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Exhibit 10.4
SERVICING AGREEMENT
BY AND BETWEEN
UGLY DUCKLING CORPORATION,
A DELAWARE CORPORATION
"SERVICER"
AND
GENERAL ELECTRIC CAPITAL CORPORATION
A NEW YORK CORPORATION
"OWNER"
DECEMBER 15, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I.
DEFINITIONS....................................................................... 2
Section 1.1 Defined Terms.......................................... 2
Section 1.2 Accounting Terms....................................... 8
ARTICLE II.
APPOINTMENT AND GENERAL RESPONSIBILITIES OF SERVICER.............................. 8
Section 2.1 Appointment of Servicer................................ 8
Section 2.2 Independent Contractor................................. 8
Section 2.3 General Servicing Standards............................ 8
Section 2.4 Listing of Officers and Locations...................... 8
Section 2.5 Perfection of Ownership Interest....................... 9
Section 2.6 Servicer Compliance.................................... 9
ARTICLE III.
MAINTENANCE OF FILES AND RECORDS.................................................. 9
Section 3.1 Maintenance of Files................................... 9
Section 3.2 Records................................................ 10
Section 3.3 Original Documents..................................... 10
Section 3.4 Examination of Records................................. 10
Section 3.5 Retention of Files..................................... 10
ARTICLE IV.
SPECIFIC SERVICING DUTIES......................................................... 10
Section 4.1 Collections............................................ 10
Section 4.2 Lock-Box............................................... 11
Section 4.3 Servicer to Act as Custodian for Owner................. 11
Section 4.4 Customer Service....................................... 11
Section 4.5 Insurance.............................................. 11
Section 4.6 Payoffs................................................ 11
Section 4.7 Delinquent Payments and Defaults....................... 12
Section 4.8 Purchased Receivable Modifications..................... 12
Section 4.9 Realization upon Delinquent Purchased Receivables...... 12
Section 4.10 Contract Rights and Collection of Deficiencies......... 12
Section 4.11 Liquidation Expenses................................... 12
ARTICLE V.
STATEMENTS AND REPORTS............................................................ 13
Section 5.1 Reports and Monthly Back-Up Tape....................... 13
Section 5.2 Notice of Claims....................................... 14
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ARTICLE VI.
SERVICING FEES.................................................................... 14
Section 6.1 Servicing Fee, Reimbursable Expenses and Fees.......... 14
ARTICLE VII.
REPRESENTATIONS AND COVENANTS..................................................... 15
Section 7.1 Representations and Warranties of Servicer............. 15
Section 7.2 Covenants of Servicer.................................. 16
ARTICLE VIII.
DEFAULT........................................................................... 17
Section 8.1 Event of Default....................................... 17
ARTICLE IX.
INDEMNIFICATION................................................................... 19
Section 9.1 Indemnity.............................................. 19
ARTICLE X.
TERMINATION....................................................................... 19
Section 10.1 Termination of Agreement............................... 19
Section 10.2 Effect of Termination or Resignation................... 19
ARTICLE XI.
GENERAL TERMS AND CONDITIONS...................................................... 20
Section 11.1 Ownership and Possession............................... 20
Section 11.2 Entire Agreement....................................... 20
Section 11.3 Applicable Law......................................... 20
Section 11.5 Headings............................................... 21
Section 11.6 Attorneys' Fees........................................ 21
Section 11.7 Severability........................................... 21
Section 11.8 Successors and Assigns................................. 21
Section 11.9 Counterparts........................................... 22
Section 11.10 Waiver................................................. 22
Section 11.11 Offset................................................. 22
EXHIBITS
Exhibit A Collection Policy
Exhibit B Depository Accounts
Exhibit C Performance Certificate
Exhibit D Reimbursable Expenses and Costs
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SERVICING AGREEMENT
This SERVICING AGREEMENT (this "Agreement") is entered into as of
December 15, 1997, by and between UGLY DUCKLING CORPORATION, a Delaware
corporation ("Servicer"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation ("Owner").
RECITALS
A. On July 11, 1997, First Merchants Acceptance Corporation, a Delaware
corporation, as debtor in possession in the Bankruptcy Case as defined below
("FMAC") filed a Chapter 11 petition under the provisions of ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ Code, as amended (the "Bankruptcy Code"), in the United States District
Court for the State of Delaware (the "Court") and such petition is currently
pending as Case No. 97-1500 (JJF) (the "Bankruptcy Case").
B. FMAC is a national specialty finance company, primarily engaged in
the business of dealing with and servicing retail installment sale contracts
(the "Contracts") for the purchase of new or used automobiles, trucks, vans and
sport utility vehicles by consumers who have limited access to traditional
sources of credit. Such Contracts, together with all amendments, modifications
and any and all security interests, contract rights and other rights related
thereto, are referred to herein as the "Receivables."
▇. ▇▇▇▇▇▇▇ National Bank, as Agent ("Agent")has purchased from FMAC a
portfolio of Receivables set forth on Schedules I and II attached hereto (the
"Purchased Receivables") pursuant to that certain Order Approving Debtor's Sale
of Bank Group Contracts Free and Clear of Liens, Claims and Encumbrances and
Authorizing Debtor to Enter into, a Contribution Agreement and Guaranty and
Pledge Agreement entered by the Court on December 15, 1997.
D. FMAC has agreed to service the Purchased Receivables pursuant to
that certain Servicing Agreement dated as of December 15, 1997 and effective as
of December 1, 1997, by and between FMAC and Agent (the "FMAC Servicing
Agreement").
E. GE has executed of even date herewith a Purchase Agreement
("Purchase Agreement") by and among GE, Agent and Servicer pursuant to which GE
shall purchase from Agent the Purchased Receivables upon terms and conditions
set forth in the Purchase Agreement.
F. Pursuant to the Consulting Agreement, Servicer is to provide
consulting services to FMAC regarding FMAC's servicing of the Purchased
Receivables pursuant to the FMAC Servicing Agreement.
G. Servicer has agreed to commence servicing the Purchased Receivables
pursuant to this Agreement upon termination of the FMAC Servicing Agreement.
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AGREEMENTS
NOW, THEREFORE, in consideration of the agreements, covenants and
conditions contained herein, and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Defined Terms. Whenever used in this Agreement, the
following capitalized words and phrases shall have the respective meanings set
forth below. The definitions of such terms are applicable to the singular as
well as to the plural forms of such terms.
Borrower. The person(s) or entity(ies) that have executed a Contract,
including any guarantor, cosigner, or other person or entity obligated to make
payments under the Contract.
Borrower Documents. With respect to each Purchased Receivable, (i) the
original Certificate of Title or proof of lien perfection; (ii) the executed
Original Purchased Contract with original signatures; (iii) if available or
unless electronically stored, a copy of the dealer invoice and invoices for any
additional equipment included in the Contract, (iv) a copy of the original
signed Credit Application; (v) verification for the Required Borrower Insurance
(including policy number) that FMAC was the loss payee, additional insured, or
lienholder at the time of FMAC's purchase of the Contract; (vi) a copy of the
"Report of Sale," "Guaranty of Title" or other comparable document executed by
the selling dealer which has been forwarded to the appropriate department of
motor vehicles; (vii) if available or unless electronically stored, copies of:
(a) the credit bureau reports, (b) the completed credit investigation form, (c)
the completed verification of employment and income forms, (d) Borrower
references, and (e) the credit scoring sheet; (viii) FMAC's funds disbursement
invoice or listing; (ix) a certificate for each type of Optional Borrower
Insurance purchased by Borrower; (x) if available, FMAC's loan process or "deal
structure" sheet; (xi) if available, a "fact sheet" from the dealer, and (xii)
if available, other documents, or copies, as applicable, that may be reasonably
required in the ordinary course of business with respect to the enforceability
of the Borrower's obligations.
