EXHIBIT 10.3
SERVICING AGREEMENT
-------------------
This SERVICING AGREEMENT (the "Agreement"), dated and effective as of
the date appearing on the signature page of this Agreement, is entered into by
and between AutoPrime, Inc., a Delaware corporation ("Owner") and the entity
described on the signature page of this Agreement ("Servicer").
WHEREAS, Servicer and Owner have entered into a Master Purchase and
Sale Agreement, dated of even date herewith (the "Master Purchase and Sale
Agreement"), pursuant to which, among other things, Owner purchased from
20
Servicer certain retail installment sales contracts secured by first priority
liens on automobiles and light-duty trucks ("Contracts").
WHEREAS, Servicer is engaged in the business of managing and servicing
Contracts.
WHEREAS, Owner desires to retain the services of Servicer for the
purposes of managing and servicing Contracts purchased from time to time by
Owner from Servicer for Owner's account pursuant to the Master Purchase and Sale
Agreement ("Acquired Contracts"). All capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Master
Purchase and Sale Agreement.
NOW, THEREFORE, in consideration of the mutual premises and promises of
the parties and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Servicer and Owner agree as
follows:
Section 1. Contract Management and Servicing. Subject to the terms and
conditions hereinafter set forth along with all terms, conditions,
representations, warranties, covenants and definitions set forth in the Master
Purchase and Sale Agreement, which are expressly incorporated herein by
reference, Servicer shall provide all management and servicing of the Acquired
Contracts purchased by Owner from Servicer from time to time under the Master
Purchase and Sale Agreement and covenants and agrees to manage and service the
Acquired Contracts for the account of Owner as described below and in accordance
with the industry standards pertaining to such Contracts utilizing the same
degree of care as if the Acquired Contracts were owned by Servicer itself:
(a) Servicer obligates itself to service the Acquired Contracts
under this Servicing Agreement in accordance with the industry standards
pertaining to such Contracts utilizing the same degree of care as if the
Acquired Contracts were owned by Servicer itself including, without limitation,
an obligation to maintain an automated reporting system at its sole cost which
produces information with respect to each Contract and each Pool in form and
content reasonably acceptable to Owner.
(b) Servicer covenants and agrees to comply with all requirements
of State law and any other applicable federal, state and local laws, and
regulations thereunder, including, without limitation, the Fair Debt Collection
Practices Act, in servicing the Acquired Contracts under this Agreement.
(c) During the term of the Acquired Contracts serviced under this
Agreement, Servicer will proceed diligently to collect all sums due under the
Acquired Contracts and will deposit on a daily basis or as otherwise directed in
writing by Owner all funds received with respect to the Acquired Contracts, less
the servicing fee provided for in Section 2 hereof, into a bank custodial or
trust account or accounts maintained for the benefit of Owner and from which
Owner will have the right to withdraw or transfer such funds. Said account or
accounts shall be maintained in a financial institution designated by Owner, the
accounts of which are insured by the Federal Deposit Insurance Corporation.
(d) Servicer shall maintain complete books and records relating to
its servicing activities hereunder and shall provide to Owner, not less
frequently than once per week, a written servicing report containing a complete
and accurate accounting of the servicing activity during the preceding week.
Said report will include the following information with respect to each Acquired
Contract: (i) a Delinquency Analysis & Report in the form attached hereto as
Exhibit A, and (ii) a schedule of payments received and payments due but not
paid in the form attached hereto as Exhibit B. Each report shall be delivered to
Owner by hand delivery or facsimile transmission no later than 12:00 p.m. on
Tuesday of each week and shall be accurate as of all transactions through the
close of business on Saturday of the immediately preceding week.
21
(e) Servicer, in the course of servicing and managing the Acquired
Contracts, shall not waive, vary, extend or cancel any term or condition of the
Acquired Contracts without Owner's prior written consent, but Servicer may,
without legally committing Owner to any of the same, extend in its discretion
reasonable forbearance before declaring an Acquired Contract in default as shall
be consistent with industry standards, in any event not to exceed fourteen (14)
days.
(f) With respect to the Insurance Policies, if any, maintained by
Servicer for the Acquired Contracts in connection with and as described by the
Master Purchase and Sale Agreement, Servicer shall, at Servicer's expense, file
all claims and/or other forms necessary or appropriate to preserve and protect
Owner's interest in the Insurance Policies, if any, identified in the Master
Purchase and Sale Agreement.
