Document:

Exhibit 10.118

 

EXECUTION COPY

 

 

SERVICING AGREEMENT

 

by and among

 

First Investors Auto Owner Trust 2005-A

 

as Issuer

 

Wells Fargo Bank, National Association

 

as Back-up Servicer, Indenture Trustee and Custodian

 

and

 

First Investors Servicing Corporation

 

as Servicer

 

Dated as of

 

May 5, 2005

 

 

	
  ARTICLE I

  	
   

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1.01.

  	
   

  	
  Defined Terms

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  ADMINISTRATION AND SERVICING
  OF CONTRACTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.01.

  	
   

  	
  Appointment and Duties of the Back-up
  Servicer and the Servicer

  	
   

  
	
  2.02.

  	
   

  	
  Collection of Contract Payments;
  Defaulted Contracts; Reporting Obligations

  	
   

  
	
  2.03.

  	
   

  	
  Realization Upon Contracts

  	
   

  
	
  2.04.

  	
   

  	
  Physical Damage Insurance

  	
   

  
	
  2.05.

  	
   

  	
  Maintenance of Security Interests in
  Financed Vehicles and Contracts

  	
   

  
	
  2.06.

  	
   

  	
  Covenants of Servicer;
  Notices

  	
   

  
	
  2.07.

  	
   

  	
  Repurchase of Contracts by Seller and
  Depositor Upon Breach

  	
   

  
	
  2.08.

  	
   

  	
  Monthly Servicing Fee; Back-up Servicing Fee

  	
   

  
	
  2.09.

  	
   

  	
  Annual Statement as to Compliance

  	
   

  
	
  2.10.

  	
   

  	
  Financial Statements; Annual Servicing
  Review

  	
   

  
	
  2.11.

  	
   

  	
  Costs and Expenses

  	
   

  
	
  2.12.

  	
   

  	
  Responsibility for Insurance
  Policies; Processing of Claims Under Insurance Policies; Daily Records and
  Reports

  	
   

  
	
  2.13.

  	
   

  	
  Delivery of Documents to Custodian

  	
   

  
	
  2.14.

  	
   

  	
  Maintenance of Copies of Documents by
  the Servicer

  	
   

  
	
  2.15.

  	
   

  	
  Possession of Servicer Files

  	
   

  
	
  2.16.

  	
   

  	
  Processing of Information

  	
   

  
	
  2.17.

  	
   

  	
  Warranties, Representations and
  Covenants With Respect to Compliance with Law and Enforcement

  	
   

  
	
  2.18.

  	
   

  	
  Standard of Care

  	
   

  
	
  2.19.

  	
   

  	
  Records

  	
   

  
	
  2.20.

  	
   

  	
  Inspection

  	
   

  
	
  2.21.

  	
   

  	
  Enforcement

  	
   

  
	
  2.22.

  	
   

  	
  Payment in Full on Contract

  	
   

  
	
  2.23.

  	
   

  	
  Duties of Back-up Servicer

  	
   

  
	
  2.24.

  	
   

  	
  Assumption of Duties by Back-up
  Servicer

  	
   

  
	
  2.25.

  	
   

  	
  Errors and Omissions Insurance

  	
   

  
	
  2.26.

  	
   

  	
  Responsibilities of Back-up Servicer and
  Servicer

  	
   

  
	
  2.27.

  	
   

  	
  Re-Liening

  	
   

  
	
  2.28.

  	
   

  	
  Repurchase by Servicer Upon Breach

  	
   

  
	
  2.29.

  	
   

  	
  Liability of Successor Servicer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  ACCOUNTS; COLLECTIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.01.

  	
   

  	
  Accounts

  	
   

  
	
  3.02.

  	
   

  	
  Collections

  	
   

  
	
  3.03.

  	
   

  	
  Collection Account and
  Acknowledgment Letter

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.01.

  	
   

  	
  Representations and Warranties of
  the Servicer

  	
   

  
	
  4.02.

  	
   

  	
  Representations and
  Warranties of the Back-up Servicer

  	
   

  
	
  4.03.

  	
   

  	
  Representations and
  Warranties of the Issuer

  	
   

  

 

ii

 

	
  4.04.

  	
   

  	
  Survival of
  Representations and Warranties

  	
   

  
	
  4.05.

  	
   

  	
  Merger or
  Consolidation of, or Assumption of the Obligations of, or Resignation of
  Servicer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  DEFAULT,
  REMEDIES AND INDEMNITY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.01.

  	
   

  	
  Event of Servicing
  Termination

  	
   

  
	
  5.02.

  	
   

  	
  Remedies

  	
   

  
	
  5.03.

  	
   

  	
  Indemnity by the
  Servicer

  	
   

  
	
  5.04.

  	
   

  	
  Procedure for
  Indemnification

  	
   

  
	
  5.05.

  	
   

  	
  Liability of the
  Back-up Servicer

  	
   

  
	
  5.06.

  	
   

  	
  Notification

  	
   

  
	
  5.07.

  	
   

  	
  Waiver of Event of Defaults

  	
   

  
	
  5.08.

  	
   

  	
  Survival

  	
   

  
	
  5.09.

  	
   

  	
  Servicer and Back-up
  Servicer Not to Resign

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  TERMINATION
  OF AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.01.

  	
   

  	
  Term

  	
   

  
	
  6.02.

  	
   

  	
  Effect of Termination

  	
   

  
	
  6.03.

  	
   

  	
  Transfer of Servicing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  MISCELLANEOUS
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.01.

  	
   

  	
  Amendment

  	
   

  
	
  7.02.

  	
   

  	
  Waivers

  	
   

  
	
  7.03.

  	
   

  	
  Notices

  	
   

  
	
  7.04.

  	
   

  	
  Severability of
  Provisions

  	
   

  
	
  7.05.

  	
   

  	
  Rights Cumulative

  	
   

  
	
  7.06.

  	
   

  	
  No Offset

  	
   

  
	
  7.07.

  	
   

  	
  Inspection and Audit
  Rights

  	
   

  
	
  7.08.

  	
   

  	
  Powers of Attorney

  	
   

  
	
  7.09.

  	
   

  	
  Assignment and Binding
  Effect

  	
   

  
	
  7.10.

  	
   

  	
  Captions

  	
   

  
	
  7.11.

  	
   

  	
  Counterparts

  	
   

  
	
  7.12.

  	
   

  	
  Governing Law

  	
   

  
	
  7.13.

  	
   

  	
  Parties

  	
   

  
	
  7.14.

  	
   

  	
  Relationship of the
  Parties

  	
   

  
	
  7.15.

  	
   

  	
  No Bankruptcy
  Petition Against the Issuer or Depositor

  	
   

  
	
  7.16.

  	
   

  	
  Third Party
  Beneficiaries

  	
   

  
	
  7.17.

  	
   

  	
  Other Agreements

  	
   

  
	
  7.18.

  	
   

  	
  Purchase and Subsequent
  Pledge

  	
   

  
	
  7.19.

  	
   

  	
  Exercise of Rights by
  Insurer

  	
   

  
	
  7.20.

  	
   

  	
  Limitation of Liability

  	
   

  

 

	
  SCHEDULE I

  	
  Collection Policy

  
	
  EXHIBIT A-1

  	
  Monthly Servicer Report

  
	
  EXHIBIT A-2

  	
  Certificate of Officer

  
	
  EXHIBIT B

  	
  Monthly Verification Certificate

  

 

iii

 

SERVICING AGREEMENT

 

This
Servicing Agreement (“Servicing Agreement”) is made as of the 5th day of
May, 2005, by and among First Investors Auto Owner Trust 2005-A, a Delaware
statutory trust, as issuer (the “Issuer”), Wells Fargo Bank, National
Association, a national banking association, as back-up servicer (in such
capacity, the “Back-up Servicer”), as custodian (in such capacity, the “Custodian”)
and as indenture trustee (in such capacity, the “Indenture Trustee”) and
First Investors Servicing Corporation, a Delaware corporation, as servicer (the
“Servicer”).

 

PRELIMINARY STATEMENT

 

WHEREAS,
pursuant to the Indenture, the Issuer has issued the Notes; and

 

WHEREAS,
the Insurer has issued the Policy to provide for the full and timely payment of
all amounts of interest due on each Class of Class A Notes on any
Payment Date and, on the Final Note Payment Date relating to each Class of
Class A Notes, an amount equal to the outstanding principal balance of
such Class of Class A Notes (after making all distributions on such
Final Note Payment Date).  In addition,
on each Payment Date, the Insurance Policy will guarantee certain payments of
principal of the Class A Notes; and

 

WHEREAS,
First Investors Financial Services, Inc. (the “Seller”) has
acquired and will acquire certain Contracts secured by Financed Vehicles and
will contribute such Contracts and all related security to First Investors Auto
Funding Corporation (the “Depositor”) pursuant to the Contribution
Agreement of even date herewith between the Seller and the Depositor (the “Contribution
Agreement”); and

 

WHEREAS,
pursuant to the Sale and Allocation Agreement of even date herewith among the
Servicer, the Depositor, the Indenture Trustee and the Issuer (the “Sale and
Allocation Agreement”), the Depositor has absolutely sold and assigned the
Contracts and related security to the Issuer; and

 

WHEREAS,
pursuant to the Indenture, the Issuer has pledged, among other things, the
Contracts to the Indenture Trustee for the benefit of the Noteholders and the
Insurer; and

 

WHEREAS,
pursuant to the terms of the Indenture, the Issuer is obligated to deliver or
cause to be delivered to the Custodian, the documents to be included in the
Contract Files, which are to be held by the Custodian pursuant to the terms of
the Indenture; and

 

WHEREAS,
the Issuer, the Indenture Trustee, the Custodian, the Back-up Servicer and the
Servicer desire to enter into this Servicing Agreement pursuant to which the
Servicer and the Back-up Servicer will perform the duties as described herein.

 

NOW
THEREFORE, in consideration of the covenants and conditions contained in this
Servicing Agreement, the parties, intending to be legally bound, hereby agree
as follows:

 

 

ARTICLE I

DEFINITIONS

 

1.01.                        Defined Terms.  Capitalized and defined terms used but not
defined in this Servicing Agreement shall have the respective meanings assigned
to them in the Indenture or the Sale and Allocation Agreement, unless the
context otherwise requires, and the definitions of such terms are equally
applicable both to the singular and plural forms of such terms and to the
masculine, feminine and neuter genders of such terms.

 

“Back-up
Servicing Fee” shall mean the amount paid to the Back-up Servicer on each
Payment Date for the preceding Collection Period equal to the greater of (i) the
product of (a) the Back-up Servicing Fee Rate divided by 12 and (b) the
Pool Balance as of the close of business on the first day of the related
Collection Period, and (ii) $750.

 

“Back-up
Servicing Fee Rate” shall mean 0.015% per annum.

 

“Collection
Account Depository” shall mean the depository for the Collection Account
established pursuant to Section 3.1(a) of the Sale and Allocation
Agreement.

 

“Collection
Policy” shall mean the Servicer’s statement of policies and procedures for
the collection of Contracts attached hereto as Schedule I, as
amended and restated from time to time with the consent of the Insurer and in
accordance with the Transaction Documents.

 

“Continued
Errors” shall have the meaning set forth in Section 2.29
hereof.

 

“Eligible
Servicer” shall mean First Investors Servicing Corporation, as initial
Servicer, Wells Fargo Bank, National Association, as initial Back-up Servicer,
and any other Person which, at the time of its appointment as Servicer, (i) is
approved in writing by the Insurer, (provided that no Insurer Default shall
have occurred and be continuing), (ii) has a net worth of not less than
$50,000,000, (iii) is servicing a portfolio of motor vehicle retail
installment sale contracts and/or motor vehicle loans, (iv) is legally
qualified, and has the capacity, to service the Contracts, (v) has
demonstrated the ability to service a portfolio of motor vehicle retail
installment sale contracts and/or motor vehicle loans similar to the Contracts
professionally and competently in accordance with standards of skill and care
that are consistent with prudent industry standards and (vi) is qualified
and entitled to use pursuant to a license or other written agreement, and
agrees to maintain the confidentially of, the software which the Servicer uses
in connection with performing its duties and responsibilities under this
Agreement or obtain rights to use, or develops at its own expense, software
which is adequate to perform its duties and responsibilities under this
Agreement.

 

“Errors”
shall have the meaning set forth in Section 2.29 hereof.

 

“Event
of Servicing Termination” shall have the meaning set forth in Section 5.01
hereof.

 

“Extended
Contract Rate” means, with respect to a Collection Period, the fraction,
expressed as a percentage, the numerator of which is the number of Contracts
whose payments are extended during the related Collection Period (measured on
the last day of such Collection

 

2

 

Period) and the
denominator of which is the number of Contracts as of the last day of such
Collection Period.

 

“Extension”
shall have the meaning set forth in Section 2.02(a) hereof.

 

“FIFSGI”
shall mean First Investors Financial Services Group, Inc., a Texas
corporation.

 

“Indemnified
Parties” shall have the meaning set forth in Section 5.03
hereof.

 

“Indemnifying
Party” shall have the meaning set forth in Section 5.03 hereof.

 

“Insurance
Policies” means insurance policies covering the Financed Vehicles or the
Obligors, including VSI Insurance.

 

“Lockbox
Bank” means Wachovia Bank, National Association, or such other bank chosen
by the Servicer from time to time, with the prior consent of the Insurer (if no
Insurer Default shall have occurred and be continuing) and the Indenture
Trustee.