Borrower Records. With respect to each Purchased Receivable, and
whether existing before or after the date of this Agreement (i) the Borrower
Documents; and (ii) all other records, files, and documents, whether consisting
of paper or computerized or in some other form, which relate specifically to the
applicable Purchased Receivable, Borrower or Financed Vehicle or associated
Receivable Rights.
Borrower's Outstanding Principal Balance. The outstanding and unpaid
principal balance with respect to the Purchased Receivable calculated as of a
certain date.
Business Day. Any day other than (i) a Saturday or Sunday or (ii)
another day on which banking institutions in the State of Illinois or Arizona
are authorized or obligated by law to be closed.
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Certificate of Title. With respect to any Financed Vehicle, the
certificate of title (or other evidence of ownership) issued by the department
of motor vehicles, or other appropriate governmental body, of the state in which
the Financed Vehicle is registered or is to be registered, showing the Borrower
as owner with either notation of the first lien of FMAC or, if applicable, FMN
or Magna, or such other status indicated thereon which is necessary to perfect
the security interest of FMAC or, if applicable, FMN or Magna, in the Financed
Vehicle as a first priority interest, and showing no other actual or possible
ownership or lien interests.
Charge-Off Deficiency. With respect to each Charge-Off Receivable, the
amount by which the Borrower's Outstanding Principal Balance exceeds the
Liquidation Proceeds and Insurance Proceeds, to the extent that such amount has
not been included in a previous calculation and report of Charge-Off Deficiency.
Charge-Off Receivable. A Purchased Receivable; (i) which is a Defaulted
Receivable; (ii) in connection with which Insurance Proceeds or Liquidation
Proceeds have been received, or (iii) for which the Borrower has made what
purports to be the final payment or a prepayment in full but the amount paid
results in a failure to satisfy the then remaining Borrower's Outstanding
Principal Balance.
Collection Account. The account established prior to the Effective Date
by Owner at a bank selected by Owner and of which Owner gives Servicer written
notice.
Collection Policy. The Collection Policy (Rev: 6/95) of Servicer, a
copy of which is attached hereto as Exhibit A.
Consulting Agreement. The Consultation and Assistance Agreement to be
entered into by and between Servicer and FMAC pursuant to which Servicer shall
provide FMAC with consultation and assistance with respect to FMAC's servicing
of the Purchased Receivables and other Receivables serviced by FMAC for so long
as FMAC is the servicer under the FMAC Servicing Agreement.
Credit Application. The credit application completed by the Borrower in
order to request financing for the Borrower's purchase of the Financed Vehicle.
Defaulted Receivable. For any Due Period, a Purchased Receivable for
which (i) any Scheduled Payment is delinquent (not paid by the due date) more
than 120 days as of the end of the Due Period; (ii) a petition requesting relief
under the Bankruptcy Code or a similar law was filed by or against the Borrower
during the Due Period, and any Scheduled Payment is delinquent (not paid by the
due date) more than 90 days as of the end of the Due Period; (iii) as of the end
of the Due Period, the Financed Vehicle is missing, has been damaged beyond
ordinary means of repair, or has been leased or disposed of by sale or other
transfer of title; (iv) Servicer or Owner shall have reasonably determined as of
the last date of the Due Period that by reason of a claim, lien, charge, pledge
or encumbrance regarding the Purchased Receivable or the Financed Vehicle, or
otherwise, payments under the Purchased Receivable will not be made; or (v) a
Skip Loss Investigation was
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initiated and not satisfactorily resolved within 90 days or the occurrence of
the event in (i) above, whichever occurs first.
Deferred Contracts. Any Purchased Receivable for which a Scheduled
Payment has been advanced into the next Due Period without receipt of at least
75% of such Scheduled Payment.
Depository Account. The bank accounts in the name of Servicer
designated in writing to the Owner as the Depository Accounts, with the initial
Depository Accounts set forth on Exhibit B hereto.
Discharge Date. The first date by which all of the Purchased
Receivables have been paid in full or forgiven by Owner and all of Servicer's
obligations under the Purchase Agreement and this Agreement have been performed.
Due Period. A calendar month during the Servicing Period.
Effective Date. The effective date of the termination of the FMAC
Servicing Agreement or the termination of FMAC as Servicer thereunder.
Event of Default. This term has the meaning provided in Article VIII of
this Agreement.
Financed Vehicle. The new or used automobile, truck, van or sport
utility vehicle purchased by a Borrower pursuant to a Contract.
FMN. First Merchants Acceptance Corporation of Nevada, a Nevada
corporation.
Governmental Rule. Any law, rule, regulation, ordinance, order, code,
interpretation, judgment, decree, policy, decision or guideline issued by any
branch of government.
Insurance Proceeds. With respect to a Purchased Receivable, amounts,
including rebates and refunds, recovered under any warranty, Required Borrower
Insurance, or Optional Borrower Insurance, net of any amounts required by law to
be remitted to Borrower.
Liquidation Expenses. The out-of-pocket expenses incurred in connection
with the collection and enforcement of a Purchased Receivable (including without
limitation, the attempted liquidation of a Purchased Receivable which is brought
current and is no longer in default during such attempted liquidation), and the
repossession and sale of a Financed Vehicle.
Liquidation Proceeds. With respect to a Purchased Receivable and a Due
Period, all amounts (other than Insurance Proceeds) received from the sale or
other disposition of a Financed Vehicle, during such Due Period, net of any
amounts required by law to be remitted to the Borrower.
Lock Box. The lock-box maintained by Servicer at the Lock Box Bank
pursuant to the Lock-Box Agreement.
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Lock Box Agreement. The agreement between Servicer and the Lock Box
Bank regarding the maintenance and operation of the Lock Box and containing such
terms and conditions as are acceptable to Owner.
Lock Box Bank. LaSalle National Bank, a national banking association,
or any other banking institution acceptable to Owner.
Magna. Magna Bank of St. Louis, a Missouri banking corporation.
Optional Borrower Insurance. Any insurance, other than Required
Borrower Insurance, which insures a Financed Vehicle or a Borrower's obligations
under a Purchased Receivable, including but not limited to credit life, credit
health, credit disability, unemployment insurance; and any service contract,
mechanical breakdown coverage, warranty, or extended warranty for a Financed
Vehicle.
Original Purchased Contract. With respect to each Purchased Receivable,
the original contract, together with the original of any and all modifications,
amendments or assignments with respect thereto.
Performance Certificate. A certificate signed by an officer of the
Servicer in the form of Exhibit C attached hereto.
Receivable Rights. With respect to a Purchased Receivable, (i) FMAC's
interest in the related Financed Vehicle; (ii) all rights of FMAC with respect
to the related Contract and Financed Vehicle under all dealer agreements
pursuant to which such Contract was acquired by FMAC including, any rights or
obligations of FMAC to any dealer reserve accounts; (iii) all rights of FMAC
with respect to Required Borrower Insurance and Optional Borrower Insurance;
(iv) all rights of FMAC, if any, to prepaid dealer rate participation in
connection with the related Contract; (v) all rights of FMAC with respect to
Borrower Records and Remittances.
Reimbursable Expenses. The costs and expenses of Servicer set forth on
Exhibit D hereto.
Remittances. Any amounts received with respect to the Purchased
Receivables and associated Receivable Rights, including, but not limited to,
Scheduled Payments, prepayments, payoffs, Liquidation Proceeds, Insurance
Proceeds and late charges (including not-sufficient-funds fees).
Required Borrower Insurance. Any casualty insurance the Borrower is
required to obtain pursuant to the terms of a Purchased Receivable.