(g) Owner shall be named as an additional insured on any fidelity
and errors and omissions insurance policies maintained by Servicer. Upon Owner's
request, Servicer shall furnish to Owner a certificate of insurance with respect
to any such coverage reflecting Owner as additional insured. Servicer shall not
reduce the amount of any such coverage without prior written notice to Owner.
Owner may, at its option and expense, obtain and maintain such fidelity and
errors and omissions insurance policies with respect to the employees of
Servicer, naming Owner as additional insured, as it deems necessary or
appropriate.
(h) No later than ten (10) days after the end of each calendar
month, Servicer shall furnish to Owner a monthly unaudited profit and loss
statement and balance sheet of Servicer, each prepared in reasonable detail and
in accordance with generally accepted accounting principles and certified by an
authorized officer of Servicer as being true and correct.
Section 2. Servicing Fees. As compensation for its services rendered
hereunder, Servicer shall be entitled to retain an amount, as set forth on
Exhibit C to this Agreement, of all payments due and actually received by
Servicer under each Acquired Contract serviced hereunder. Servicer shall remit
in full to Owner the balance of the payments actually received by Servicer under
each Acquired Contract serviced hereunder, less the servicing fee provided for
in this Section 2, into a bank custodial or trust account or accounts as set
forth in Section 1(b) hereof. Servicer will pay all costs and expenses incurred
by it in connection with its servicing activities hereunder.
Section 3. Term and Termination. This Agreement shall be effective and
commence on the date hereof and, unless earlier terminated pursuant to this
Section 3, shall terminate after the repayment of the last Acquired Contract in
Owner's portfolio and after all taxes, fees and funds have been accounted for
and disbursed with respect thereto in accordance with the terms hereof. This
Agreement may be terminated as follows:
(a) This Agreement shall terminate automatically as to any and all
Acquired Contracts upon the dissolution, termination of existence, insolvency
(failure to pay debts as they mature or the failure to maintain the fair salable
value of assets in excess of liabilities), business failure, appointment of a
receiver, trustee, custodian or similar fiduciary, assignment for the benefit of
22
creditors, or the commencement of any proceedings under the bankruptcy laws, of,
by, or against Servicer, or the making by Servicer of any offer or settlement,
extension or composition to its creditors generally.
(b) If Servicer breaches or fails to perform, keep or observe any
representation, warranty, covenant or agreement contained in this Agreement or
in the Master Purchase and Sale Agreement (including, but not limited to,
Servicer's failure to deposit funds received for any Acquired Contract into an
account as set forth in Section 1(b) hereof, Servicer's failure to deliver on a
timely basis any of the reports to Owner pursuant to this Agreement or the
Master Purchase and Sale Agreement, Servicer's failure to use due diligence in
collecting funds due under any Acquired Contract, Servicer's failure to timely
perform its replacement and repurchase obligations as set forth in Article 5 of
the Master Purchase and Sale Agreement, and the occurrence of a material adverse
change in the financial condition of Servicer), Owner may, upon twenty-four (24)
hours written or oral notice, terminate this Agreement with respect to any and
all Acquired Contracts.
(c) This Agreement may be terminated as to any and all Acquired
Contracts at any time by the mutual agreement of Owner and Servicer.
Section 4. Procedure upon Termination.
(a) Immediately upon the termination of this Agreement pursuant to
Section 3(a) and Section 3(c) hereof and immediately upon Servicer's receipt of
notice of termination pursuant to Section 3(b) hereof, Servicer's right to
retain the servicing fees prescribed in Section 2 hereof with respect to any and
all of such terminated Acquired Contracts shall terminate immediately and, from
and after the date of such termination, Servicer shall deposit all amounts
received with respect to such Acquired Contracts, if any, into the account or
accounts maintained pursuant to Section 1(b) hereof, without deduction.
(b) Upon termination of this Agreement as to any and all Acquired
Contracts, Servicer immediately shall deliver to Owner the Servicing File and
any other documents in Servicer's possession with respect to each Acquired
Contract so terminated and an accounting of all monies collected by Servicer and
held by it for Owner with respect to such Acquired Contracts, and shall
immediately pay over to Owner all monies so held.