 

“Monthly
Servicer Report” shall mean the monthly report provided by the Servicer as
contemplated by Section 2.02(c) hereof.

 

“Predecessor
Servicer Work Product” shall have the meaning set forth in Section 2.29
hereof.

 

“Servicer
Files” shall have the meaning set forth in Section 2.15 hereof.

 

“Subservicer”
shall have the meaning set forth in Section 2.01(g) hereof.

 

“Subservicing
Agreement” shall have the meaning set forth in Section 2.01(g) hereof.

 

“Successor
Servicer” shall mean the Back-up Servicer or any other Eligible Servicer
who succeeds to the authority, power, obligations and responsibilities of the
Servicer hereunder in accordance with the provisions of Article V
hereof.

 

“Successor
Back-up Servicer” shall mean any Eligible Servicer who succeeds to the
authority, power, obligations and responsibilities of the Back-up Servicer
hereunder in accordance with the provisions of Article V hereof.

 

“Termination
Notice” shall have the meaning set forth in Section 5.02
hereof.

 

ARTICLE II

ADMINISTRATION AND SERVICING OF CONTRACTS

 

2.01.                        Appointment and
Duties of the Back-up Servicer and the Servicer.

 

(a)                                  The Issuer
hereby appoints Wells Fargo Bank, National Association as Back-up Servicer and
First Investors Servicing Corporation as Servicer and each of Wells Fargo Bank,
National Association and First Investors Servicing Corporation accept such
appointments hereunder. The Back-up Servicer and the Servicer shall perform the
services

 

3

 

required of each pursuant to
the terms of this Servicing Agreement. In performing their respective duties
hereunder, the Back-up Servicer and Servicer shall have full power and
authority to do or cause to be done any and all things in connection with such
servicing and administration which either may deem necessary or desirable,
within the terms of this Servicing Agreement.

 

(b)                                 As of the date
of this Servicing Agreement, each of the Back-up Servicer and the Servicer is,
and shall remain, for so long as it is acting as Back-up Servicer or Servicer,
an Eligible Servicer. Compensation and expense reimbursement payable to the
Back-up Servicer and Servicer under this Servicing Agreement shall be payable
from the amounts on deposit in the Collection Account pursuant to the priority
of payments set forth in Section 3.5(d) of the Sale and Allocation
Agreement, and except as provided herein or in the Sale and Allocation
Agreement, none of the Issuer, the Insurer, the Indenture Trustee or the
Noteholders will have any liability to the Back-up Servicer or the Servicer
with respect thereto; provided, however, that the Issuer shall
remain liable to the extent of funds available pursuant to Section 3.5(d)(x)
of the Sale and Allocation Agreement (and not from any other source) for any
fees, expenses and indemnities due and payable to the Servicer and any fees,
expenses and indemnities due and payable to the Back-up Servicer which have not
been paid from the amounts on deposit in the Collection Account in accordance
with Section 3.5 of the Sale and Allocation Agreement.

 

(c)                                  The Insurer, or
if an Insurer Default has occurred and is continuing, the Indenture Trustee or
the Issuer, shall be entitled to terminate the services of the Servicer or the
Back-up Servicer under this Servicing Agreement upon the occurrence of an Event
of Servicing Termination, in each case in accordance with the terms and
conditions hereof; provided, however, that in the event of
termination of the Servicer, the Back-up Servicer shall act directly as
Servicer unless a different Successor Servicer is appointed in accordance
herewith and, with prior written notice to the Rating Agencies, the Insurer
shall direct the Issuer to enter into a servicing agreement with such Successor
Servicer acceptable to the Rating Agencies and the Insurer and which will be bound
by the terms of such servicing agreement. In the event of termination of the
Back-up Servicer or the Successor Servicer, the Insurer, or if an Insurer
Default has occurred and is continuing, the Indenture Trustee, or the Indenture
Trustee at the direction of Noteholders evidencing not less than 51% of the Class A
Note Balance shall appoint a Successor Servicer or a Successor Back-up
Servicer, as the case may be, and shall direct the Issuer to enter into a
servicing agreement with a Successor Servicer or Successor Back-up Servicer, as
the case may be, which will be bound by the terms of such servicing agreement.

 

(d)                                 This Servicing
Agreement shall be deemed to be among the Back-up Servicer, the Indenture
Trustee, the Servicer and the Issuer; the Insurer and the Noteholders shall not
be deemed parties hereto and neither the Insurer, nor the Noteholders shall
have any obligations, duties or liabilities with respect to the Back-up
Servicer or the Servicer except as set forth herein and in the Indenture. The Issuer
has agreed that the Indenture Trustee, in its name or (to the extent required
by law) in the name of the Issuer, may (but is not required to) enforce all
rights of the Issuer and all obligations of the Servicer and the Back-up
Servicer under, and shall be entitled to all benefits of, this Servicing
Agreement for and on behalf of the Noteholders and the Insurer, whether or not
the Issuer is in default thereunder. The Servicer, in making collections of
Contract payments pursuant to Section 2.02 hereof, shall be acting
as agent for the Indenture

 

4

 

Trustee, and shall be deemed
to be holding such funds in trust on behalf of, and as agent for, the Indenture
Trustee.

 

(e)                                  In the event
the Back-up Servicer shall for any reason no longer be acting as such
(including by reason of an Event of Servicing Termination as specified in Section 5.01
hereof), the Successor Back-up Servicer shall thereupon assume all of the
rights and obligations of the outgoing Back-up Servicer under this Servicing
Agreement. In such event, the Successor Back-up Servicer shall be deemed to
have assumed all of the outgoing Back-up Servicer’s interest herein and to have
replaced the outgoing Back-up Servicer as a party to this Servicing Agreement
to the same extent as if this Servicing Agreement had been assigned to the
Successor Back-up Servicer, except that the outgoing Back-up Servicer shall not
thereby be relieved of any liability or obligations on its part under this
Servicing Agreement arising prior to such replacement. The outgoing Back-up
Servicer shall, at the reasonable expense of the Issuer pursuant to the
priority of payments set forth in Section 3.5(d) of the Sale and
Allocation Agreement, deliver to the Successor Back-up Servicer all documents
and records relating to this Servicing Agreement and the Contracts then being
serviced hereunder and an accounting of amounts collected and held by it and
otherwise use its best efforts to effect the orderly and efficient transfer of
this Servicing Agreement to the Successor Back-up Servicer. Compensation and
expense reimbursement of the outgoing Back-up Servicer shall be payable through
the date that the outgoing Back-up Servicer ceases to render services.

 

(f)                                    The Issuer
shall, at its own expense, duly and punctually perform and observe its
obligations to the Back-up Servicer and the Servicer under this Servicing
Agreement in accordance with the terms hereof. In addition, promptly following
a request from the Indenture Trustee to do so and at the Issuer’s own expense,
the Issuer shall take all such lawful action as the Indenture Trustee (which
shall so request if directed by Noteholders evidencing not less than 51% of the
Class A Note Balance, with the consent of the Insurer, to do so) may request
to compel or secure the performance and observance by the Back-up Servicer and
the Servicer of each of its respective obligations to the Issuer under or in
connection with this Servicing Agreement, in accordance with the terms hereof,
and in effecting such request shall exercise any and all rights, remedies,
powers and privileges lawfully available to the Issuer under or in connection
with this Servicing Agreement to the extent and in the manner directed by the
Indenture Trustee, including, without limitation, the transmission of notices
of default on the part of the Back-up Servicer or the Servicer hereunder and
the institution of legal or administrative actions or proceedings to compel or
secure performance by the Back-up Servicer or the Servicer of its respective
obligations under this Servicing Agreement.

 

(g)                                 The Servicer or
the Back-up Servicer, if applicable, may enter into one or more subservicing
agreements (each, a “Subservicing Agreement”) with one or more
Subservicers (each, a “Subservicer”) for the servicing and
administration of certain of the Contracts; provided, however,
that unless the Insurer otherwise agrees in writing, the only servicing
functions that may be performed by Subservicers of the initial Servicer are (i) sending
“welcome letters” to new Obligors, (ii) sending payment coupons to each
Obligor on a monthly basis, (iii) receipt and posting of all payments
received with respect to the Contracts, (iv) tracking of Obligor
compliance with physical damage insurance, (v) repossessing Financed
Vehicles, (vi) preparing Financed Vehicles for sale and representing the
Servicer throughout the related vehicle auction process, (vii) tracking
titles to and liens on the Financed Vehicles and

 

5

 

(viii) other functions
pursuant to any other Subservicing Agreement approved in writing by the
Insurer; provided, however, that entering into a Subservicing
Agreement shall not relieve the Servicer or the Back-up Servicer from any of
their respective obligations hereunder. References in this Servicing Agreement
to actions taken or to be taken by the Servicer in servicing the Contracts
include actions taken or to be taken by a Subservicer on behalf of the
Servicer. Each Subservicing Agreement will be upon such terms and conditions as
are not inconsistent with this Servicing Agreement and as the Servicer, or
Back-up Servicer, as applicable, and the Subservicer have agreed. The Servicer,
or Back-up Servicer, as applicable, and a Subservicer may enter into amendments
thereto; provided, however, that any such amendments shall be
consistent with and not violate the provisions of this Servicing Agreement.

 

(h)                                 The Back-up
Servicer may be removed by the Insurer or, if an Insurer Default has occurred
and is continuing, by the Indenture Trustee, the Issuer, or the Indenture
Trustee at the direction of the Class A Noteholders evidencing not less
than 51% of the Class A Note Balance, with or without cause upon thirty
days’ written notice to the Back-up Servicer; provided, however,
that (A) such removal may be made immediately and shall not require notice
if: (i) the Back-up Servicer shall consent to the appointment of a
conservator, receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings of or relating to
the Back-up Servicer or relating to all or substantially all of its property;
or (ii) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings, or for the winding up or
liquidation of its affairs shall have been entered against the Back-up
Servicer, and such decree or order shall have remained in force undischarged or
unstayed for a period of 60 days; or (iii) the Back-up Servicer shall
become insolvent or admit in writing its inability to pay its debts generally
as they become due, file a petition to take advantage of any applicable debtor
relief laws, make an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations; or (iv) a petition is filed against
the Back-up Servicer seeking relief under any applicable debtor relief laws of
the United States or any state or other competent jurisdiction, and such
petition, order, judgment or decree shall have remained in force undischarged
or unstayed for a period of 60 days after its entry; and (B) such removal
shall not be effective unless and until a Successor Back-up Servicer is
appointed by the Insurer or, if an Insurer Default has occurred and is
continuing, by the Indenture Trustee at the direction of Noteholders evidencing
not less than 51% of the Class A Note Balance; provided, however,
that the Back-up Servicer may petition a court of competent jurisdiction to
appoint a Successor Back-up Servicer if one is not chosen within 60 days.

 

2.02.                        Collection of
Contract Payments; Defaulted Contracts; Reporting Obligations.

 

(a)                                  The Servicer
shall be responsible for collection of payments called for under the terms and
provisions of the Contracts, as and when the same shall become due. The
Servicer, consistent with the standard of care set forth in Section 2.18,
shall service, manage, administer and make collections on the Contracts on
behalf of the Issuer and shall have full power and authority, acting alone
and/or through Subservicers as provided in Section 2.01(g), to do
any and all things which it may deem necessary or desirable in connection
therewith which are consistent with this Servicing Agreement. The Servicer may
extend the then-current maturity date of any Contract by one month (an “Extension”);
provided, however, that (i) no Extension

 

6

 

may be granted with respect
to any Contract unless at least six scheduled payments have been received with
respect to such Contract; (ii) Extensions may be granted in the aggregate
for no more than one month for each twelve months of the original term of a
Contract, (iii) Extensions may be granted no more than twice for periods
of one month each during any consecutive 12-month period and (iv) such
Extension shall result in the Contract becoming current. In the event that an
Extension causes a Contract to remain outstanding on the Final Note Payment
Date of the Class A-2 Notes, the Servicer shall purchase such Contract as
of the Business Day preceding the Payment Date in December following the
date such Extension was granted.  Such
purchase obligation shall commence on the Payment Date in December 2005.
In consideration of the repurchase of such Contract hereunder, the Servicer
shall remit the Purchase Amount of such Contract in the manner specified in Section 3.4
of the Sale and Allocation Agreement. The sole remedy of the Issuer, the
Indenture Trustee, or the Noteholders for any Extension that causes a Contract
to remain outstanding on the Final Note Payment Date of the Class A-2
Notes shall be the repurchase thereof as provided herein. The Servicer may in
its discretion waive any late payment charge or any other fees that may be
collected in the ordinary course of servicing a Contract. In no event shall the
Principal Balance of a Contract be reduced, except in connection with a
settlement in the event the Contract becomes a Defaulted Contract. The Servicer
shall also enforce all rights of the Issuer under the Originator Agreements
including, but not limited to, the right to require an Originator to repurchase
Contracts for breaches of representations and warranties made by the respective
Originators.

 

(b)                                 If the full
amount of a scheduled payment due under a Contract is not timely received, the
Servicer shall make reasonable and customary efforts to collect such Contract
in accordance with this Servicing Agreement and the procedures set forth in the
Collection Policy. The Servicer shall use its best efforts, consistent with the
standard of care set forth in Section 2.18 hereof, to collect funds
on a Defaulted Contract; such collections shall be deposited into the
Collection Account no later than two Business Days following receipt thereof.
The Servicer shall, consistent with the standard of care set forth in Section 2.18
hereof, have the discretion to determine whether or not it is in the best interest
of the Issuer to sell, or not to sell, a Defaulted Contract, and to act in
accordance with its determination under this Article II.