Rolling Average Charge-Off.
(a) For the month ending December 31, 1997, the Charge-Off Deficiency
for such month, divided by the aggregate Borrower's Outstanding Principal
Balance of Purchased Receivables as of the beginning of such month which as of
such time are not Charge-Off Receivables, expressed as
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a percentage. For each of the succeeding five (5) months, the sum of each of the
preceding months' (i.e., commencing with the month ending December 31, 1997)
Charge-Off Deficiencies, divided by the sum of each of such preceding months'
aggregate Borrower's Outstanding Principal Balance of Purchased Receivables as
of the beginning of each of such months which as of such time are not Charge-Off
Receivables, expressed as a percentage.
(b) For the month ending June 30, 1998, the Charge-Off Deficiency for
such month, divided by the aggregate Borrower's Outstanding Principal Balance of
Purchased Receivables as of the beginning of such month which as of such time
are not Charge-Off Receivables, expressed as a percentage. For each of the
succeeding five (5) months, the sum of each of the preceding months' (i.e.,
commencing with the month ending June 30, 1998) Charge-Off Deficiencies, divided
by the sum of each of such preceding months' aggregate Borrower's Outstanding
Principal Balance of Purchased Receivables as of the beginning of each of such
months which as of such time are not Charge-Off Receivables, expressed as a
percentage. For the next six (6) months thereafter, the sum of each of the six
(6) consecutive calendar months ending with the month in question, of Charge-Off
Deficiencies for such months divided by the aggregate Borrower's Outstanding
Principal Balance of Purchased Receivables as of the beginning of each of such
months which as of such time are not Charge-Off Receivables, expressed as a
percentage.
(c) For the month ending June 30, 1999, the Charge-Off Deficiency for
such month, divided by the aggregate Borrower's Outstanding Principal Balance of
Purchased Receivables as of the beginning of such month which as of such time
are not Charge-Off Receivables, expressed as a percentage. For each of the
succeeding five (5) months, the sum of each of the preceding months' (i.e.,
commencing with the month ending June 30, 1999) Charge-Off Deficiencies, divided
by the sum of each of such preceding months' aggregate Borrower's Outstanding
Principal Balance of Purchased Receivables as of the beginning of each of such
months which as of such time are not Charge-Off Receivables, expressed as a
percentage. For all months thereafter, the sum of the six (6) consecutive
calendar months ending with the month in question, of Charge-Off Deficiencies
for such months divided by the sum of the aggregate Borrower's Outstanding
Principal Balance of Purchased Receivables as of the beginning of each of such
months which as of such time are not Charge-Off Receivables, expressed as a
percentage.
Rolling Average Delinquency.
(a) For the month ending December 31, 1997, the Purchased Receivables
which as of such month end are two or more payments delinquent, divided by the
aggregate Borrower's Outstanding Principal Balance of Purchased Receivables
which as of such month end have not been paid in full, expressed as a
percentage. For each of the succeeding five (5) months, the sum of each of the
preceding months' (i.e., commencing with the month ending December 31, 1997)
Purchased Receivables which as of the end of each of such months were two or
more payments delinquent, divided by the sum of each of such preceding months'
aggregate Borrower's Outstanding Principal Balance of Purchased Receivables
which as of the end of each of such months have not been paid in full, expressed
as a percentage.
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(b) For the month ending June 30, 1998, the Purchased Receivables which
as of such month end are two or more payments delinquent, divided by the
aggregate Borrower's Outstanding Principal Balance of Purchased Receivables
which as of the end of such month have not been paid in full, expressed as a
percentage. For each of the succeeding five (5) months, the sum of each of the
preceding months' (i.e., commencing with the month ending June 30, 1998)
Purchased Receivables which as of the end of each of such months were two or
more payments delinquent, divided by the sum of each of such preceding months'
aggregate Borrower's Outstanding Principal Balance of Purchased Receivables
which as of the end of each of such months have not been paid in full, expressed
as a percentage.
(c) For the month ending December 31, 1998, the Purchased Receivables
which as of such month end are two or more payments delinquent, divided by the
aggregate Borrower's Outstanding Principal Balance of Purchased Receivables
which as of such month end have not been paid in full, expressed as a
percentage. For each of the succeeding five (5) months, the sum of each of the
preceding months' (i.e., commencing with the month ending December 31, 1998)
Purchased Receivables which as of the end of each of such months were two or
more payments delinquent, divided by the sum of each of such months' aggregate
Borrower's Outstanding Principal Balance of Purchased Receivables which as of
the end of each of such months have not been paid in full, expressed as a
percentage. For all months thereafter, the sum of each of the six (6)
consecutive calendar months ending with the month in question, of the aggregate
Borrower's Outstanding Principal Balance for Purchased Receivables which as of
the end of such months were two or more payments delinquent, divided by the sum
of each of such months' aggregate Borrower's Outstanding Principal Balance of
Purchased Receivables which as of the end of each of such months have not been
paid in full, expressed as a percentage.
Schedule of Payments. The schedule of monthly payments disclosed on a
Purchased Receivable, as modified or extended pursuant to and consistent with
the Collection Policy and this Agreement.
Scheduled Payment. The monthly payment amount indicated on the Schedule
of Payments.
Servicing Fee. With respect to each Purchased Receivable outstanding as
of the first day of a Due Period, a fee to be calculated and paid for each Due
Period equal to the greater of (i) 1/12 of 3.25% of the Borrower's Outstanding
Principal Balance as of such first day of a Due Period for each such outstanding
Purchased Receivable (other than any Defaulted Receivable), or (ii) Fifteen
Dollars ($15.00) per month per such outstanding Purchased Receivable (other than
any Defaulted Receivable).
Servicing Period. The period of time from the date of this Agreement to
the Discharge Date, unless this Agreement or Servicer is sooner terminated
pursuant to the terms of this Agreement.
Skip Loss Investigation. An investigation of the whereabouts of a
Financed Vehicle or Borrower which has been initiated by Servicer.
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Section 1.2 Accounting Terms. Unless otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be interpreted, all
accounting determinations under this Agreement shall be made, and all financial
statements required to be delivered by any person or entity pursuant to this
Agreement shall be prepared, in accordance with generally accepted accounting
principles as in effect from time to time, applied on a consistent basis. To the
extent generally accepted accounting practices do not apply to certain reports
or accounting practices of Servicer, the parties will mutually agree on the
accounting practices.
ARTICLE II.
APPOINTMENT AND GENERAL RESPONSIBILITIES OF SERVICER
Section 2.1 Appointment of Servicer. Provided Owner continues to own
the Purchased Receivables, upon the Effective Date, Owner shall be deemed to
have appointed Servicer, and Servicer shall be deemed to have agreed, to service
the Purchased Receivables according to the terms of this Agreement.
Section 2.2 Independent Contractor. In the performance of its duties
hereunder, Servicer shall be an independent contractor acting on its own behalf
in its own name and for its own account. It shall have no authority, express or
implied, to act in any manner or by any means for or on behalf of Owner in any
capacity other than as an independent contractor. Servicer and Owner are not
partners, joint venturers, agents or assignees of each other. Notwithstanding
the foregoing provisions of this Section 2.2, pursuant to express provisions of
this Agreement, Servicer may be authorized or directed to take certain actions
on behalf of or for the direct benefit of the Owner, provided that, in the
taking of such actions, Servicer shall continue to be acting as an independent
contractor. Except as set forth in Section 6.1 hereof, Servicer shall perform
all of its obligations under this Agreement at its own expense.
