case of the Servicer) written
notice thereof and shall promptly file appropriate amendments to all previously
filed financing statements or continuation statements.
(c) FIARC and the Servicer shall have an obligation to give
the Servicer, MBIA and the Collateral Agent (in the case of FIARC)
and FIARC, MBIA and the Collateral Agent (in the case of the
Servicer) at least 60 days' prior written notice of any relocation
of its principal executive office and shall promptly file any
amendment or new financing statements required under the UCC. The
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Servicer shall at all times maintain each office from which it shall service
Receivables, within the United States of America.
(d) The Servicer shall maintain records for each Receivable, which records
shall include (i) the original principal balance, the amount of each payment
applied to the Receivable, the date of each payment, the interest rate and the
current outstanding gross balance, and (ii) a reconciliation between payments or
recoveries on (or with respect to) the Receivable and the amounts from time to
time deposited in the Collection Account in respect of the Receivable. The
Servicer's obligation to perform its servicing duties and maintain accurate
records hereunder is limited to the accuracy and availability of the information
the Servicer receives in the Receivable Files delivered to the Servicer
hereunder.
SECTION 9.04. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 9.05. NOTICES.
All demands, notices and communications upon or to FIARC, MBIA the
Servicer or the Collateral Agent under this Agreement shall be in writing,
personally delivered or mailed by certified mail, return receipt requested, and
shall be deemed to have been duly given upon receipt (a) in the case of FIARC,
to 000 Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, Attention: President, (b) in the
case of MBIA, to MBIA Insurance Corporation, 000 Xxxx Xxxxxx, Xxxxxx, Xxx Xxxx
00000, Attention: Insured Portfolio Management - SF, (c) in the case of the
Servicer, to General Electric Capital Corporation, Automobile Securitization,
000 Xxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000, and (d) in the case of the Collateral
Agent, at the Corporate Trust Office, or in each case at such other address as
shall be designated in a written notice to the parties to this Agreement.
SECTION 9.06. 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, to the
extent permitted by law, 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.
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SECTION 9.07. ASSIGNMENT.
Notwithstanding anything to the contrary contained herein, except as
provided in Section 9.08 below and in the provisions of this Agreement
concerning the appointment of a successor Servicer, this Agreement may not be
assigned by FIARC or the Servicer without the prior written consent of the other
and MBIA.
SECTION 9.08. COLLATERAL ASSIGNMENT.
Notwithstanding anything to the contrary contained herein, the Servicer
(i) acknowledges and consents that FIARC has assigned its rights hereunder and
its interests herein to the Collateral Agent as collateral pursuant to the
Security Agreement, and (ii) agrees to attorn to the Collateral Agent in the
event of its succession to the rights and interests of FIARC hereunder pursuant
to the provisions of the Security Agreement.
SECTION 9.09. GOODWILL.
FIARC hereby acknowledges that substantial goodwill exists with respect to the
trade names "GE", "GECC", "GE Capital Corporation" and "General Electric Capital
Corporation" in the United States and that the Servicer's reputation in the
financial services business is of substantial importance to the operations of
the Servicer. Accordingly, FIARC agrees to use its best efforts to conduct its
activities under this Agreement in a manner that will not detract from the
Servicer's goodwill and standing and will not otherwise damage the reputation or
the Servicer.
SECTION 9.10. CERTAIN PROCEEDINGS.
For so long as this Agreement is in effect, the Servicer hereby agrees
that it 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
FIARC.
SECTION 9.11. LIMITED RECOURSE OF THE SERVICER.
Any provisions of this Agreement to the contrary notwithstanding, the sole
recourse of the Servicer for the payment of monies due and owing to it under the
terms of this Agreement shall be as follows:
(i) with respect to Servicing Fees as provided in Section 4.08 and
reimbursable expenses as provided in Sections 4.01 and 4.03, the Servicer's
right to withhold the same from deposit in the
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Collection Account as provided in Section 5.02 shall be exclusive of any other
recourse, and no other amounts shall be withheld by the Servicer from deposits
in the Collection Account pursuant to the terms of Sections 5.02 and 5.05;
(ii) with respect to any other amounts of any nature that may become due
and owing by FIARC to the Servicer hereunder (including, without limitation, any
Purchase Amount payable by FIARC pursuant to Section 3.02 and any amounts
payable by FIARC pursuant to its indemnification obligations under Section
6.02), such amounts shall be payable only from funds available to FIARC as a
result of distributions to it from the Collection Account in accordance with the
priorities set forth in the Security Agreement; and
(iii) except as expressly provided in clause (i) of this Section 9.11, the
Servicer hereby irrevocably and unconditionally waives all rights of setoff that
it may have under contract (including this Agreement), applicable law or
otherwise with respect to any funds or monies of FIARC at any time held by or in
the possession of the Servicer.
SECTION 9.12. THIRD PARTY BENEFICIARY.
Each of the parties agrees that MBIA is a third-party beneficiary of this
Agreement.
IN WITNESS WHEREOF, FIARC and the Servicer have caused this Servicing
Agreement to be duly executed by their respective officers as of the day and
year first above written.
FIRST INVESTORS AUTO RECEIVABLES
CORPORATION
By: /s/ XXXXX X. XXXXX
Xxxxx X. Xxxxx, Xx., President
GENERAL ELECTRIC CAPITAL CORPORATION
By: ________________________________
Title: ___________________________
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