 

(c)                                  The Servicer
shall provide monthly reports substantially in the form of Exhibit A-1
hereto, each under a certificate substantially in the form of Exhibit A-2
hereto, to the Indenture Trustee. The Servicer shall also provide,
electronically and, by mail and facsimile transmission if requested, copies of
such reports and certificates to the Back-up Servicer, the Insurer, the Rating
Agencies and any other Persons identified on a list provided to the Servicer by
the Issuer, as such list may be amended from time to time, regarding (i) payments
received from or on behalf of the Obligors and deposited to the Collection
Account (identified in Section 3.03 hereof) representing
collections with respect to the Contracts, (ii) other amounts received
with respect to the Contracts, including Liquidation Proceeds or the proceeds
of repurchases under the Sale and Allocation Agreement, (iii) other
matters relating to the Contracts including extensions, delinquencies,
repossessions and filing and payment of claims under Insurance Policies, (iv) financial
information used to calculate whether certain Events of Default have occurred, (v) calculation
of the three month average Delinquency Ratio and the Cumulative Net Loss Rate,
and (vi) other items reflected on Exhibit A-1. Such reports
shall be delivered to the parties specified above no later than the
Determination Date related to each Collection

 

7

 

Period. The Servicer may
submit the reports and other documents described in this section in
electronic format.

 

(d)                                 The Back-up
Servicer shall provide monthly reports to the Indenture Trustee, and the
Indenture Trustee shall provide copies of such reports to the Rating Agencies,
the Insurer, the Issuer and any other Persons identified on a list provided to
the Back-up Servicer by the Issuer, as such list may be amended from time to
time, substantially in the form of Exhibit B hereto. Such report
shall be dated as of the Determination Date for each Payment Date and delivered
to the Indenture Trustee on or before such Payment Date.

 

(e)                                  The Servicer
shall, upon request, promptly, but no later than two (2) Business Days
after receipt of a request provide, or cause to be provided, to the Back-up
Servicer and the Insurer copies of all monthly bank statements, notices,
reports or other documents received from the Indenture Trustee and from the
Collection Account Depository regarding funds held in or transferred to or from
all applicable accounts.

 

(f)                                    No later than
the Determination Date related to each Collection Period, the Servicer shall
forward to the Back-up Servicer, via reputable overnight courier or electronic
transmission, a computer diskette in a format mutually acceptable to the
Servicer and the Back-up Servicer, of its computerized records reflecting (i) all
collections received during such Collection Period with respect to the
Contracts, (ii) the Pool Balance as of the last day of the Collection
Period, (iii) information as of the last day of such Collection Period
regarding the number of Defaulted Contracts, (iv) the number of
repossessed Financed Vehicles and the number of sales of repossessed Financed
Vehicles as of the last day of such Collection Period and (v) all other
information necessary for the Back-up Servicer to perform its duties under Section 2.23.
Promptly upon discovery by the Back-up Servicer or receipt by the Back-up
Servicer of notice of an Event of Servicing Termination with respect to the
Servicer, the Back-up Servicer shall input such information onto its computer
system so that such information is immediately available to the Back-up
Servicer.

 

2.03.                        Realization
Upon Contracts.

 

(a)                                  Unless
otherwise contemplated by the Collection Policy, in the event a Contract
becomes or is reasonably anticipated to become a Defaulted Contract, the
Servicer, itself or through the use of independent contractors or agents shall,
consistent with the standard of care set forth in Section 2.18,
repossess or otherwise convert the ownership of the Financed Vehicle securing
such Contract. In accordance with the priority of payments set forth in Section 3.5(d)(x)
of the Sale and Allocation Agreement, all costs and expenses incurred by the
Servicer in connection with the repossession of the Financed Vehicles securing
such Contracts shall be reimbursed to the Servicer from the Collection Account
on the Payment Date relating to the Collection Period in which the Servicer
delivered to the Indenture Trustee an itemized statement of such costs and
expenses. Notwithstanding the foregoing and consistent with the terms of this
Servicing Agreement, the Servicer shall not be obligated to repossess or take
any action with respect to a Defaulted Contract if, in its reasonable judgment
consistent with the servicing standards specified in Section 2.18,
the Liquidation Proceeds are expected to be a negative number.

 

8

 

(b)                                 The Servicer,
itself or through the use of independent contractors or agents to the extent
allowed by Section 2.01(g), shall follow practices consistent with
the standard of care set forth in Section 2.18, including the
Collection Policy, in its servicing of automotive contracts, which may include
selling the Financed Vehicle, or requesting a Subservicer to sell the Financed
Vehicle, at public or private sale; provided, however, that the
Servicer, itself or through the use of independent contractors or agents to the
extent allowed by Section 2.01(g), shall, in accordance with its
Collection Policy, maximize the sales proceeds for each repossessed Financed
Vehicle. 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 for the repair or the repossession of such Financed Vehicle unless
the Servicer shall determine in its discretion that such repair or repossession
should increase the Liquidation Proceeds.

 

2.04.                        Physical Damage
Insurance.

 

(a)                                  The Servicer,
itself or through the use of independent contractors or agents to the extent
allowed by Section 2.01(g), in accordance with the standard of care
set forth in Section 2.18, shall, upon receipt of notice that an
Obligor’s physical damage insurance covering the Financed Vehicle has lapsed or
is otherwise not in force, send written notice to such Obligor stating that
such Obligor is required to maintain physical damage insurance covering the
Financed Vehicle throughout the term of the Contract.

 

(b)                                 In the event of
any physical loss or damage to a Financed Vehicle from any cause, whether
through accidental means or otherwise, the Servicer shall have no obligation to
cause the affected Financed Vehicle to be restored or repaired. The Servicer
shall, however, comply with the provisions of any Insurance Policies directly
or indirectly related to any physical loss or damage to a Financed Vehicle.

 

(c)                                  The Servicer
will administer the filing of claims under the Insurance Policies as described
under Section 2.12 hereof.

 

2.05.                        Maintenance of
Security Interests in Financed Vehicles and Contracts.

 

(a)                                  The Issuer
hereby directs the Servicer, and the Servicer agrees, to (i) take or cause
to be taken such steps as are necessary, in accordance with the standard of
care set forth in Section 2.18, to maintain perfection of the
security interest created by any Contract covering a Financed Vehicle which has
been relocated in such a manner as to require such steps, and (ii) within
two Business Days of its receipt thereof forward to the Custodian, on behalf of
the Issuer, via reputable overnight courier, any certificate of title to a
Financed Vehicle received by the Servicer for any reason with respect to a
Financed Vehicle relating to a Contract serviced hereunder.

 

(b)                                 The Servicer
shall, at the direction of the Issuer, the Insurer or the Indenture Trustee
(which shall so direct if directed by Noteholders evidencing not less than 51%
of the Class A Note Balance to do so), take any action necessary to
preserve and protect the security interests of the Issuer and the Indenture
Trustee in the Contracts, including any action specified in any opinion of
counsel delivered to the Servicer.

 

9

 

2.06.                        Covenants of
Servicer; Notices.

 

(a)                                  The Servicer
shall (i) not release any Financed Vehicle securing any Contract from the
security interest granted therein by such Contract in whole or in part except
in the event of payment in full by the Obligor thereunder or upon transfer of
the Financed Vehicle to a successor purchaser following repossession by the
Servicer or a Subservicer, (ii) not impair the rights of the Issuer, the
Noteholders, the Insurer or the Indenture Trustee in the Contracts, (iii) not
increase the number of scheduled payments due under a Contract except as
permitted herein, (iv) prior to the payment in full of the Class A
Notes, not sell, pledge, assign, or transfer to any other Person, or grant,
create, incur, assume, or suffer to exist any Lien on any Contract pledged to
the Indenture Trustee or any interest therein except with respect to Defaulted
Contracts, (v) immediately notify the Issuer, the Back-up Servicer, the
Insurer and the Indenture Trustee of the existence of any Lien on any Contract
(other than the Lien of the Indenture Trustee) if the Servicer has actual
knowledge thereof, (vi) defend the right, title, and interest of the
Issuer, the Noteholders, the Insurer and the Indenture Trustee in, to and under
the Contracts pledged to the Indenture Trustee, against all claims of third
parties claiming through or under the Servicer, (vii) deposit into
Collection Account or cause to be deposited into the lockbox account maintained
at the Lockbox Bank all payments received by the Servicer with respect to the
Contracts in accordance with this Servicing Agreement, (viii) comply in
all respects with the terms and conditions of this Servicing Agreement relating
to the obligation of the Issuer to remove Contracts from the Collateral pursuant
to the Indenture, the obligation of the Depositor to reacquire the Contracts
from the Issuer pursuant to the Sale and Allocation Agreement, and the
obligation of the Seller to reacquire Contracts from the Depositor pursuant to
the Contribution Agreement, (ix) promptly notify the Issuer, the Back-up
Servicer, the Insurer and the Indenture Trustee of the occurrence of any Event
of Servicing Termination and any breach by the Servicer of any of its covenants
or representations and warranties contained herein, (x) promptly notify the
Issuer, the Insurer, the Back-up Servicer and the Indenture Trustee of the
occurrence of any event which, to the knowledge of the Servicer, would require
that the Issuer make or cause to be made any filings, reports, notices, or
applications or seek any consents or authorizations from any and all government
agencies, tribunals, or authorities in accordance with the UCC and any state
vehicle license or registration authority as may be necessary or advisable to
create, maintain, and protect a first-priority security interest of the
Indenture Trustee in, to, and on the Financed Vehicles and a first-priority
security interest of the Indenture Trustee in, to, and on the Contracts pledged
to the Indenture Trustee and (xi) take all reasonable action necessary to
maximize the returns pursuant to the Insurance Policies.

 

(b)                                 The Servicer
shall, within three Business Days of its receipt thereof, respond to reasonable
written directions or written requests for information that the Issuer, the
Indenture Trustee, the Insurer, or the Indenture Trustee at the direction of
Noteholders evidencing not less than 51% of the Class A Note Balance might
have with respect to the administration of the Contracts.

 

(c)                                  The Servicer
will promptly advise the Issuer, the Insurer, the Back-up Servicer and the
Indenture Trustee of any inquiry received from an Obligor which requires the
consent of the Issuer or the Indenture Trustee. Inquiries requiring consent of
the Issuer, the Insurer, the Back-up Servicer or the Indenture Trustee may
include, but are not limited to,

 

10

 

inquiries about settlement
of any unasserted claim or defense, or compromise of any amount an Obligor
owes.

 

(d)                                 The Servicer
will not make any material change to the Collection Policy with respect to the
Contracts without the consent of the Insurer (unless an Insurer Default shall
have occurred and be continuing), which consent shall not be unreasonably
withheld; and if an Insurer Default shall have occurred and be continuing, the
Servicer will not make any material change to the Collection Policy with
respect to the Contracts if such change would have a material adverse effect on
the Contracts.

 

2.07.                        Repurchase of
Contracts by Seller and Depositor Upon Breach.  The Servicer shall inform the Issuer, the
Insurer, the Indenture Trustee and the Back-up Servicer promptly, in writing,
upon the discovery of the occurrence of any event which would require the
Seller or the Depositor to repurchase a Contract under Section 2.3 of the
Contribution Agreement or Section 2.3 of the Sale and Allocation
Agreement, as applicable; provided, however, that the Servicer
shall have no duty to investigate or determine the existence of any breach
except as specified herein. Unless waived by the Insurer, the Servicer shall
deliver to the Issuer a written demand to cause the Seller or the Depositor, as
applicable, to reacquire the affected Contract as provided in the Contribution
Agreement and the Sale and Allocation Agreement. The sole remedy of the Issuer,
the Indenture Trustee, the Insurer (except as otherwise provided in the
Insurance Agreement) or the Noteholders against the Seller or the Depositor
with respect to any Contract shall be the repurchase thereof as provided in the
Contribution Agreement or the Sale and Allocation Agreement, as applicable.

 

2.08.                        Monthly
Servicing Fee; Back-up Servicing Fee.

 

(a)                                  Pursuant to the
Sale and Allocation Agreement, the Issuer has agreed to cause the Indenture
Trustee to pay out of monthly collections with respect to the Contracts to the
Back-up Servicer, the Back-up Servicing Fee and to the Servicer, the Monthly
Servicing Fee with respect to the Contracts serviced under this Servicing
Agreement; provided, however, that the Issuer hereby agrees not
to amend or consent to any amendment of any provision of the Sale and
Allocation Agreement relating to compensation of the Back-up Servicer or the
Servicer without the prior written consent of such Person and the Insurer.

 

(b)                                 On each Payment
Date, the Back-up Servicing Fee with respect to the preceding Collection Period
shall be due. The Back-up Servicer shall also be entitled to reimbursement of
its conversion costs and other transition expenses associated herewith pursuant
to Section 3.5(d)(i) of the Sale and Allocation Agreement, up to the
limit set forth therein, and any excess pursuant to Section 3.5(d)(x) of
the Sale and Allocation Agreement.

 

(c)                                  In the event
this Servicing Agreement is terminated on a date other than the last day of a Collection
Period or a Contract is designated to be no longer outstanding for purposes of
this Servicing Agreement, then the Monthly Servicing Fee for such period or
with respect to such Contract, as the case may be, shall be determined on a pro
rata basis.