Section 2.3 General Servicing Standards. Servicer shall service and
administer the Purchased Receivables and Borrower Records with due care and in
accordance with the terms of this Agreement, and shall have full power and
authority, subject only to the provisions of this Agreement, to do any and all
things in connection with such servicing and administration that it may in good
▇▇▇▇▇ ▇▇▇▇ necessary or desirable. Servicer shall service the Purchased
Receivables and maintain the Borrower Records in accordance with customary and
usual procedures employed by financial institutions servicing installment
contracts secured by motor vehicles and, to the extent more exacting, in
accordance with the Collection Policy or the procedures used by it to service
and administer similar motor vehicle installment contracts owned or serviced by
Servicer; provided, however, that Servicer shall not release or waive, without
the prior written consent of Owner, any obligation of any Borrower except to the
extent allowed in Article IV.
Section 2.4 Listing of Officers and Locations. Contemporaneously with
the execution and delivery of this Agreement, Servicer shall deliver to Owner a
list of the servicing locations of Servicer and the officers involved in, or
responsible for, the administration and servicing of the Purchased Receivables,
which list shall be promptly updated in writing by the Servicer to Owner as
changes are made. Servicer shall not change a location where it administers or
services the
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Purchased Receivables unless it first gives Owner 60 days written notice and
takes what action Owner reasonably requests in order to protect Owner's interest
in the Purchased Receivables and Borrower Records at the new location.
Section 2.5 Perfection of Ownership Interest. Servicer shall use
reasonable best efforts (or when Servicer knows or should have known of facts
that would require action to maintain the security interests granted by
Borrowers under the respective Purchased Receivables, Servicer shall take all
actions necessary), consistent with the standard set forth in Section 2.3, and
such other reasonable actions requested by Owner, to maintain continuing
perfection and priority of Owner's right, title and interest in the Purchased
Receivables, Borrower Records and Financed Vehicles, including, but not limited
to, obtaining the execution and the recording, filing, and refiling of all
security agreements, Certificates of Title, cautionary financing statements,
continuation statements or other instruments as are necessary to maintain the
security interests granted by the Borrowers under the respective Purchased
Receivables. Without affecting the Servicer's obligations set forth in the first
sentence of this Section 2.5 or any liability that Servicer may incur
thereunder, Owner authorizes Servicer to re-perfect or cause the re-perfection
of such security interests on its behalf, as reasonably necessary. In the event
Owner directs Servicer to reissue in Owner's name the Certificate of Titles
related to the Purchased Receivables, Owner shall reimburse Servicer for its
reasonable out-of-pocket expenses therefor. Servicer may release the lien on a
Financed Vehicle upon payment in full of the applicable Purchased Receivable or
upon disposition or liquidation of the Financed Vehicle pursuant to the
Collection Policy.
Section 2.6 Servicer Compliance. Servicer shall, at all times while
performing its duties and obligations hereunder, comply with all applicable
Governmental Rules, including, but not limited to, state and federal
Governmental Rules pertaining to financing, licensing, sales, debt collection,
consumer protection, credit reporting, the Uniform Commercial Code, foreclosure,
record retention and financial privacy. Servicer shall regularly train its
collection employees to comply with applicable Governmental Rules.
ARTICLE III.
MAINTENANCE OF FILES AND RECORDS
Section 3.1 Maintenance of Files. Servicer shall establish and maintain
the Purchased Receivable files and records in a safe, up-to-date manner, either
segregated from its own account files or marked on its electronic files to
disclose the ownership thereof by Owner. All Purchased Receivable files and
records shall be stored and maintained at one or more of the locations
identified pursuant to Section 2.4. Servicer shall keep in each Purchased
Receivable file all Borrower Records to be maintained by or in the possession of
Servicer pursuant to the terms of this Agreement and that are not exclusively
computerized, including, but not limited to, all correspondence received
regarding the Purchased Receivable, Borrower, Financed Vehicle and copies of all
correspondence and documents sent by Servicer regarding the Purchased
Receivable, Financed Vehicle or Borrower.
Section 3.2 Records. Servicer shall maintain records (including,
without limitation, computerized records) reflecting its activities servicing
the Purchased Receivables, which records
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shall be clearly marked to indicate that the Purchased Receivables and Borrower
Records are owned by Owner.
Section 3.3 Original Documents. Owner will, with respect to each
Purchased Receivable, retain (a) the Original Purchased Contract or proof of
lien perfection and (b) the Certificate of Title. To the extent necessary for
enforcement, lien release, or correction, Owner shall deliver the Original
Purchased Contract or Certificate of Title to Servicer. Whenever Servicer
obtains any Original Purchased Contract or Certificate of Title other than from
Owner pursuant to the foregoing sentence, it will hold it as agent for Owner and
immediately deliver it to Owner unless this Agreement provides otherwise.
Servicer shall not grant or allow any person or entity other than Owner an
interest in original documents related to the Purchased Receivables or rights
thereunder.
Section 3.4 Examination of Records. At any time during Servicer's
normal business hours, after not less than 24 hours notice to Servicer, Owner
and its agents and representatives may (a) physically inspect the Borrower
Records, to the extent in the custody of Servicer, and any other documents,
files or other records of Servicer relating to the Purchased Receivables,
including records relating to the performance and servicing of the Purchased
Receivables, and (b) discuss the same with Servicer's officers and employees.
Servicer shall make available to Owner copies of any such documents, files, or
other records for this purpose.
Section 3.5 Retention of Files. Unless otherwise requested by Owner, or
unless otherwise required by law, Servicer shall retain, with respect to each
Purchased Receivable, copies of the Borrower Records, to the extent held by
Servicer pursuant to the terms of this Agreement, and all other records, files
and documents related to the Purchased Receivables, to the extent held by
Servicer pursuant to the terms of this Agreement, until the earlier of (a) six
(6) months after Servicer closes its files for the Purchased Receivables, or (b)
the date upon which Servicer transfers such items to Owner. Servicer may retain
copies of any such documents for its own files.
ARTICLE IV.
SPECIFIC SERVICING DUTIES
Section 4.1 Collections. Servicer shall in every event deposit all
payments and other amounts, if any, made directly to Servicer by or received by
Servicer with respect to any Purchased Receivable on behalf of the Borrower,
including all Remittances and all other actual payments, Insurance Proceeds,
recoveries, collections and all proceeds relating to the repossession or
disposition of the Financed Vehicles (the "Collections") , in either one of the
Depository Accounts or the Collection Account not later than the first Business
Day after its receipt. The Servicer shall arrange that available funds on
deposit in the Depository Accounts be swept into the Collection Account by wire
transfer or ACH on a daily basis, pursuant to standing written instructions
provided by Servicer to the applicable banking institution; provided, however,
that sufficient funds will be kept on deposit in each Depository Account to
cover fees related to such account.
Section 4.2 Lock-Box. Prior to the Effective Date, Owner and the
Lock-Box Bank shall enter into the Lock-Box Agreement or agree that an existing
lock-box agreement between Servicer
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and the Lock-Box Bank will constitute the Lock-Box Bank for purposes of this
Agreement. Servicer shall cause the Lock-Box Bank to take such actions as are
necessary for Servicer to perform its obligations with respect to this Agreement
regarding all transactions related to the Lock-Box (the "Lock-Box
Transactions"). The Lock-Box Agreement shall contain a provision requiring the
Lock-Box Bank to provide Servicer with (a) copies of monthly statements, (b) a
daily list of deposits, (c) all original correspondence, envelopes, coupons and
all other documents (other than Remittances) received by the Lock-Box Bank, (d)
a daily and monthly list of Remittances by Borrower to the extent the Borrower
is identifiable by the Lock-Box Bank from the Remittance (and documents
accompanying the Remittance), and (e) copies of Remittances for which the
Lock-Box Bank is not able to identify the Borrower. Servicer shall not amend or
modify the terms of the LockBox Agreement without the prior written consent of
Owner. Servicer shall take and perform such actions as are necessary for the
Lock-Box Bank to perform its obligations with respect to the LockBox Agreement,
such as providing assistance to the Lock-Box Bank with respect to identifying
payments. Servicer shall arrange that available funds on deposit in the Lock-Box
be swept into the Collection Account by wire transfer or ACH on a daily basis,
pursuant to standing written instructions provided by Servicer to the Lock-Box
Bank; provided, however, that sufficient funds will be kept on deposit in the
Lock-Box account at the Lock-Box Bank to cover fees related to said account.