Section 5. Indemnification. Servicer hereby agrees to protect, defend,
indemnify and hold Owner and its assigns and their respective attorneys,
accountants, employees, agents, officers and directors harmless from and against
all losses, liabilities, damages, judgments, claims, counterclaims, demands,
actions, proceedings, costs and expenses (including reasonable attorneys' fees)
of every kind and character resulting from, relating to or arising out of this
Agreement or the performance of Servicer's obligations hereunder. In addition to
and without limiting the foregoing, (a) if Servicer breaches any representation,
warranty or covenant contained in this Agreement or the Master Purchase and Sale
23
Agreement and such breach has not been cured in all material respects within
five (5) days of Servicer's receipt of notice of such breach from Owner,
Servicer shall replace or repurchase the Acquired Contract within five (5) days
of the expiration of the aforementioned cure period or (b) if any payment due
under any of the Acquired Contracts becomes delinquent for a period of thirty
(30) days or more, Servicer shall replace or repurchase the Acquired Contract
within ten (10) days of the Acquired Contract becoming thirty (30) days
delinquent, each in accordance with Article 5 of the Master Purchase and Sale
Agreement, which is expressly incorporated herein by reference. The purchase
price for any such Acquired Contract shall be an amount equal to the unpaid
principal balance of the Acquired Contract plus accrued interest, less one-half
of any unearned discounts. In addition, Servicer shall reimburse Owner for any
and all expenses incurred by Owner with respect to such Acquired Contract. Upon
receipt of the purchase price and any and all additional funds due Owner as
stated herein, Owner promptly shall deliver to Servicer the Contract File and
all other documentation related to the purchased Acquired Contract. Servicer's
obligations under this Section 5 shall survive the termination of this
Agreement.
Section 6. Independent Contractor. Any possible construction of any
other provisions of this Agreement to the contrary notwithstanding, it is
intended by this Agreement that Owner, for and during the term hereof, has
delegated to Servicer the right for it and on its behalf, subject to the terms
and conditions of this Agreement and the Master Purchase and Sale Agreement, to
service each Acquired Contract as an independent contractor with discretion in
the manner and means thereof, but subject to the specific covenants and
agreements of the parties contained in this Agreement and in the Master Purchase
and Sale Agreement.
Section 7. Miscellaneous.
(a) Amendment. This Agreement may be amended from time to time by
Servicer and Owner only by written agreement signed by Servicer and Owner.
(b) Disputes. In the event of a dispute regarding the terms of
this Agreement or any matter arising hereunder, if Servicer and Owner cannot
otherwise agree, the matter shall be submitted to binding arbitration under the
International Rules of the American Arbitration Association, before an
independent qualified expert in Dallas, Texas.
(c) Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which counterparts shall be deemed to be an
original, and all of such counterparts shall constitute one and the same
Agreement.
(d) Survival. The obligations of Servicer under Section 5 hereof
shall survive the termination of this Agreement as to any or all Pools.
(e) Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Texas and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws without
giving effect to the conflict of laws principles thereof. This Agreement is
performable in Dallas County, Texas, which is proper venue for all legal
proceedings.
(f) Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally, delivered by a national overnight delivery service or mailed by
first class mail, postage prepaid to the addresses set forth on the signature
page of this Agreement.
24
(g) Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
[remainder of page intentionally left blank]
25
(h) Successor and Assigns. This Agreement shall inure to the
benefit of and be binding upon Servicer and Owner and their respective
successors and assigns; provided, however, that this Agreement may not be
assigned by Servicer without the prior written consent of Owner.
IN WITNESS WHEREOF, each of the parties has caused its duly authorized
officer or representative to execute this Agreement on the 6th day of October,
1997, the effective date of this Agreement.
SERVICER: OWNER:
-------- -----
CONSUMER INVESTMENT CORPORATION AUTOPRIME, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------- ------------------------------------
Title: President Title: Director of Dealer Relations
Address: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
STATE OF TEXAS
COUNTY OF DALLAS
The foregoing instrument was acknowledged before me this 6th day of
October 1997, by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President of Consumer Investment
Corporation, an Arizona corporation.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Notary Public in and for said County
and State
My commission expires: 3-25-98
(SEAL)
▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
The foregoing instrument was acknowledged before me this 6th day of
October 1997, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Director of Dealer Relations of AutoPrime
Inc., a Delaware corporation.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Notary Public in and for said County
and State
My commission expires: 3-25-98
(SEAL)
27
Exhibit C
Servicing Fees
The Servicing Fee is equal to twenty percent (20%) of gross
amounts collected.
28