 

2.09.                        Annual
Statement as to Compliance.  The Servicer shall deliver to the Indenture
Trustee, and the Indenture Trustee shall deliver to the Issuer, the Back-up
Servicer, the Insurer,

 

11

 

the Rating Agencies and any
Persons identified on a list provided to the Servicer by the Issuer, as such
list may be amended from time to time, on or before July 31 of each year
beginning July 31, 2006, an Officer’s Certificate, dated effective as of
the preceding April 30, stating that (i) a review of the activities
of the Servicer during the preceding 12-month period (or such shorter period,
as is applicable) and of its performance under this Servicing Agreement during
such period has been made under such officer’s supervision, (ii) based on
such review, the Servicer has fulfilled all its obligations under this
Servicing Agreement throughout such period, or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof and the remedies therefor being
pursued; and (iii) to the best of such officer’s knowledge, each
Subservicer, if any, has fulfilled its obligations under its Subservicing
Agreement in all material respects, or if there has been a material default in
the fulfillment of such obligations, specifying such default known to such
officers and the nature and status thereof. 
This Section shall not apply to the Back-up Servicer acting as
Servicer.

 

2.10.                        Financial
Statements; Annual Servicing Review.

 

(a)                                  The Servicer,
shall deliver, in duplicate, to the Rating Agencies, the Insurer, the Back-up
Servicer, the Indenture Trustee and any other Persons identified on a list
provided to the Servicer by the Issuer, as such list may be amended from time
to time:

 

(i)                                     as soon as
available, but in no event later than 60 days after the end of each fiscal
quarter of FIFSGI (commencing with the quarter ending July 31, 2005), an
unaudited consolidated balance sheet and income statement (prepared in
accordance with generally accepted accounting principles applied on a
consistent basis, and subject to year end adjustments) for FIFSGI covering the
preceding quarter, in each case certified by the chief financial officer of
FIFSGI to be true, accurate and complete copies of such financial statements;
and

 

(ii)                                  on or before
ninety (90) days after the end of each fiscal year of FIFSGI (commencing with
the fiscal year ending April 30, 2006) the consolidated financial
statements of FIFSGI containing a report of a firm of independent public
accountants selected by FIFSGI to the effect that such firm has examined the
books and records of FIFSGI and that, on the basis of such examination
conducted in compliance with generally accepted audit standards, such financial
statements accurately reflect the financial condition of FIFSGI, in each case
certified by the chief financial officer of FIFSGI, to be true, accurate and
complete copies of such financial statements.

 

(b)                                 The Servicer
will cause the same firm of independent public accountants which prepared the
audited financial statements pursuant to paragraph (a)(ii) of this Section to
deliver to the Rating Agencies, the Insurer, the Back-up Servicer, the
Indenture Trustee, the Owner Trustee and any Persons identified on a list
provided to the Servicer, as such list may be amended from time to time, upon
receipt of such covenants and representations from such Persons as the
independent public accountants may require, and as soon as practicable, but in
any event within 120 days after the end of each fiscal year, an annual review
of the Servicer’s procedures and operations in form and substance reasonably
satisfactory to the Insurer, prepared by such firm of independent public
accountants, dated as of April 30 of each year beginning

 

12

 

2006 and substantially
stating to the effect that (i) such accountants have examined the accounts
and records of the Servicer relating to the Collateral and the conveyed
property in all similar asset-based financing transactions sponsored by the
Issuer or an affiliate thereof (which records shall be described in one or more
schedules to such statement), (ii) such firm has compared the information
contained in certain Monthly Servicer Reports (and similar reports for other
similar asset-based financing transactions sponsored by the Issuer or an
affiliate thereof) delivered in the relevant period with information contained
in the accounts and records or other relevant source documents for such period,
and (iii) on the basis of the procedures performed, whether the
information examined and contained in such Monthly Servicer Reports (and
similar reports for such other similar asset-based financing transactions)
delivered on the relevant period reconciles and agrees with the information
contained in the accounts and records or other relevant source documents except
for such exceptions as such independent public accountants believe to be
immaterial and such other exceptions as shall be set forth in such statement.
In the event such independent public accountants require the Indenture Trustee
to agree to the procedures to be performed by such firm in any of the reports
required to be prepared pursuant to this Section 2.10, the Servicer
shall direct the Indenture Trustee in writing to so agree; it being understood
and agreed that the Indenture Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Servicer, and the Indenture
Trustee has not made any independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.

 

2.11.                        Costs and
Expenses.

 

(a)                                  Except as set
forth in Sections 2.11(b) and 2.27, all costs and expenses
incurred by the Servicer in carrying out its duties hereunder, fees and
expenses of independent public accountants with respect to preparation of the
financial statements and reports described in Section 2.10(a) and
(b) and all other fees and expenses not expressly permitted
pursuant to the priorities of Section 3.5(d) of the Sale and
Allocation Agreement to be for the account of the Issuer, shall be paid or
caused to be paid by the Servicer out of the compensation to be paid to the
Servicer pursuant to Section 2.08.

 

(b)                                 During the term
of this Servicing Agreement, the Servicer shall be reimbursed pursuant to Section 3.5(d)(x)
of the Sale and Allocation Agreement for actual out-of-pocket costs and
expenses incurred in connection with the sale or other disposal of a Financed
Vehicle or collection of amounts due with respect to a Contract including, but
not limited to, the following (to the extent such cost or expense relates to
the sale or other disposal or collection of amounts due with respect to a Contract
or a Financed Vehicle):

 

(i)                                     Any
compensation paid to outside legal counsel retained to protect the interests of
the Issuer, the Indenture Trustee, the Insurer or the Noteholders in the assets
administered under this Servicing Agreement as the Servicer deems necessary in
accordance with its normal procedures;

 

(ii)                                  Any
compensation paid to independent repossessors, auctioneers or appraisers and
any direct out of pocket expenses arising from or related to realization of the
Contracts administered under this Servicing Agreement;

 

13

 

(iii)                               Any sales,
franchise, income, excise, personal property or other taxes arising from or
related to any Contracts administered under this Servicing Agreement;

 

(iv)                              Any parking or
other fees, insurance, title or similar fees arising from or related to any
Contracts administered under this Servicing Agreement;

 

(v)                                 Any expenses
for special forms and materials, freight, tapes, communications, lock-box and
other bank service charges, and other expenses approved by the Issuer; and

 

(vi)                              Any expenses
and fees paid to outside accountants in connection with the procedures required
to be performed pursuant to Section 2.10(a) and (b) hereof.

 

2.12.                        Responsibility
for Insurance Policies; Processing of Claims Under Insurance Policies; Daily
Records and Reports.

 

(a)                                  The Servicer,
on behalf of the Issuer, will administer and enforce all rights and
responsibilities of the holder of the Contracts provided for in the Insurance
Policies relating to the Contracts.

 

(b)                                 The Servicer
will administer the filings of claims under the Insurance Policies by filing
the appropriate notices related to claims, including initial notices of loss,
as well as claims with the respective carriers or their authorized agents all
in accordance with the terms of the Insurance Policies.  The Servicer shall use reasonable efforts to
file such 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 2.18
hereof. The Servicer will utilize such notices, claim forms and claim
procedures as are required by the respective insurance carriers.

 

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 such Insurance Policies.  The Servicer shall not be responsible to the
Issuer, the Insurer, the Noteholders or the Indenture Trustee (i) for any
act or omission to act done in order to comply with the requirements or satisfy
any provisions of the Insurance Policies or (ii) for any act, absent
willful misconduct or negligence, or omission to act done in compliance with
this Servicing Agreement. In the case of any inconsistency between this
Servicing Agreement and the terms of any Insurance Policy, the Servicer shall
comply with the latter. A copy of any claim shall be furnished to the Insurer
upon the Insurer’s request.

 

2.13.                        Delivery of
Documents to Custodian.  The
Servicer shall deliver or cause to be delivered all of the Contract Files with
respect to the Contracts in its possession to the Custodian via reputable
overnight courier service for receipt by the Custodian no later than the
Closing Date, with respect to the Contracts acquired by the Issuer on the
Closing Date, or the applicable Additional Contract Purchase Date, with respect
to Contracts acquired by the Issuer on an Additional Contract Purchae Date, as
the case may be.  While in its
possession, the Servicer shall hold the Contract Files in trust on behalf of
the Custodian.

 

14

 

2.14.                        Maintenance of
Copies of Documents by the Servicer.

 

(a)                                  The Servicer
shall maintain legible copies (in electronic or hard-copy form, in the
discretion of the Servicer) or originals of the following documents in its
files with respect to each Contract and the Financed Vehicle related thereto:

 

(i)                                     application of
the Obligor for credit;

 

(ii)                                  a copy (but not
the original) of the retail installment contract or promissory note and
security agreement and any amendments thereto; provided, however,
that the Servicer shall deliver any original amendments to the retail
installment contract or promissory note and security agreement to the Indenture
Trustee immediately following execution thereof;

 

(iii)                               a copy (but not
the original) of a certificate of title with a lien notation or an application
therefor;

 

(iv)                              a certificate
of insurance or application therefor with respect to the Financed Vehicle
securing the Contract;

 

(v)                                 a copy of the
proof of income and references, credit report and approval sheet utilized by
the Seller in the underwriting of the Contract;

 

(vi)                              the invoice for
the Financed Vehicle (in the case of a new vehicle) or the bookout sheet (in
the case of a used vehicle);

 

(vii)                           Obligor’s order
for the Financed Vehicle, together with proof (if any) of down payment;

 

(viii)                        a copy of the
service contract, if any, on the Financed Vehicle;

 

(ix)                                a copy of the
credit life insurance policy, if any, and the credit disability insurance
policy, if any, on the Obligor relating to the Financed Vehicle and a copy of a
certificate evidencing physical damage insurance covering the related Financed
Vehicle, if any; and

 

(x)                                   such other
documents as the Servicer may reasonably request in order to accomplish its
duties under this Servicing Agreement.

 

(b)                                 The Servicer
shall keep books and records, satisfactory to the Insurer, pertaining to each
Contract and shall make periodic reports in accordance with this Servicing
Agreement. Such records may not be destroyed or otherwise disposed of except as
provided herein and as allowed by applicable laws, regulations or decrees. All
documents, whether developed or originated by the Servicer or not, reasonably
required to document or to properly administer any loan shall remain at all
times the property of the Issuer and shall be held in trust by the Servicer.
The Servicer shall not acquire any property rights with respect to such
records, and shall not have the right to possession of them except as subject
to the conditions

 

15

 

stated in this Servicing
Agreement. The Servicer shall bear the entire cost of restoration in the event
any Servicer Files (as defined below) shall become damaged, lost or destroyed
while in the Servicer’s possession or control.

 

2.15.                        Possession of
Servicer Files.  Unless
otherwise specified herein, the Servicer shall maintain physical possession of
the instruments and documents listed in paragraph 2.14(a) above; such
other instruments or documents that modify or supplement the terms or
conditions of any of the foregoing; and, all other instruments, documents,
correspondence and memoranda generated by or coming into the possession of the
Servicer (including, but not limited to, insurance premium receipts, ledger
sheets, payment records, insurance claim files, correspondence and current and
historical computerized data files) that are required to document or service
any Contract. Collectively, all of the documents described in this Section 2.15
with respect to a Contract are referred to as the “Servicer Files”. The
Servicer hereby agrees that the computer files and other physical records of
the Contracts maintained by the Servicer will bear an indication reflecting
that the Contracts are owned by the Issuer and pledged to the Indenture Trustee
for the benefit of the Noteholders and the Insurer and that all Servicer Files
shall remain the property of the Issuer and shall be held in trust by the
Servicer. The Servicer shall respond to all third party inquiries concerning
ownership of the Contracts by indicating that the Contracts have been assigned
by the Seller to the Issuer and pledged to the Indenture Trustee for the
benefit of the Noteholders and the Insurer.

 

2.16.                        Processing of
Information.  Information
with respect to each Contract is to be recorded into the Servicer’s loan
management and accounting system.

 

2.17.                        Warranties,
Representations and Covenants With Respect to Compliance with Law and
Enforcement.

 

(a)                                  The Issuer
hereby represents to the Servicer, based on certain representations the
Depositor has made to the Issuer concerning the Contracts in the Sale and
Allocation Agreement, and on which representations the Issuer has relied in
acquiring the Contracts and with respect to the pledge of the Contracts to the
Indenture Trustee, that each Contract and the sale of the related Financed
Vehicle complied at the time it was originated or made and on the Cutoff Date,
as the case may be, does comply in all material respects with all requirements
of applicable federal, state and local laws, and regulations thereunder.

 

(b)                                 The Servicer
covenants that in the event that the Servicer realizes upon any Contract, the
methods utilized by the Servicer to realize upon such Contract or otherwise
enforce any provisions of the Contract, will not subject the Servicer, the
Issuer, the Noteholders, the Insurer or the Indenture Trustee to liability
under any federal, state or local law, and that such enforcement by the
Servicer will be conducted in accordance with the provisions of this Servicing
Agreement, the standard of care set forth in Section 2.18 hereof
and in the Collection Policy.