Section 4.3 Servicer to Act as Custodian for Owner. Servicer shall
direct Borrowers and others making payments with respect to the Purchased
Receivables to remit payments to the Lock-Box Bank. Owner recognizes that from
time to time Remittances may come into Servicer's possession and it hereby
appoints Servicer as custodian of Owner to receive such Remittances.
Notwithstanding this appointment, or any other provision in this Agreement,
Owner shall remain the sole and absolute owner of the Remittances, Purchased
Receivables and associated Receivable Rights. Servicer shall maintain any
Remittances received by it separate and apart from other funds and shall clearly
denominate the funds so as to indicate the paramount interest of Owner therein.
If any Remittance is received by Servicer, Servicer shall deposit the Remittance
pursuant to Section 4.1, and until so deposited any such Remittance shall be
held in trust by Servicer for Owner.
Section 4.4 Customer Service. Servicer shall provide sufficient
staffing and telephone lines to: (1) quote payoffs to requesting Borrowers
verbally and in writing, (2) record changes in garaging and billing addresses
for Borrowers, (3) record name changes, (4) answer billing questions and (5)
respond to any other reasonable written or telephonic inquiries relating to the
Purchased Receivables.
Section 4.5 Insurance. Servicer shall collect refunds and benefits
payable to Owner with respect to Required Borrower Insurance and Optional
Borrower Insurance.
Section 4.6 Payoffs. In the event a Purchased Receivable is paid in
full with good funds or released as provided in Section 4.9, Servicer shall, if
requested by the Borrower, and upon receipt thereof by Servicer from Owner or
otherwise (a) stamp the Original Purchased Contract "Paid" and return the
Certificate of Title to the Borrower, and (b) release the lien on the related
collateral.
Section 4.7 Delinquent Payments and Defaults. If a payment is not
received from a Borrower within 5 days after the date it is due under the
Purchased Receivable, Servicer shall begin
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contact (by phone and/or mail as Servicer deems appropriate) with the Borrower
to effect collection and to encourage timely payment.
Section 4.8 Purchased Receivable Modifications. Based on Borrower's
reasons for delinquency, Servicer may grant short extensions (monthly payment
deferrals) to those Borrowers Servicer deems to be having temporary cash flow
problems, provided such extensions are limited to two (2) one (1) month
extensions in any consecutive twelve month period. Servicer may also modify
Purchased Receivable terms to allow collateral substitutions or assumptions.
Servicer will exercise care in offering extensions and modifications so as not
to defer losses likely to occur. During the life of a Purchased Receivable,
extensions and modifications shall not have the effect of extending the final
date for payment in full of the Purchased Receivable for more than six (6)
months beyond the original final date for such payment in full or reducing the
Borrower's Outstanding Principal Balance. Servicer shall not permit any due date
changes in a Purchased Receivable other than in the same month.
Section 4.9 Realization upon Delinquent Purchased Receivables. If no
satisfactory arrangements can be made for collection of delinquent payments
after giving the Borrower all required notices and opportunities to cure,
Servicer shall, to the extent permitted by law, accelerate the Purchased
Receivable and pursue foreclosure of Owner's security interest in the Financed
Vehicle. In connection with the foreclosure of Owner's security interest in a
Financed Vehicle, Servicer may commence and prosecute legal proceedings in
respect of the related Purchased Receivable in its own name or, if Servicer's
counsel determines it is necessary, in the name and on behalf of Owner. Servicer
shall foreclose on Owner's security interest in a commercially reasonable
manner, following the procedures necessary to preserve the right to pursue
collection of any deficiency. Neither Servicer nor its employees or their
relatives shall be allowed to purchase Financed Vehicles being foreclosed upon,
except through an open auction procedure. Liquidation Proceeds and Insurance
Proceeds shall be applied against the Borrower's Outstanding Principal Balance.
Servicer will use its reasonable efforts to sell Financed Vehicles within 90
days of repossession.
Section 4.10 Contract Rights and Collection of Deficiencies. Servicer
shall collect and enforce any and all contract rights that comprise a Purchased
Receivable in a timely manner. If there is a deficiency balance after all
Insurance Proceeds and Liquidation Proceeds have been received, Servicer shall
pursue collection of the deficiency, except to the extent that such pursuit is
not economically practical pursuant to the Collection Policy.
Section 4.11 Liquidation Expenses. All Liquidation Expenses legally
recoverable from the Borrower shall be added to the Borrower's Outstanding
Principal Balance.
ARTICLE V.
STATEMENTS AND REPORTS
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Section 5.1 Reports and Monthly Back-Up Tape. Servicer shall furnish to
Owner the following reports in a form reasonably acceptable to Owner, except
that the Static Pool report shall be in form mutually acceptable to Servicer and
Owner.
Report Frequency
------ ---------
Cash Report Daily
Trial Balance of Contracts Monthly
Contract Delinquency Report Monthly
Paid Off Contract Report Monthly
Charge-Off Contract Report Monthly
Recovery Report Monthly
Repossession Report Monthly
Title Tracking Report As Required
Servicing Fee Report Monthly
Deferment Report Monthly
Static Pool Quarterly
The monthly reports shall be provided to Owner by the earlier of (a) ten (10)
Business Days after the Lock-Box Bank provides Servicer with all of the daily
reports for the month, or (b) the fifteenth of the month following the period to
which such reports relate. The daily reports shall be provided to Owner no later
than four (4) Business Days after the day covered by the report. Along with the
monthly reports Servicer shall deliver to Owner an executed Performance
Certificate.
Servicer shall furnish to Owner no later than when the monthly reports
are due, an up-to-date back-up tape of all information related to Purchased
Receivables which Servicer has placed on electronic media, including but not
limited to customer names, addresses and phone numbers, loan numbers, the
Borrower's Outstanding Principal Balance, last payment and next payment;
provided that, until Servicer has the system to do so, which it shall make a
good faith effort to acquire, in lieu of the monthly tape, Servicer can instead
provide Owner with (a) a disk which has such information on it, and (b) a trial
balance which shows the Borrower's Outstanding Principal Balance, the last
payment date and amount, the unearned finance charge, and the next payment date
and amount.
Servicer shall furnish to the Owner such additional reports in such
form the Owner determines is reasonably necessary for it to track and monitor
(a) Servicer's performance of this Agreement, and (b) the Purchased Receivables,
Remittances and Financed Vehicles; provided that, if such additional reports
cannot be done in-house by Servicer, Owner shall reimburse Servicer for
reasonable out-of-pocket expenses that Servicer incurs in developing the
capabilities to prepare and in otherwise furnishing such additional reports,
including, but not limited to, reasonable computer programming and software
expenses, to the extent the expenses do not exceed an amount approved in advance
by Owner.