 

2.18.                        Standard of
Care.  In performing its duties and
obligations hereunder and in administering and enforcing the Insurance Policies
relating to the Contracts pursuant to this Servicing Agreement, the Servicer
will comply with all applicable state and federal laws and shall service and
administer the Contracts by employing such procedures (including collection

 

16

 

procedures) and degree of
care, in each case consistent with prudent industry standards, as are
customarily employed by the Servicer in servicing and administering motor
vehicle retail installment sales contracts and notes owned or serviced by the
Servicer comparable to the Contracts. In performing such duties, so long as
First Investors Servicing Corporation is the Servicer (i) it shall comply
with the Collection Policy, and (ii) it shall not make any material
amendment to such Collection Policy without the prior written consent of the
Insurer (provided that no Insurer Default shall have occurred and be
continuing) which consent shall not be unreasonably withheld; provided, however,
that notwithstanding the foregoing, the Servicer shall not, except pursuant to
a judicial order from a court of competent jurisdiction, or as otherwise
required by applicable law or regulation, release or waive the right to collect
the unpaid balance on any Contract. In performing its duties and obligations
hereunder, the Servicer shall comply with all applicable federal and state laws
and regulations, shall maintain all state and federal licenses and franchises
necessary for it to perform its servicing responsibilities hereunder, and shall
not impair the rights of the Issuer, the Insurer or the Indenture Trustee on
behalf of the Noteholders in the Collateral.

 

2.19.                        Records.  The Servicer shall maintain or cause to be
maintained such books of account and other records as will enable the Issuer
and the Insurer to determine the status of each Contract and any Insurance
Policy relating thereto.

 

2.20.                        Inspection.

 

(a)                                  At all times
during the term hereof, the Servicer shall afford the Issuer, the Insurer, the
Back-up Servicer and the Indenture Trustee and their authorized agents, upon
three Business Days’ prior written notice, reasonable access during normal
business hours to the Servicer’s records and files relating to the Contracts
and the Collateral and will cause its personnel to assist in any examination of
such records by the Issuer, the Insurer, the Back-up Servicer or the Indenture
Trustee, and will permit such parties to discuss the affairs, finances and
accounts of the Servicer with the chief operating officer and chief financial
officer of the Servicer. The examination referred to in this Section 2.20
will be conducted in a manner which does not unreasonably interfere with the
Servicer’s normal operations or customer or employee relations. Without
otherwise limiting the scope of the examination the Issuer, the Insurer, the
Back-up Servicer or the Indenture Trustee may, using generally accepted audit
procedures, verify the status of each Contract and review the Servicer Files
and records relating thereto for conformity to Monthly Servicer Reports
prepared pursuant to Section 2.02(c) and compliance with the
standards represented to exist as to each Contract in this Servicing
Agreement.  Nothing herein shall require
the Issuer, the Insurer, the Back-up Servicer or the Indenture Trustee to
conduct any inspection pursuant to this Section. Such parties may, with the
Servicer’s consent, which shall not be unreasonably withheld or delayed,
discuss the affairs, finances and accounts of the Servicer with the Servicer’s
independent accountants, provided that an officer of the Servicer shall have
the right to be present during such discussions.

 

(b)                                 At all times
during the term hereof, the initial Servicer shall keep available at its office
located at 380 Interstate North, Atlanta, Georgia 30559 (or such other location
as to which it shall give written notice to the Issuer, the Indenture Trustee,
and the Insurer), for inspection by the Issuer, the Insurer, the Back-up
Servicer and the Indenture Trustee a copy of the Contract Schedule, as amended.

 

17

 

(c)                                  All information
obtained by the Issuer, the Insurer, the Back-up Servicer or the Indenture
Trustee regarding the Obligors and the Contracts, whether upon exercise of its
rights under this Section 2.20 or otherwise, shall be maintained by
the Issuer, the Insurer, the Back-up Servicer or the Indenture Trustee in
confidence and shall not be disclosed to any other Person, except as otherwise
required by applicable law or regulation.

 

(d)                                 The Servicer
will, at the Issuer’s or the Insurer’s request, provide the Issuer or the
Insurer with a data extract disk of portfolio information.

 

(e)                                  The Servicer
and the Insurer and their agents and representatives shall at all times have
full and free access during normal business hours to all computer tapes, books,
correspondence and records of the Back-up Servicer insofar as they relate to
the Contracts and the Insurer and its agents and representatives may examine
the same, take extracts therefrom and make photocopies thereof. The Servicer
and the Insurer each agree that all such information, practices, books,
correspondence and records are to be regarded as confidential information and
that (a) it shall retain in strict confidence and shall use its best
efforts to ensure that its representatives retain in strict confidence and will
not disclose without the prior written consent of the Back-up Servicer any or
all of such information practices, books, correspondence and records furnished
to it and (b) it will not, and it will use its best efforts (in the case
of the Insurer, consistent with Section 2.02 of the Insurance Agreement)
to ensure that its agents and representatives will not, make any use whatsoever
(other than for purposes contemplated by this Agreement) of any of such
information practices, computer tapes books, correspondence and records without
the prior written consent of the Back-up Servicer, unless such information (i) is
generally available to the public, (ii) is required by law, regulation, or
court order to be disclosed or is requested by any governmental authority
having authority over the Servicer and the Insurer, or is necessary to preserve
any of such Persons’ rights under or to enforce any provision of the Indenture,
or (iii) is required by the Rating Agencies in connection with their
rating of the related Notes or the implied rating of the facility.

 

2.21.                        Enforcement.

 

(a)                                  The Servicer
will, consistent with the standard of care required by Section 2.18
hereof, act with respect to the Contracts and the Insurance Policies in such
manner as will, in the reasonable judgment of the Servicer, maximize the amount
to be received by the Indenture Trustee with respect thereto.

 

(b)                                 The Servicer
shall to the extent consistent with the servicing standards set forth in Section 2.18,
including the Collection Policy, or at the written direction of the Insurer,
sue to enforce or collect upon the Contracts and the Insurance Policies
(including unpaid claims), in its own name, if possible, or as agent for the
Issuer or the Indenture Trustee. If the Servicer commences a legal proceeding
to enforce a Contract or an Insurance Policy, the act of commencement shall be
deemed to be an automatic assignment of the Contract and the related rights
under the Insurance Policies by the Issuer to the Servicer for purposes of
collection only. If, however, in any enforcement suit or legal proceeding it is
held that the Servicer may not enforce a Contract or an Insurance Policy on the
grounds that it is not a real party in interest or a holder entitled to enforce
the Contract or the Insurance Policy, the Issuer shall, at the Servicer’s
request, assign the Contract or the Insurance Policy to the Servicer to the
limited extent

 

18

 

necessary to enforce the
Contract or the Insurance Policy, or take such steps as the Issuer deems
necessary to enforce the Contract or the Insurance Policy, including bringing
suit in its name.

 

(c)                                  The Servicer
shall exercise any rights of recourse against third persons that exist with
respect to any Contract in accordance with the standard of care required by Section 2.18
hereof.  In exercising such recourse
rights, the Servicer is hereby authorized on the Issuer’s behalf to reassign
the Contract and to deliver the certificate of title to the Financed Vehicle to
the person against whom recourse exists at the price set forth in the document
creating the recourse.

 

(d)                                 The Servicer
may grant to the Obligor on any Contract that has been repaid in full any
rebate, refund or adjustment that the Servicer in good faith believes is
required because of prepayment in full of the Contract, and may deduct the
amount of any such rebate, refund or adjustment from the amount otherwise
payable by the Servicer into the Collection Account. The Servicer may not
permit any rescission or cancellation of any Contract nor may it take any
action with respect to any Contract, except as required by applicable law,
regulation or court order, or Insurance Policy which would materially impair
the rights of the Indenture Trustee, the Insurer or the Noteholders therein or
in the proceeds thereof.

 

2.22.                        Payment in Full
on Contract.  Upon
payment in full on any Contract, the Servicer shall notify the Custodian prior
to the next succeeding Determination Date by a written request for the release
of such Contract (which shall include a statement of an officer of the Servicer
to the effect that all amounts received in connection with such payment in full
which are required to be deposited in the Collection Account pursuant to Sections
3.02 and 3.03 hereof have been so deposited).

 

2.23.                        Duties of
Back-up Servicer.

 

(a)                                  The Back-up Servicer
will perform the services set forth in this Section 2.23 which
shall not be delegated to the Servicer. The Back-up Servicer shall, unless it
is prohibited as a matter of law, as evidenced by an Opinion of Counsel
provided for in Section 5.09 and unless a different Successor
Servicer is appointed by the Insurer, service the Contracts upon receipt of
written notice of an Event of Servicing Termination by the Servicer under this
Servicing Agreement. The Back-up Servicer will, on a periodic basis, perform
the functions specified in this Section 2.23, provided that the
Back-up Servicer shall be entitled to request of and receive from the Indenture
Trustee and the Servicer, as appropriate, all information necessary to conduct
tests or make reports in a timely manner as specified below and, except as
otherwise specified herein, the Back-up Servicer shall be entitled to assume
for all purposes that the information received by it is true, correct and
complete, and the Back-up Servicer shall be fully protected in relying upon
such information without any independent investigation or audit to prove the
facts stated therein. The Back-up Servicer shall utilize such methods as it
deems reasonable and necessary to reconcile information provided by the
Servicer with the cash balances held by the Indenture Trustee.

 

(b)                                 Prior to each
Payment Date, the Back-up Servicer shall review the Monthly Servicer Report
related thereto and shall:

 

19

 

(i)                                     determine that
such Monthly Servicer Report is complete on its face;

 

(ii)                                  review the
amounts on deposit in the Collection Account against the monthly distribution
amounts set forth in such Monthly Servicer Report and reasonably determine
whether the amount on deposit is sufficient to pay such distribution amounts;
and

 

(iii)                               determine the
amount on deposit in the Reserve Account.

 

(c)                                  No later than
each Payment Date, the Back-up Servicer shall load the computer tape or
diskette received from the Servicer pursuant to Section 2.02(f) hereof,
and confirm that such computer tape or diskette is in readable form and
calculate and confirm the aggregate Principal Balance of Contracts as of the
most recent Payment Date.

 

In
addition, the Back-up Servicer shall confirm that the Delinquency Ratio, the
average Delinquency Ratio for any three Collection Periods and the Cumulative
Net Loss Rate as set forth in the Monthly Servicer Report, are accurate based
solely on a comparison to the computer tape referred to above.

 

(d)                                 In the event of
any discrepancy between the information set forth in subparagraphs (b) and
(c), as calculated by the Servicer, from that determined or calculated by the
Back-up Servicer, the Back-up Servicer shall promptly notify the Servicer, the
Indenture Trustee, and the Insurer of such discrepancy. If within ten days of
such notice being provided to the Servicer, the Back-up Servicer and the
Servicer are unable to resolve such discrepancy, the Back-up Servicer shall
promptly notify the Rating Agencies, the Insurer, the Indenture Trustee and any
other Persons identified on a list provided to the Back-up Servicer, as such
list may be amended from time to time, of such discrepancy.

 

(e)                                  Other than as
specifically set forth elsewhere in this Servicing Agreement, the Back-up
Servicer shall have no obligation to supervise, verify, monitor or administer
the performance of the Servicer and shall have no liability for any action
taken or omitted by the Servicer.

 

(f)                                    The Back-up
Servicer shall consult fully with the Servicer as may be necessary from time to
time to perform or carry out the Back-up Servicer’s obligations hereunder,
including the obligation, if requested by the Insurer, to succeed at any time
to the duties and obligations of the Servicer as servicer under Section 5.02
hereof.

 

2.24.                        Assumption of
Duties by Back-up Servicer.  At any time following the assumption of
duties of the Servicer by the Back-up Servicer or the designation of a
Successor Servicer pursuant to Section 2.01(c), the Servicer shall,
at the Indenture Trustee’s or the Insurer’s request, (A) assemble all of
the records relating to the Collateral including all Contract Files, and shall
make the same available to the Indenture Trustee and the Insurer at a place
selected by the Indenture Trustee and the Insurer or its designee, and (B) segregate
all cash, checks and other instruments received by it from time to time
constituting collections of Collateral in a manner acceptable to the Indenture
Trustee and the Insurer and shall promptly upon receipt but no later than two
Business Days after receipt, remit all such cash, checks and instruments, duly
endorsed

 

20

 

or with duly executed
instruments of transfer, to the lockbox account maintained by the Lockbox Bank
or its designee.

 

2.25.                        Errors and
Omissions Insurance.  The
Servicer has obtained, and shall continue to maintain in full force and effect,
errors and omissions insurance and employee theft insurance of a type and in
such amount as is customary for servicers engaged in the business of servicing
automobile contracts. The scope of such insurance coverage shall include the
acts and omissions of Subservicers or, if that is not the case with respect to
any Subservicer, the Servicer shall require such Subservicer to maintain such
insurance or a bond substantially equivalent thereto. Annually, or more
frequently upon request of the Issuer, the Insurer, the Indenture Trustee or
the Back-up Servicer, the Servicer shall cause to be delivered to the Indenture
Trustee a certification evidencing coverage under such insurance.  Any such insurance shall not be canceled or
modified in a materially adverse manner without thirty days’ prior written
notice to the Issuer, the Insurer, the Indenture Trustee and the Rating
Agencies. No provision of this Section 2.25 requiring the maintenance of
insurance shall diminish or relieve the Servicer from its duties and
obligations as set forth in this Servicing Agreement.

 

2.26.                        Responsibilities
of Back-up Servicer and Servicer.  Neither the Back-up Servicer nor the Servicer
shall have any duties, obligations or responsibilities other than those
specifically expressed and set forth herein and no implied obligations of the
Back-up Servicer or the Servicer shall be read into this Servicing Agreement. Neither
the Back-up Servicer nor the Servicer nor any of their respective directors,
officers, agents or employees shall be liable to any Person, including, without
limitation, the Servicer or the Back-up Servicer, as the case may be, or the
Issuer, the Insurer, the Indenture Trustee or the Noteholders in connection
with this Servicing Agreement, except for the breach of any of its
representations and warranties or obligations under this Servicing Agreement or
for the negligence, bad faith or willful misconduct of the Back-up Servicer or
the Servicer, as the case may be, or any of their respective officers,
directors, agents or employees. The Back-up Servicer may rely on and shall be
protected in acting upon, or in refraining from acting in accordance with, any
resolution, officer’s certificate, certificate of auditors or any other
certificate, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document reasonably believed by it to be
genuine and correct and to have been signed or presented by the proper person
or persons. Without limiting the foregoing, the Back-up Servicer (i) may
consult with legal counsel (including the Indenture Trustee’s or the Back-up
Servicer’s), independent public accountants and other experts selected by it
with reasonable care and shall not be liable for any action reasonably taken or
omitted to be taken by it in accordance with the advice of such counsel,
accountants or experts, (ii) shall not be responsible to the Issuer, the
Insurer, the Servicer, the Indenture Trustee or any other Person for any
recitals, statements, warranties or representations made in or in connection
with this Servicing Agreement, the Transaction Documents or any other
agreement, document or instrument executed in connection therewith by any other
Person, (iii) shall not be responsible for the actions or omissions of any
other Person, including, without limitation, the Servicer, the Seller, the
Issuer, the Insurer, the Indenture Trustee and the Noteholders unless such act
or omission was caused by an act or omission of the Back-up Servicer, (iv) except
as provided in this Servicing Agreement or any Transaction Document, shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of the Indenture or any other
Transaction Document on the part of any Person, or to inspect the property
(including the books and records) of the Seller, the

 

21

 

Insurer, the Issuer or the
Servicer, (v) except as otherwise provided herein, shall not be charged
with the knowledge of any breach of representation or warranty by any other
Person, or the failure of any other Person to comply with its obligations,
hereunder or under any other Transaction Document, or of the occurrence of any
Event of Servicing Termination unless a responsible officer of the Back-up
Servicer has received written notice of the same from the Servicer, the Insurer
or the Indenture Trustee, as the case may be, or otherwise has actual knowledge
of such breach or Event of Servicing Termination, (vi) shall not be
responsible to any Person for the due execution, legality, validity and
enforceability against the other parties of this Servicing Agreement and (vii) shall
incur no liability under or in respect of this Servicing Agreement by acting
upon any notice (including notice by telephone), consent, certificate or other
instrument or writing (which may be telex or telecopy) reasonably believed by
it to be genuine and signed, sent or communicated by the proper party or
parties.

 

It
is agreed and understood that the Back-up Servicer is responsible for providing
the services described in Section 2.23 only in accordance with the
information as shall have been timely supplied to it by the Servicer, the
Indenture Trustee or the Collection Account Depository, as the case may be. The
Back-up Servicer shall incur no liability for any failure by the Servicer, the
Indenture Trustee or the Collection Account Depository to furnish information
required of it, nor shall the Back-up Servicer be responsible for the content
or accuracy of any information provided to it by any such Person, unless
required by the Transaction Documents to do so. Except as may be expressly
provided herein or in the Indenture, the Back-up Servicer shall have no duty to
supervise, investigate or audit any records or activities of the Servicer with
respect to the servicing of the Collateral. The Back-up Servicer shall have no
responsibility or liability for any acts or omissions of the Servicer with
respect to the Collateral.

 

The
Back-up Servicer shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if the repayment
of such funds or adequate written indemnity against such risk or liability is
not reasonably assured to it in writing prior to the expenditure or risk of
such funds or incurrence of financial liability.

 

2.27.                        Re-Liening.  Upon the occurrence of a Re-Liening Trigger,
the Insurer may instruct the Servicer to take or cause to be taken such actions
as may, in the judgment of the Insurer or its counsel, be necessary to perfect
or re-perfect the security interests in the Financed Vehicles in the name of
the Indenture Trustee by amending the title documents relating to such Financed
Vehicles or by such other reasonable means as may, in the judgment of the
Insurer or its counsel, be necessary or prudent. The Servicer shall take or
cause to be taken such actions and the fees and expenses arising as a result of
the occurrence of a Re-Liening Trigger related to such perfection or
re-perfection shall be reimbursed as provided in Section 3.5(d)(viii) of
the Sale and Allocation Agreement. The Servicer agrees to take all action
necessary therefor, including the preparation, execution and delivery of all
such documents as may be requested by the Indenture Trustee or the Insurer in
connection therewith. The Servicer shall grant to the Successor Servicer an
irrevocable power of attorney, pursuant to which the Servicer shall appoint the
Successor Servicer as its attorney-in-fact, such appointment being coupled with
an interest, to take any and all steps required to be performed by it pursuant
to this Section 2.27 including execution of certificates of title
or any other documents in the name and stead of the Servicer. If at any time a
Person other than First Investors Servicing Corporation becomes the Servicer,
First Investors

 

22

 

Servicing Corporation shall
grant to such Successor Servicer, promptly after its appointment as such, a
power of attorney as described in the preceding sentence.

 

2.28.                        Repurchase by
Servicer Upon Breach.  The Seller,
the Insurer, the Servicer or the Issuer, as the case may be, shall inform the
parties to this Agreement promptly, in writing, upon the discovery of any
breach or failure to be true of the representations and warranties made by the
Servicer pursuant to this Agreement. If such breach or failure shall not have
been cured by the close of business on the last day of the Collection Period
which includes the thirtieth (30th) day after the date on which the Servicer
becomes aware of, or receives written notice from the Seller, the Insurer or
the Issuer of, such breach or failure, and such breach or failure materially
and adversely affects the interest of the Issuer or the Insurer in a Contract,
the Servicer shall repurchase such Contract from the Issuer on the Business Day
next preceding the Payment Date immediately following such Collection Period.
In consideration of the repurchase of a Contract hereunder, the Servicer shall
remit the Purchase Amount of such Contract in the manner specified in Section 3.4
of the Sale and Allocation Agreement. The sole remedy of the Issuer, the
Indenture Trustee, the Insurer (except as otherwise specified in the Insurance
Agreement), and the Noteholders with respect to a breach or failure to be true
of the representations and warranties made by the Servicer pursuant to this
Agreement shall be to require the Servicer to repurchase Contracts pursuant to
this Section 2.28. Neither the Owner Trustee nor the Indenture
Trustee shall have any duty to conduct an affirmative investigation as to the
occurrence of any condition requiring the repurchase of any Contract pursuant
to this Section 2.28 or the eligibility of any Contract for
purposes of this Agreement.

 

2.29.                        Liability of
Successor Servicer. 
Notwithstanding anything contained in this Agreement to the contrary,
Wells Fargo Bank, National Association as Successor Servicer is authorized to
accept and reasonably rely on all of the accounting, records (including
computer records) and work of the prior Servicer relating to the Contracts
(collectively, the “Predecessor Servicer Work Product”) without any
audit or other examination thereof, and Wells Fargo Bank, National Association
shall have no duty, responsibility, obligation or liability for the acts and
omissions of the prior Servicer; provided, however, that Wells
Fargo Bank, National Association will provide notice to the Indenture Trustee
and the Insurer if it discovers any defective or inaccurate data.  If any error, inaccuracy, omission or
incorrect or non-standard practice or procedure (collectively, “Errors”)
exist in any Predecessor Servicer Work Product and such Errors make it
materially more difficult to service or should cause or materially contribute
to Wells Fargo Bank, National Association making or continuing any Errors
(collectively,”Continued Errors”), Wells Fargo Bank, National
Association shall provide notice of such circumstances to the Indenture Trustee
and the Insurer and shall have no duty, responsibility, obligation or liability
for such Continued Errors; provided, however, that Wells Fargo
Bank, National Association agrees to use its best efforts to prevent further
Continued Errors.  In the event that
Wells Fargo Bank, National Association becomes aware of Errors or Continued
Errors, Wells Fargo Bank, National Association shall, with the prior consent of
the Indenture Trustee and the Insurer, use its best efforts to reconstruct and
reconcile such data as is commercially reasonable to correct such Errors and
Continued Errors and to prevent future Continued Errors.  Wells Fargo Bank, National Association shall
be entitled to recover its costs thereby expended from the Servicer and, to the
extent not paid by the Servicer, pursuant to Section 3.5(d)(i) of the
Sale and Allocation Agreement (provided that the Insurer has provided its prior
written consent to the amount of such costs and expenses).

 

23

 

ARTICLE III

ACCOUNTS; COLLECTIONS

 

3.01.                        Accounts.  There has been established pursuant to the
Sale and Allocation Agreement the Collection Account in the name of the
Indenture Trustee for the benefit of the Noteholders and the Insurer.

 

3.02.                        Collections.  The Servicer shall remit or cause a
Subservicer to remit first, to a lockbox account maintained with the Lockbox
Bank and second, to the Collection Account described in Section 3.03
hereof, and to no other account, as soon as practicable, but in no event later
than the Collection Account Depository’s close of business two Business Days
after receipt thereof in the lockbox, all Collections received during the
Collection Period, in respect of a Contract being serviced by the Servicer, and
all payments or other amounts, if any, made by or on behalf of an Obligor or
received by the Servicer with respect to any Contract.

 

3.03.                        Collection
Account and Acknowledgment Letter.

 

(a)                                  The Issuer
shall provide thirty days’ notice to the Servicer, the Indenture Trustee, the
Insurer and the Back-up Servicer of its appointment of a successor Collection
Account Depository which shall be acceptable to the Rating Agencies, the
Insurer and the Indenture Trustee and which shall hold the Collection Account
under the terms and conditions outlined herein and in the Indenture.

 

(b)                                 Except as
otherwise provided herein, the Servicer shall deposit or cause to be deposited
into the Collection Account all amounts (including late payments) remitted by
Obligors to the Servicer under the terms of the Contracts within two Business
Days after receipt thereof by the lockbox.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

 

4.01.                        Representations
and Warranties of the Servicer.  The initial Servicer hereby represents,
warrants and covenants to the Back-up Servicer, the Issuer, the Insurer, the
Noteholders and the Indenture Trustee that as of the date of this Servicing
Agreement:

 

(a)                                  The Servicer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware;

 

(b)                                 All necessary
corporate, regulatory or other similar action has been taken to authorize and
empower the Servicer and the officers or representatives acting on the Servicer’s
behalf, and the Servicer has full power and authority to execute, deliver and
perform this Servicing Agreement;

 

(c)                                  This Servicing
Agreement and the Sale and Allocation Agreement have been duly authorized,
executed and delivered by the Servicer and the performance and compliance with
the terms of this Servicing Agreement and the Sale and Allocation Agreement

 

24

 

 

will not violate the
Servicer’s certificate of incorporation or bylaws or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in the breach of, any Transaction Document or any
other contract, loan, lease, credit agreement or any other agreement or
instrument to which the Servicer is a party or which may be applicable to the
Servicer or any of its assets;

 

(d)                                 The Servicer is
duly licensed and qualified to perform the functions specified herein and this
Servicing Agreement and the Sale and Allocation Agreement constitutes a valid,
legal and binding obligation of the Servicer, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the enforcement of creditors’ rights generally and to
general principles of equity;

 

(e)                                  The Servicer is
not in violation of, and the execution, delivery and performance of this
Servicing Agreement and the Sale and Allocation Agreement by the Servicer will
not constitute a violation with respect to any order or decree of any court or
any order, regulation or demand of any federal, state, municipal or
governmental agency, which violation might have consequences that would materially
and adversely affect the condition (financial or other) or operations of the
Servicer or its properties or might have consequences that would affect the
performance of its duties hereunder;

 

(f)                                    No proceeding
of any kind, including but not limited to litigation, arbitration, judicial or
administrative, is pending or threatened against or contemplated by the
Servicer which would under any circumstance have an adverse effect on the
execution, delivery, performance or enforceability of this Servicing Agreement
or the Sale and Allocation Agreement;

 

(g)                                 No information,
officer’s certificate or statement furnished in writing or report delivered to
the Indenture Trustee, the Issuer, the Insurer, the Back-up Servicer or the
Noteholders by the Servicer required under this Servicing Agreement or the Sale
and Allocation Agreement contains any untrue statement of a material fact or
omits a material fact necessary to make the information, certificate, statement
or report not misleading; provided, however, that the Servicer
makes no representation or warranty with respect to any information
incorporated into or forming the basis of any officer’s certificate,
information, statement or report provided by the Servicer that is provided to
the Servicer by any other Person;

 

(h)                                 The Servicer
has the knowledge, the experience and the systems, financial and operational
capacity available to timely perform each of its obligations hereunder; and

 

(i)                                     The Servicer
has, with respect to the Contracts, complied in all material respects with the
Collection Policy.