Section 5.2 Notice of Claims. Within two (2) Business Days of receipt,
Servicer shall provide Owner with copies of all correspondence, notices, and
legal and administrative documents which allege that Servicer committed a
wrongful act with regard to a Purchased Receivable,
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Borrower, Receivable Rights obligor, Optional Borrower Insurance, Required
Borrower Insurance or Financed Vehicle which claims damages or loss are in
excess of $20,000 per occurrence or $100,000 in the aggregate (collectively, the
"Notice Items"). Within two (2) Business Days of receipt, Servicer shall inform
Owner in writing of the following:
(a) the receipt of any claim or the initiation of any legal process,
litigation or administrative or judicial investigation regarding the Notice
Items involving an uninsured amount in excess of $20,000 in any one instance or
$100,000 in the aggregate;
(b) the receipt of a notice from any agency or governmental body having
authority over the conduct of its business that (i) it is being placed under
regulatory supervision, (ii) any license, permit, charter, membership or
registration needed to perform this Agreement or material to the conduct of its
business is to be suspended or revoked, or (iii) it is to cease and desist any
practice, procedure or policy employed by it in the conduct of its business, and
such cessation will materially adversely affect the conduct of its business or
materially adversely affect its financial affairs or adversely affect its
ability to perform this Agreement; or
(c) the receipt of any claim or the initiation of any legal process,
litigation or administrative or judicial investigation against it which may
materially and adversely affect the operations, financial condition or business
of Servicer or Servicer's ability to perform this Agreement or which in any way
involves Owner's security interest in the Purchased Receivables or related
collateral or other rights therein or under this Agreement.
ARTICLE VI.
SERVICING FEES
Section 6.1 Servicing Fee, Reimbursable Expenses and Fees. In
consideration of Servicer's obligations, Owner shall pay to Servicer for the
prior Due Period, within five (5) Business Days after delivery of the Servicing
Fee Report (a) the Servicing Fee for such Due Period, (b) the Reimbursable
Expenses for such Due Period and (c) all third party charges for not-sufficient
fund checks and returned checks which relate to payments made by Borrowers to
the extent not otherwise recovered from obligor. Additionally, Servicer shall be
permitted to collect and retain modification and extension fees actually paid by
Borrowers. If there is an Event of Default by Servicer, or an event has occurred
which with the passage of time or the giving of notice or both will become an
Event of Default by Servicer if it is not cured, at the time any Servicing Fee
is payable by Owner, Owner may withhold the payment until the Event of Default
or other event is cured to Owner's satisfaction, if this Agreement or Owner
allows Servicer an opportunity to cure; provided that, before an Event of
Default by Servicer, Owner shall not withhold payment with respect to an event
which can be readily quantified as a monetary amount except to the extent of
such amount. If an Event of Default by Servicer or other event is cured to
Owner's satisfaction, Owner shall make the payment for the period withheld.
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ARTICLE VII.
REPRESENTATIONS AND COVENANTS
Section 7.1 Representations and Warranties of Servicer. Servicer makes
the following representations and warranties. The representations and warranties
are made hereby as of the execution and delivery of this Agreement, and each
time Servicer delivers a Performance Certificate to Owner the representations
and warranties are made hereby again as of that time. The representations and
warranties shall survive the sale of the Purchased Receivables to Owner and the
execution of this Agreement. Owner's knowledge of any breach of the
representations and warranties contained herein shall not void or waive any of
the representations or warranties.
(a) Servicer (i) is duly organized, validly existing and in good
standing as a Delaware corporation, (ii) is qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of its properties or the nature of its activities makes such
qualification necessary, and (iii) has full power, authority and legal right to
own its property, to carry on its business as presently conducted, and to enter
into and perform its obligations under this Agreement.
(b) The execution and delivery by Servicer of this Agreement are within
the corporate power of Servicer and have been duly authorized by all necessary
corporate action on the part of Servicer. Neither the execution nor performance
of this Agreement by Servicer conflicts with or will result in a breach of, or
constitutes a default under, any of the provisions of the Final Sale Order (as
defined in the Purchase Agreement) any Governmental Rule binding on Servicer,
the certificate of incorporation or by-laws of Servicer, or any of the
provisions of any indenture, mortgage, contract or other instrument to which
Servicer is a party or by which it is or may hereafter become bound, including
but not limited to the following agreements (the "Existing Contracts"): (i)
Confidentiality Agreement between First Merchants Acceptance Corporation, Ugly
Duckling Corporation and ALLTEL Information Services, Inc. dated as of July 23,
1997; (ii) Remote Outsourcing Agreement by and between ALLTEL Financial
Information Services, Inc. and First Merchants Acceptance Corporation dated June
1, 1996; (iii) Master License Agreement between SAS Institute, Inc. and First
Merchants Acceptance Corp. dated as of June 20, 1997 and June 9, 1997,
respectively; (iv) Systems Integration Task Order under the CMSI Professional
Services Agreement and First Merchants Acceptance Corporation between CMSI
Professional Services Agreement and First Merchants Acceptance Corporation dated
October 14, 1996; and (v) Master Lease Agreement between Insight Financial
Corporation, as Lessor, and First Merchants Acceptance Corporation, as Lessee,
dated as of June 4, 1997; nor will they result in the creation or imposition of
any lien upon any of Servicer's property.
(c) Servicer has all governmental permits, licenses, approvals and
registrations which are necessary for the execution, performance, validity and
enforceability of this Agreement.
(d) This Agreement has been duly executed and delivered by Servicer,
and constitutes a legal, valid and binding obligation of Servicer enforceable in
accordance with its terms.
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(e) Servicer has obtained all consents, approvals, waivers and
notifications of creditors, lessors and other nongovernmental persons and
entities necessary for the execution and performance of this Agreement.
(f) There are no actions, suits or proceedings pending or, to the
knowledge of Servicer threatened, against or affecting Servicer, before or by
any court, administrative agency, arbitrator or governmental body with respect
to any of the transactions contemplated by this Agreement, or which will, if
determined adversely to Servicer, materially and adversely affect it or its
business, assets, operations or condition, financial or otherwise, or adversely
affect Servicer's ability to perform its obligations under this Agreement.
Servicer is not in violation of any Governmental Rule.
(g) There is no fact known to Servicer which Servicer has not disclosed
to Owner in writing with respect to the Purchased Receivables or the assets,
liabilities, financial condition or activities of Servicer or its affiliates
which would or may be likely to have a material adverse effect upon the
Purchased Receivables (or associated Borrower Records or Receivable Rights) or
Servicer's ability to perform its obligations under the Agreement. All
information and documents prepared by Servicer and provided to Owner at any time
are and will be true and accurate.
Section 7.2 Covenants of Servicer.
(a) Servicer shall keep in full effect its existence, rights and
franchises as a corporation under the laws of the State of Delaware. Servicer
shall retain and preserve its right to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
perform this Agreement, and shall hold all licenses in all jurisdictions which
are necessary to perform this Agreement.
(b) Servicer shall punctually perform and observe all of its
obligations and agreements contained in this Agreement.
(c) Except as specifically allowed by this Agreement, Servicer shall
not take any action, or permit any action to be taken by others, which would
diminish or impair (i) the obligations of Borrowers and Receivable Rights
payors, (ii) the Borrower Records to the extent required to be held by or are in
the possession of Servicer, (iii) Owner's rights under this Agreement, or (iv)
Owner's rights with respect to the Purchased Receivables.
(d) Servicer shall not resign from its obligations under this Agreement
unless (i) its Board of Directors determines that by reason of a change in
Governmental Rules the continued performance by Servicer of its obligations
under this Agreement is no longer legally permissible, (ii) said determination
is evidenced by a resolution of its Board of Directors to such effect, and (iii)
said determination is accompanied by a legal opinion, satisfactory to Owner, to
such effect. No such resignation shall become effective until Owner appoints a
successor servicer or undertakes to do the servicing itself.