 

4.02.                        Representations
and Warranties of the Back-up Servicer.  The Back-up Servicer hereby represents,
warrants and covenants to the Issuer, the Insurer, the Noteholders, the
Servicer and the Indenture Trustee that as of the date hereof or as of such
date specifically provided herein:

 

25

 

(a)                                  The Back-up
Servicer is a national banking association duly organized, validly existing and
authorized to engage in a banking business under the federal laws of the United
States of America;

 

(b)                                 All necessary
corporate, regulatory or other action has been taken to authorize and empower
the Back-up Servicer and the officers or representatives acting on the Back-up
Servicer’s behalf to perform and comply with the Back-up Servicer’s obligations
under this Servicing Agreement, and the Back-up Servicer has full power and
authority, to execute, deliver and perform this Servicing Agreement;

 

(c)                                  The execution
and delivery of this Servicing Agreement by the Back-up Servicer and its
performance and compliance with the terms of this Servicing Agreement will not
violate the Back-up Servicer’s articles of association or bylaws or constitute
a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach of, any material contract,
security agreement, loan, credit agreement or any other agreement or instrument
to which the Back-up Servicer is a party or which may be applicable to the Back-up
Servicer or any of its assets;

 

(d)                                 This Servicing
Agreement constitutes a legal, valid and binding obligation of the Back-up
Servicer, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors’ rights generally and to general
principles of equity;

 

(e)                                  The Back-up
Servicer is not in violation of, and the execution, delivery and performance of
this Servicing Agreement by the Back-up Servicer will not constitute a
violation with respect to, any applicable order or decree of any court or any
order, regulation or demand of any federal, state, municipal or governmental
agency, which violation might have consequences that would materially and adversely
affect the condition (financial or other) or operations of the Back-up Servicer
or its properties or might have consequences that would materially adversely
affect the performance of its duties hereunder; and

 

(f)                                    No proceeding
of any kind, including but not limited to litigation, arbitration, judicial or
administrative, is pending or, to the knowledge of the Back-up Servicer,
contemplated or threatened against the Back-up Servicer which would under any
circumstance have an adverse effect on the execution, delivery, performance or
enforceability of this Servicing Agreement by or against the Back-up Servicer.

 

4.03.                        Representations
and Warranties of the Issuer.  The Issuer hereby represents, warrants and
covenants to the Back-up Servicer, the Servicer, the Noteholders, the Insurer
and the Indenture Trustee that as of the date of this Servicing Agreement or as
of such date specifically provided herein:

 

(a)                                  The Issuer is a
Delaware statutory trust duly organized and validly existing under the laws of
the State of Delaware and has full power and authority to execute and deliver
this Servicing Agreement and to perform the terms and provisions hereof;

 

(b)                                 The execution,
delivery and performance by the Issuer of this Servicing Agreement have been
duly authorized by all necessary action by the Issuer, do not

 

26

 

require any approval or
consent of any Person, do not and will not conflict with any material provision
of the organizational documents of the Issuer, and do not and will not conflict
with or result in a breach which would constitute a material default under any
agreement binding upon or applicable to it or such of its property which is
material to it, or any law or governmental regulation or court decree
applicable to it or such material property, and this Servicing Agreement is the
legal, valid and binding obligation of the Issuer enforceable in accordance
with its terms except as the same may be limited by insolvency, bankruptcy,
reorganization or other laws relating to or affecting the enforcement of
creditors’ rights or by general equity principles; and

 

(c)                                  No litigation
or administrative proceeding of or before any court, tribunal or governmental
body is presently pending, or to the knowledge of the Issuer threatened,
against the Issuer or its properties or with respect to this Servicing
Agreement, which, if adversely determined would, in the opinion of the Issuer,
have a material adverse effect on the transactions contemplated by this
Servicing Agreement.

 

4.04.                        Survival of
Representations and Warranties.  The representations and warranties set forth
in this Article IV are continuous and shall survive the date of
this Servicing Agreement. Upon discovery by any of the Issuer, the Indenture
Trustee, the Back-up Servicer or the Servicer of a breach of any of the
foregoing representations and warranties, the party discovering such breach
shall give prompt written notice to the other parties hereto, including the
Insurer and the Indenture Trustee.

 

4.05.                        Merger or
Consolidation of, or Assumption of the Obligations of, or Resignation 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, (c) which
may succeed to the properties and assets of the Servicer substantially as a
whole, or (d) which may succeed to the duties and obligations of the
Servicer under this Servicing Agreement following the resignation of the
Servicer subject to Section 2.01 hereof, which Person executes an
agreement of assumption to perform every obligation of the Servicer hereunder,
shall be the successor to the Servicer under this Servicing Agreement with the
prior written consent of the Insurer (if no Insurer Default shall have occurred
and be continuing) and without further act on the part of any of the parties to
this Servicing Agreement; provided, however, that (i) written
notice of such merger, consolidation or assumption of liabilities shall be
delivered by the Servicer to the Insurer and the Noteholders, (ii) immediately
after giving effect to such transaction, no Event of Servicing Termination (as
defined in Section 5.01), and no event which, after notice or lapse
of time, or both, would become an Event of Servicing Termination shall have
occurred or be continuing, (iii) no Event of Default, Event of Servicing
Termination or Re-Liening Trigger would occur as a result of such merger,
consolidation or assumption of liability, (iv) the Servicer shall have
delivered to the Issuer, the Insurer, the Back-up Servicer and the Indenture
Trustee an officer’s certificate and an Opinion of Counsel each stating that
such consolidation, merger, succession or resignation and such agreement of
assumption comply with this Section 4.05 and that all conditions precedent
provided for in this Servicing Agreement relating to such transaction have been
complied with and (v) the Servicer shall have delivered to the Issuer, the
Insurer, the Back-up Servicer and the Indenture Trustee an Opinion of Counsel
either (A) stating that, in the opinion of such counsel, all financing
statements, continuation statements and amendments and notations on
certificates of title thereto have been executed and 

 

27

 

filed (or authorized and
filed, as applicable) that are necessary fully to preserve and protect the
interest of the Issuer, the Noteholders, the Insurer and the Indenture Trustee
in the Contracts and the Financed Vehicles, 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.

 

ARTICLE V

DEFAULT, REMEDIES AND INDEMNITY

 

5.01.                        Event of
Servicing Termination.  Any
of the following acts or occurrences shall constitute an “Event of Servicing
Termination” under this Servicing Agreement:

 

(a)                                  any failure by
the Servicer to make any payment, transfer or deposit due under any Transaction
Document on the date such payment, transfer or deposit is required to be made;

 

(b)                                 any failure by
the Servicer to provide any notices to the Indenture Trustee and the Insurer
pursuant to this Servicing Agreement relating to the transfer or calculation of
funds;

 

(c)                                  failure on the
part of the Servicer to duly observe or perform in any material respect any
other covenants or agreements of the Servicer set forth in this Servicing
Agreement or in any other Transaction Document; or the Servicer shall assign
its duties hereunder (except as expressly permitted herein);

 

(d)                                 any
representation, warranty or certification made by the Servicer or any successor
thereto in this Servicing Agreement or in any other Transaction Document, or
any certificate delivered pursuant to this Servicing Agreement or any other
Transaction Document (other than any representation or warranty relating to a
Contract that has been purchased by the Servicer), shall prove to have been
incorrect when made, which has a material adverse effect on the Noteholders or
the Insurer;

 

(e)                                  the Servicer or
Back-up Servicer shall consent 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
Back-up Servicer, respectively, or of or relating to all or substantially all
of their respective properties; or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment
of a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the
Servicer or Back-up Servicer or Successor Servicer or Successor Back-up Servicer
and such decree or order shall have remained in force undischarged or unstayed
for a period of 60 days; or the Servicer or Back-up Servicer or any successor
to either shall admit in writing its inability to pay its debts generally as
they become due, file or have filed against it a petition or commence an action
to take advantage of any applicable insolvency or reorganization statute, make
any assignment for the benefit of its creditors or voluntarily suspend payment
of its obligations;

 

(f)                                    the Servicer or
the Back-up Servicer or any successor to either shall fail to be an Eligible
Servicer as determined by the Insurer;

 

28

 

(g)                                 the Servicer
makes any material changes to its Collection Policy with respect to the
Contracts without the consent of the Insurer, which consent shall not be
unreasonably withheld;

 

(h)                                 an Event of
Default (as defined in the Indenture) with respect to the Servicer occurs which
has not been waived by the Insurer or, if an Insurer Default has occurred and
is continuing, Noteholders evidencing not less than 51% of the Class A
Note Balance;

 

(i)                                     the average
Extended Contract Rate with respect to any 3 consecutive Collection Periods
exceeds 1.75%;

 

(j)                                     the merger or
consolidation (including a conveyance transaction) of the Servicer with or into
any Person whereby the Servicer is not the surviving entity; or

 

(k)                                  the Servicer
shall have defaulted on any payment required to be made by it under any
material credit agreement or other loan agreement pursuant to which it has
borrowed money.

 

5.02.                        Remedies.

 

(a)                                  If an Event of
Servicing Termination shall occur and be continuing, the Insurer (or, if an
Insurer Default shall have occurred and be continuing, any of the Indenture
Trustee (to the extent an officer of the Indenture Trustee has actual knowledge
thereof), the Issuer, or the Indenture Trustee at the direction of Noteholders
evidencing not less than 51% of the Class A Note Balance), by notice given
in writing to the Servicer or the Back-up Servicer, as the case may be (“Termination
Notice”) (with copies to the Indenture Trustee and the Issuer if given by
the Insurer), may terminate all of the rights and obligations of the Servicer
or the Back-up Servicer, as the case may be, under this Servicing Agreement
(except as set forth in Section 5.03). On or after the receipt by
the Servicer of such Termination Notice, all authority, power, duties,
obligations and responsibilities of the Servicer under this Servicing
Agreement, whether with respect to the Contracts, or otherwise, automatically
shall pass to, be vested in and become obligations and responsibilities of the
Back-up Servicer (or such other Successor Servicer appointed in accordance
herewith); provided, however, that the Successor Servicer shall
have no liability with respect to any obligation which was required to be
performed by the terminated Servicer prior to the date that the Successor
Servicer becomes the Servicer or any claim based on any alleged action or
inaction of the terminated Servicer. The Successor Servicer is authorized and
empowered by this Agreement to execute and deliver, on behalf of the terminated
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 Termination Notice, whether to
complete the transfer and endorsement of the Contracts and related documents to
show the Issuer or the Indenture Trustee as lienholder or secured party on the
related title documents, or otherwise. The terminated Servicer agrees to
cooperate with the Successor Servicer in effecting the termination of the
responsibilities and rights of the terminated Servicer under this Servicing
Agreement, including, without limitation, the transfer to the Successor
Servicer for administration by it of all cash amounts that shall at the time be
held by the terminated Servicer for deposit, or have been deposited by the
terminated

 

29

 

Servicer, in the Collection
Account or thereafter received with respect to the Contracts and the delivery
to the Successor Servicer of all Servicer Files, collection records and a
computer tape in readable form as of the most recent Business Day containing
all information necessary to enable the Back-up Servicer or other Successor
Servicer, as the case may be, to service the Contracts. The terminated Servicer
shall grant the Issuer, the Indenture Trustee, the Successor Servicer and the
Insurer reasonable access to the terminated Servicer’s premises at the
terminated Servicer’s expense. Subject to Section 2.08(b), the
Successor Servicer shall be entitled to be reimbursed pursuant to Section 3.5(d)(i) of
the Sale and Allocation Agreement, to the extent described therein, and any
excess pursuant to 3.5(d)(x) of the Sale and Allocation Agreement for
reasonable costs incurred by it in connection with a transfer of servicing from
the Servicer to such Successor Servicer.

 

(b)                                 On and after
the time the Servicer receives a Termination Notice pursuant to Section 5.02(a),
the Back-up Servicer (unless the Insurer shall have exercised its option
pursuant to the following paragraph to appoint an alternate Successor Servicer)
shall be the successor in all respects to the Servicer in its capacity as
servicer under this Servicing Agreement and the transactions set forth or
provided for in this Servicing Agreement, and shall be subject to all the
rights, responsibilities, restrictions, duties, liabilities and termination provisions
relating thereto placed on the Servicer by the terms and provisions of this
Servicing Agreement except as otherwise stated herein. The Issuer and such
successor shall take such action, consistent with this Servicing Agreement, as
shall be necessary to effectuate any such succession. If a Successor Servicer
is acting as Servicer hereunder, it shall only be subject to termination under Section 5.02
upon the occurrence of any Event of Servicing Termination with respect to such
Successor Servicer.

 

(c)                                  On and after
the receipt by the terminated Servicer of a Termination Notice pursuant to this
Section 5.02, the terminated Servicer shall continue to perform all
servicing functions under this Servicing Agreement until the date specified in
the Termination Notice. The Insurer (provided that no Insurer Default shall
have occurred and be continuing) may exercise at any time (after a Termination
Notice is given) its right to appoint as Successor Back-up Servicer or as
Successor Servicer a Person other than the Person serving as Indenture Trustee
or Back-up Servicer, as the case may be, at the time, and (without limiting the
Insurer’s obligations under the Policy with respect to the Class A Notes)
shall have no liability to the Issuer, the Indenture Trustee, the Person then
serving as Back-up Servicer, any Noteholder or any other Person if it does so.
If a Successor Servicer is not chosen within 90 calendar days after the receipt
by the Servicer of the Termination Notice, the Back-up Servicer shall act as
Successor Servicer unless it is legally unable to do so, in which event the
outgoing Servicer shall continue to act as Servicer until a successor has been
appointed and accepted such appointment. If the Back-up Servicer shall be
legally unable to act as Servicer, and an Insurer Default shall have occurred
and be continuing, the Back-up Servicer, the Indenture Trustee, Noteholders
evidencing not less than 51% of the Class A Note Balance or the Issuer may
petition a court of competent jurisdiction to appoint an Eligible Servicer as
the Successor Servicer. Notwithstanding the above, no provision of this
Servicing Agreement shall be construed as relieving the Back-up Servicer of its
obligation to succeed as Successor Servicer upon the termination of the
Servicer pursuant to this Section 5.02 or the resignation of the
Servicer pursuant to Section 5.09. If, upon the termination of the
Servicer pursuant to this Section 5.02 or the resignation of the
Servicer pursuant to Section 5.09, the Insurer appoints a Successor
Servicer other than the Back-up

 

30

 

Servicer, the Back-up
Servicer shall not be relieved of its duties as Back-up Servicer hereunder.
Within 30 days of termination of the Servicer, if such termination causes a
change in the address to which Obligor payments are to be sent, the Successor
Servicer shall send, or cause to be sent, to each Obligor, a written notice of
the name and mailing address of the Successor Servicer to which payments on the
Contracts are to be made.