(e) During the term of this Agreement, Servicer shall provide Owner
with quarterly financial statements within 45 days of the end of each of
Servicer's fiscal quarter, and with annual
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audited financial statements within 90 days of the fiscal year-end. The annual
financial statements shall be audited by a public accounting firm acceptable to
Owner. Along with the financial statements, Servicer shall also provide Owner
with a certificate in the form of Exhibit B attached hereto.
(f) Servicer shall promptly notify Owner if an Event of Default occurs,
or if an event occurs which with the passage of time or giving of notice will be
an Event of Default if not cured.
(g) Servicer shall throughout the term of this Agreement maintain types
and amounts of insurance customary for its business, covering, without
limitation, fire, theft, burglary, public liability, property damage' and
workers' compensation. Servicer shall pay all insurance premiums payable for
such coverage and shall upon request of Owner deliver a copy of the policies of
such insurance to Owner, together with evidence of payment of all premiums
therefor.
(h) Servicer shall take such additional action as is reasonably
requested by Owner in order to carry out this Agreement.
(i) On or prior to the Effective Date, Servicer (i) shall assume all
executory obligations of FMAC under any Existing Contract to which Servicer is
not a party; (ii) shall enter into an agreement that is substantially comparable
to any Existing Contract to which Servicer is not a party and which it does not
assume; or (iii) shall enter into such agreements with such third parties as
shall permit Servicer to take over the servicing of the Purchased Receivables in
accordance with this Agreement without adverse effect upon the Purchased
Receivables, Servicer's ability to service them or Owner's rights therein by
reason of Servicer not being a party to or not having assumed any Existing
Contract.
(j) Effective from and after the date hereof, Servicer shall use its
best efforts to enable Owner to obtain "blocking rights" with respect to the
depository accounts identified in the FMAC Servicing Agreement. "Blocking
Rights" means the right to direct the depository bank to send all Remittances
received in any such account directly to Owner or as Owner shall otherwise
direct.
ARTICLE VIII.
DEFAULT
Section 8.1 Event of Default. Any of the following events shall
constitute an Event of Default under this Agreement:
(a) The failure of Servicer to make any payment or deposit required to
be made under the terms of this Agreement which failure continues unremedied for
a period of two (2) Business Day after the date when originally due.
(b) The failure of Servicer to observe or perform in any material
respect any covenant or agreement required to be performed under this Agreement,
other than the payment or depositing
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of money, which failure continues unremedied for a period of five (5) Business
Days after written notice of such failure shall have been given by Owner to
Servicer.
(c) If any of the following types of orders are not dismissed within 30
days of being entered: (i) an order for relief against Servicer in an
involuntary case under a federal or state bankruptcy, insolvency or similar law;
(ii) an order appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of Servicer or of any substantial part of
its property; or (iii) an order ordering the winding up or liquidation of the
affairs of Servicer.
(d) The commencement by Servicer of a voluntary case under any federal
or state bankruptcy, insolvency or similar law; or the consent by Servicer to
the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of Servicer or of any
substantial part of its property; or the making by Servicer of an assignment for
the benefit of creditors; or the failure by Servicer generally to pay its debts
as such debts become due; or the taking of action by Servicer in furtherance of
any of the foregoing.
(e) Owner determines that a material adverse change has occurred in the
business, operations, servicing, or financial condition of Servicer or in its
ability to perform this Agreement.
(f) Servicer breaches the Purchase Agreement or the Guaranty (as
defined in the Purchase Agreement) and fails to cure such breach within five (5)
Business Days after written notice of such failure shall have been given by
Owner to Servicer.
(g) Any representation, warranty or statement made by Servicer in this
Agreement or in any certificate, report or other writing delivered pursuant
hereto shall prove to be incorrect in any material respect as of the time when
the same shall have been made.
(h) An Event of Default as to Servicer shall occur under the Loan and
Security Agreement dated as of August 15, 1997, as amended, by and between
Servicer and Owner.
(i) The Purchased Receivables in total as a group, or the motor vehicle
installment contracts owned by Servicer in total as a separate group, shall have
(i) a Rolling Average Delinquency greater than 16% during any of Due Periods
1-6, 12% during any of Due Periods 7-12 or 11% during any Due Period thereafter;
(ii) a Rolling Average Charge-Off greater than 2.5% during any of Due Periods
1-6, 1.75% during any of Due Periods 7-18 or 1% thereafter; or (iii) Deferred
Contracts greater than 2% during any Due Period.
Notwithstanding anything herein to the contrary, Servicer shall not be
considered in default hereunder or have any liability to any party for any
failure to perform if such failure arises solely out of the following causes
beyond the control of Servicer, as the case may be: acts of God or a public
enemy, fire, flood or war; provided, however, that the termination of any
Existing Contract shall not relieve Servicer of its obligation to perform under
this Agreement.
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ARTICLE IX.
INDEMNIFICATION
Section 9.1 Indemnity. Servicer shall indemnify and hold Owner harmless
from any and all losses, damages, costs, good faith settlements, expenses,
taxes, reasonable attorneys' fees and other liabilities including, without
limitation, costs of investigation, fees and expenses at trial and on appeal,
and costs in successfully asserting the right to indemnification hereunder (all
of the foregoing are referred to in this Section as "Losses") incurred by Owner
at any time and pertaining to (a) a default of Servicer's obligations under this
Agreement or the otherwise; (b) facts which are, or allegations which if true
would be, a breach of any representation, warranty, agreement or covenant of
Servicer contained in this Agreement; provided, however, that in the event of
the occurrence of an Event of Default under Section 8.1(e), (h) or (i), Servicer
shall not (without in any manner affecting its liability under this Agreement
for any other Losses) be liable to Owner for any credit losses arising solely by
reason of the occurrence of any such Event of Default; or (c) activities,
operations or conduct of Servicer as Servicer under this Agreement. If legal
action is commenced against Owner regarding a matter for which Owner is entitled
to indemnification under this Section, Owner will give notice to Servicer of the
action within 60 days following Owner's knowledge thereof. The failure to notify
will not relieve Servicer from any liability which it may have to Owner
hereunder or otherwise. With respect to each such notice, Servicer shall, at
Owner's option, immediately take all action necessary to minimize any risk or
loss to Owner including retaining counsel reasonably satisfactory to Owner and
take such other actions as are necessary to defend Owner or to discharge the
indemnity obligations hereunder. If Servicer is not actually defending the
matter in good faith, Owner may, at its option, conduct such defense at the
expense of Servicer. Servicer shall pay on demand any indemnified Losses
incurred by Owner. Owner and Servicer shall fully cooperate with each other in
fulfilling the intent of this Section of this Agreement. Neither Owner nor
Servicer shall settle any claim in which Owner is named without the prior
written consent of the other, which consent shall not be unreasonably withheld;
provided, however, that Owner shall not be obligated to obtain Servicer's
consent unless Servicer is actively defending such claim in good faith.
ARTICLE X.
TERMINATION
Section 10.1 Termination of Agreement. Unless sooner terminated, this
Agreement shall terminate on the Discharge Date. Owner has the right to
terminate this Agreement prior to the Discharge Date following the occurrence of
any of the following events: (a) an Event of Default by Servicer or (b)
termination of the Purchase Agreement.
Section 10.2 Effect of Termination or Resignation. Following the
effective date of termination of this Agreement or the effective date of the
termination or resignation of Servicer as servicer of the Purchased Receivables:
(a) Servicer at Owner's request and at Servicer's expense shall deliver the
Borrower Records, and all records and files described in Article III, as
instructed by Owner, and shall use its best efforts to effect the orderly and
efficient transfer of the servicing of the Purchased Contracts to the party
which will be assuming responsibility for such servicing
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including, without limitation, directing Borrowers to remit all Remittances to
an account or address designated by Owner; (b) Owner is authorized on behalf of
Servicer, and in Servicer's name if Owner so elects, to take such action as is
necessary to transfer servicing from Servicer; (c) except as otherwise
specifically provided in this Agreement, Owner's rights and Servicer's
obligations under this Agreement shall not be affected by the termination or
resignation; (d) Owner is no longer obligated to pay the Servicing Fee; (e) at
Owner's request, Servicer shall assign to Owner such portion of Servicer's
right, title and interest under any Existing Contract identified by Owner
relating to, or as may be necessary for a successor servicer to continue to
service, the Purchased Receivables; and (f) Servicer hereby (i) irrevocably
consents and agrees that Owner also shall have the right to contact any third
party to an Existing Contract and to obtain from such third party any
information, and (ii) Servicer agrees to continue to provide to Owner
information, in each case, in such form as Owner shall reasonably request, which
Servicer is entitled to receive pursuant to any such Existing Contract. Servicer
hereby directs each such third party to comply with any such request of Owner.
ARTICLE XI.
GENERAL TERMS AND CONDITIONS
Section 11.1 Ownership and Possession. All Remittances, all records and
files described in Article III, and Borrower Records and associated Receivable
Rights are the sole and exclusive property of Owner. Any possession of such
items by Servicer is temporary, in trust for the benefit of Owner, and subject
to the superior ownership and possession rights of Owner. Servicer has no
interest in, and shall not create or convey an interest in Remittances or
Borrower Records.
Section 11.2 Entire Agreement. This Agreement, the Purchase Agreement
and the documents incorporated by reference herein and therein, express the
entire agreement of the parties hereto, and supersede all prior promises,
representations, understandings, arrangements and agreements between the parties
with respect to the subject matter contained herein. The parties hereto further
acknowledge and agree that neither of them has made any representations to
induce the execution and delivery of this Agreement except those expressly set
forth herein.
Section 11.3 Applicable Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Illinois without regard to
its conflicts of law principles.
Section 11.4 Notices. All notices, authorizations, approvals, and
consents provided for, required, or desired to be given in connection with this
Agreement shall be in writing and shall be given to the parties hereto at the
addresses set forth below or at such other address as the parties may hereafter
specify by notice given in the manner provided in this Section.
If to Servicer: Ugly Duckling Corporation
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
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With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to Owner: General Electric Capital Corporation
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Manager, Asset Based Financing
with a copy to: General Electric Capital Corporation
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Counsel-Auto Financial Services
Each such notice or other communication, together with appropriate copies, shall
be (a) mailed by United States registered or certified mail, return receipt
requested, postage prepaid, (b) delivered by overnight delivery service such as
Federal Express, providing for signed receipts, (c) delivered by personal
service in the manner provided for service of legal process, or (d) transmitted
by facsimile at the above facsimile numbers, with a copy by United States mail
as provided in subsection (a) hereof. Counsel to a party may give notice for its
client provided such notice is otherwise made in accordance with the provisions
of this Section. Notices shall be effective on the first business day following
the date of mailing or transmission, or upon receipt or personal service.
Section 11.5 Headings. Paragraph headings have been inserted in this
Agreement as a matter of convenience for reference only. The paragraph headings
shall not be used in the interpretation of this Agreement.
Section 11.6 Attorneys' Fees. In the event of any action at law or suit
in equity or a claim in bankruptcy or other proceeding to enforce this
Agreement, Owner shall be entitled to receive, in addition to any other sums
which it is awarded, all costs and expenses of such action or suit, including
reasonable attorneys' fees incurred.
Section 11.7 Severability. If any one or more of the provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions of this Agreement shall not
be in any way impaired.
Section 11.8 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Servicer may not assign this Agreement or any
right or obligation hereunder without Owner's prior written consent and any
prohibited assignment shall be void ab initio; provided, however, that Servicer
shall have
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the right to delegate its duties hereunder to any wholly-owned subsidiary of
Servicer so long as Servicer supervises such subsidiary's performance hereunder
and no such delegation shall release Servicer from liability hereunder.
Section 11.9 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. This Agreement may also be executed by facsimile.
Section 11.10 Waiver. The failure or delay of either party to strictly
enforce the terms of this Agreement shall not be a waiver of the party's right
to do so. A party can only waive a right under this Agreement if the waiver is
in writing, identifies the right being waived, and is signed by the party
waiving the right. Any approval of a document or procedure by Owner shall not be
a waiver of Owner's rights regarding any breach of this Agreement arising from
the procedure or document.
Section 11.11 Offset. Owner has the right to offset, apply or recoup
any obligation of Servicer to Owner against any obligation or payments Owner
owes to Servicer, or against any property of Servicer held by Owner. Servicer
shall not have any right to offset, apply, counterclaim or recoup against any
obligation it owes to Owner.
Section 11.12 Waiver of Jury Trial. Owner and Servicer hereby WAIVE ANY
RIGHT TO A TRIAL BY JURY waive any right to a trial by jury for a claim based on
an Event of Default or otherwise arising from or related to this Agreement.
Section 11.13 Amendments. This Agreement may be amended only by an
instrument in writing executed by Owner and Servicer.
This Agreement is entered into as of December 15, 1997.
UGLY DUCKLING CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: Vice President
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"Servicer"
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Manager of Underwriting
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"Owner"
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EXHIBIT A
COLLECTION POLICY OF SERVICER
[SEE ATTACHED]
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EXHIBIT B
DEPOSITORY ACCOUNTS
Bank One, Arizona, N.A.
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Attn: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Acct: 0987-4687 (Collection)
Acct: 0987-4628 (ARD)
Bank One, Texas, N.A.
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Attn: Ms. ▇▇▇ ▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Acct: 1826339630
▇▇▇▇▇▇▇ Bank, Inc.
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Attn: ▇▇. ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Acct: 1266693164 (Collection)
Acct: 1266692930 (ARD)
Las Vegas Business Bank
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Attn: ▇▇. ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Acct: ▇▇▇▇▇▇▇
NationsBank
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Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Acct: ▇▇▇▇▇▇▇▇▇▇
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EXHIBIT C
PERFORMANCE CERTIFICATE
The undersigned, ______________________________, the ____________ of
UGLY DUCKLING CORPORATION, an Arizona corporation ("Company"), does hereby
certify on behalf of Company pursuant to that certain Servicing Agreement dated
December ___, 1997, between Company and General Electric Capital Corporation
("GE Capital") (the "Servicing Agreement") that (i) all reports and data,
regardless of the form or medium in which delivered to GE Capital, prior to or
contemporaneously with this Certificate, are accurate and complete, (ii) the
representations and warranties of Company contained in the Servicing Agreement
and made as of the execution thereof are true and correct on and as of the date
of this Certificate, and (iii) Company is not in default of the Servicing
Agreement as of the date of this Certificate.
Date: _____________, 199__ UGLY DUCKLING CORPORATION, an Arizona
corporation
By___________________________________
Its__________________________________
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EXHIBIT D
REIMBURSABLE EXPENSES
To the extent of collection or recovery of the following costs and
expenses incurred by Servicer at and after the time at which a Purchased
Receivable became a Charge-Off Receivable or Defaulted Receivable, and all of
the following costs and expenses incurred by Servicer with respect to any other
Purchased Receivable, except for any of the following costs and expenses that
are netted against any Remittances made to Servicer by any third party:
1. All reasonable expenses incurred by Servicer in the repossession and
seizure of any Financed Vehicle and in the sale or liquidation of such Financed
Vehicle including, but not limited to, repossession fees and charges, auction
fees, towing charges, storage fees, repair expenses and detailing expenses; and
2. All lien, impound or storage fees and expenses incurred by Servicer
in securing any Financed Vehicles.
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SCHEDULE 1
PURCHASED RECEIVABLES
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