 

(d)                                 The Insurer or,
if an Insurer Default has occurred and is continuing, the Indenture Trustee,
the Issuer, or the Indenture Trustee at the direction of Noteholders evidencing
not less than 51% of the Class A Note Balance shall as promptly as
possible appoint a Successor Back-up Servicer following delivery of a
Termination Notice with respect to the Back-up Servicer. If the Insurer or
Indenture Trustee, as applicable, shall fail to approve a Successor Back-up
Servicer within 30 days of the date of a Termination Notice, the Indenture
Trustee may petition a court of competent jurisdiction for the appointment of a
Successor Back-up Servicer that is an Eligible Servicer.  Notwithstanding the above, the Indenture
Trustee shall, if it is legally unable so to act, petition a court of competent
jurisdiction to appoint any Eligible Servicer as the Successor Back-up Servicer
hereunder.

 

(e)                                  Upon its
appointment, the Successor Servicer or Successor Back-up Servicer, as the case
may be, shall be the successor in all respects to the terminated Servicer or
Back-up Servicer, as the case may be, with respect to servicing functions under
this Servicing Agreement and shall be subject to all the responsibilities,
duties and liabilities (arising on and after the time of such appointment
except for liability arising from the condition of the Servicer’s records at
the time the servicing duties are transferred to the Back-up Servicer or other
Successor Servicer or for actions or omissions of other Persons) relating
thereto placed on the Servicer or Back-up Servicer, respectively, by the terms
and provisions hereof (except as otherwise provided in this Servicing Agreement
with respect to the Back-up Servicer acting as Servicer), any Successor
Servicer shall become the successor Administrator in accordance with Section 20
of the Administration Agreement, and all references in this Servicing Agreement
to the Servicer or Back-up Servicer shall be deemed to refer to the Successor
Servicer or Successor Back-up Servicer unless the context otherwise requires; provided,
however, that the Successor Servicer shall have (i) no liability
with respect to any obligation which was required to be performed by the
terminated Servicer prior to the date that the Successor Servicer becomes the
Servicer or any claim of a third party based on any alleged action or inaction
of the terminated Servicer, (ii) no obligation to perform any repurchase
or advancing obligations, if any, of the Servicer, (iii) no obligation to
pay any taxes required to be paid by the Servicer, (iv) no obligation to
pay any of the fees and expenses of any other party involved in this
transaction and (v) no liability or obligation with respect to any
Servicer indemnification obligations of any prior servicer including the
original servicer. The indemnification obligations of the Backup Servicer, upon
becoming a Successor Servicer, are expressly limited to matters arising from
the gross negligence or willful misconduct of the Backup Servicer in its role
as Successor Servicer.

 

(f)                                    In connection
with such appointment and assumption, the Back-up Servicer may make such
arrangements for the compensation of itself and the Successor Servicer out of
collections of Contract payments, as it and such Successor Servicer shall
agree; provided, however, that no such compensation shall be in
excess of the Back-up Servicing Fees and Monthly Servicing Fees permitted to
the Back-up Servicer and the Servicer, respectively, pursuant to this Servicing
Agreement without the approval of the Insurer or, if an Insurer Default

 

31

 

has occurred and is
continuing, Noteholders evidencing not less than 51% of the Class A Note
Balance.

 

5.03.                        Indemnity by
the Servicer.  The
Servicer shall be liable to the Issuer, the Insurer, the Indenture Trustee, the
Holders of the Class A Notes, the Owner Trustee, the Paying Agent and
Certificate Registrar under the Trust Agreement and the Back-up Servicer
(collectively, the “Indemnified Parties”) to the extent of the
following:

 

(a)                                  The Servicer
shall indemnify, defend and hold harmless the Indemnified Parties and any of
the officers, directors, employees and agents of the Indemnified Parties from
and against any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation, arising out of or resulting from the use, ownership or operation by
the Servicer or any affiliate thereof of a Financed Vehicle.

 

(b)                                 The Servicer
shall indemnify, defend and hold harmless the Indemnified Parties and any of
the officers, directors, employees and agents of the Indemnified Parties from
and against any and all costs, expenses, losses, claims, damages and
liabilities to the extent that such cost, expense, loss, claim, damage or
liability arose out of, or was imposed upon any such Person through the breach
of this Servicing Agreement by the Servicer, the negligence, misfeasance or bad
faith of the Servicer in the performance of its duties under this Servicing
Agreement or by reason of reckless disregard of its obligations and duties
under this Servicing Agreement.

 

(c)                                  The Servicer
shall be strictly accountable for all payments actually received on the
Contracts.

 

THE
FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH SECTION 5.03
LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN
PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR
IN PART BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY INDEMNIFIED
PARTY.

 

(d)                                 Notwithstanding
any thing herein to the contrary, the Servicer shall not be obligated to
indemnify any Person with respect to any amounts representing recourse for
uncollectible Contracts.

 

(e)                                  Notwithstanding
any other provision in this Agreement or any other Transaction Document to the
contrary, should the Back-up Servicer by any means become Successor Servicer,
the Back-up Servicer shall not inherit any of the indemnification obligations
with respect to the actions of any prior servicer including the original Servicer.

 

5.04.                        Procedure for
Indemnification. 
Notwithstanding anything to the contrary in this Servicing Agreement, in
the event that an Indemnified Party is entitled to indemnification pursuant to
the terms of this Servicing Agreement, such Indemnified Party shall promptly
notify the Person against whom such indemnity may be sought (hereinafter called
the “Indemnifying Party”) in writing and the Indemnifying Party, upon
request of the Indemnified Party, shall retain counsel reasonably satisfactory
to the Indemnified Party or, at the Indemnified Party’s option,

 

32

 

such Indemnified Party may
select its own counsel with the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed, to represent the
Indemnified Party and any others the Indemnified Party may designate in such
proceeding and shall pay the reasonable fees and disbursements of such counsel
related to such proceeding. It is understood that the Indemnifying Party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm at any one time (in addition to any local counsel) for all such
Indemnified Parties (unless necessary because of conflicts of interest), and
all such fees and expenses shall be reimbursed as they are incurred. Such firm
shall be designated in writing by the Indemnified Party. The Indemnifying Party
shall not be liable for any settlement of any proceeding effected without its
written consent, which consent shall not be unreasonably withheld or delayed,
but if settled with such consent or if there be an adverse final judgment, the
Indemnifying Party agrees to indemnify the Indemnified Party from and against
any loss or liability by reason of such settlement or judgment.

 

5.05.                        Liability of
the Back-up Servicer.  The Back-up
Servicer shall not be liable to the Servicer, the Issuer, the Insurer, the
Indenture Trustee or the Noteholders (i) by reason of any act, contract or
transaction performed in good faith by the Back-up Servicer pursuant to this
Servicing Agreement nor shall it be liable for any loss resulting therefrom or
for any lost profit derived therefrom or any errors in judgment, so long as
such act, contract or transaction shall, at the time at which it was performed
or entered into, have been reasonable and prudent under the circumstances and
shall have conformed in all material respects to the express provisions of this
Servicing Agreement or (ii) for any action taken or for errors in judgment
committed directly resulting from fraud, negligence or willful misconduct of
the Seller, the Issuer, the Servicer, the Insurer, the Indenture Trustee or the
Noteholders.

 

5.06.                        Notification.  Upon discovery of the occurrence of any Event
of Servicing Termination, after the expiration of any applicable grace period,
the Servicer or the Back-up Servicer shall give written notice of the
occurrence of an Event of Servicing Termination to the Insurer, the Indenture
Trustee, and the Owner Trustee. Unless the Insurer or, if an Insurer Default
has occurred and is continuing, Noteholders evidencing not less than 51% of the
Class A Note Balance, gives written notice to the Servicer or the Back-up
Servicer, as the case may be, within seven Business Days of receipt of such
notice from the Servicer or the Back-up Servicer that the Insurer or
Noteholders evidencing not less than 51% of the Class A Note Balance, as
the case may be, have waived such Event of Servicing Termination, the Servicer
or the Back-up Servicer, as the case may be, shall then give notice in writing
to the Rating Agencies, the Issuer and any other Persons identified on a list
provided to the Servicer or the Back-up Servicer, as the case may be, by the
Issuer as such list may be amended from time to time, and the Indenture Trustee
shall give notice to the Noteholders.

 

5.07.                        Waiver of Event
of Defaults.  The Insurer
or the Indenture Trustee at the direction of Noteholders evidencing not less than
51% of the Class A Note Balance (with the prior written consent of the
Insurer if no Insurer Default shall have occurred and be continuing) may waive
any Event of Servicing Termination, except for an Event of Servicing
Termination arising by virtue of a default in making any required deposits to
or payments from the Collection Account, the Note Payment Accounts or the
Reserve Account in accordance with this Servicing Agreement. Notwithstanding
the preceding sentence, the Insurer (if no Insurer Default shall have

 

33

 

occurred and be continuing)
may, on behalf of all Noteholders, waive any Event of Servicing Termination.
Upon any such waiver of an Event of Servicing Termination, such default shall
cease to exist, and any default arising therefrom shall be deemed to have been
remedied for every purpose of this Servicing Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon except to the extent expressly so waived.

 

5.08.                        Survival.  The agreements in Section 5.03
shall survive the termination of the Indenture, the removal, resignation or
replacement of the Servicer and the payment in full of the Notes.

 

5.09.                        Servicer and
Back-up Servicer Not to Resign.  Subject to the provisions of Section 5.02,
neither the Servicer nor the Back-up Servicer shall resign from the obligations
and duties imposed on it by this Servicing Agreement as Servicer or Back-up
Servicer except upon a determination that by reason of a change in legal
requirements the performance of its duties under this Servicing Agreement would
cause it to be in violation of such legal requirements in a manner which would
have a material adverse effect on the Servicer or the Back-up Servicer, as the case
may be, and the Insurer does not elect to waive the obligations of the Servicer
or the Back-up Servicer, as the case may be, to perform the duties which render
it legally unable to act or to delegate those duties to another Person. Any
such determination permitting the resignation of the Servicer or Back-up
Servicer shall be evidenced by an opinion of counsel to such effect delivered
and acceptable to the Issuer, the Indenture Trustee, and the Insurer. No
resignation of the Servicer shall become effective until the Back-up Servicer
or an entity acceptable to the Insurer (if no Insurer Default shall have
occurred and be continuing) shall have assumed the responsibilities and
obligations of the Servicer. No resignation of the Back-up Servicer shall
become effective until an entity acceptable to the Insurer shall have assumed
the responsibilities and obligations of the Back-up Servicer; provided, however,
that in the event a successor Back-up Servicer is not appointed within 60 days
after the Back-up Servicer has given notice of its resignation and has provided
the opinion of counsel required by this Section 5.09, the Back-up
Servicer may petition a court of competent jurisdiction for its removal.

 

ARTICLE VI

TERMINATION OF AGREEMENT

 

6.01.                        Term.  This Servicing Agreement shall remain in
effect until termination of the Indenture.

 

6.02.                        Effect of
Termination.  Upon
termination of this Servicing Agreement, the Servicer shall, at the direction
of the Issuer, promptly deliver to the Issuer or its designee all Servicer
Files and any related files and correspondence in its possession as are related
to the management of the Contracts and the services provided hereunder.

 

6.03.                        Transfer of
Servicing.  Upon
termination of this Servicing Agreement, the Servicer shall cooperate in the
transfer of the Servicer Files. Any matters pending at the effective
termination date will continue to be processed in an orderly and timely
fashion; it being intended, however, that responsibility for the Contracts
shall transfer as quickly as practicable and in any event within thirty days
after the termination date.

 

34

 

ARTICLE VII

MISCELLANEOUS PROVISIONS

 

7.01.                        Amendment.  This Servicing Agreement may only be amended
by mutual written consent of the parties hereto and with the prior written
consent of the Insurer and Noteholders evidencing not less than 51% of the Class A
Note Balance. No amendment made to the Sale and Allocation Agreement or the
Indenture, without the Back-up Servicer’s or the Servicer’s written consent,
shall be effective as to the Back-up Servicer or the Servicer, respectively, to
the extent such amendment is disadvantageous in any respect to the Back-up
Servicer or the Servicer, respectively. The Rating Agencies and any other
Persons identified on a list provided to the Issuer, as such list may be
amended from time to time, shall be given by the Issuer prior notice of any
proposed amendment to the Servicing Agreement, the Sale and Allocation
Agreement or the Indenture and, upon any such amendment, shall promptly be
provided by the Issuer a copy of any such amendment.

 

7.02.                        Waivers.  The provisions of this Servicing Agreement
may only be waived by written consent of the Insurer or, if an Insurer Default
has occurred and is continuing, Noteholders evidencing not less than 51% of the
Class A Note Balance, and the parties hereto. The failure of any party at
any time to require performance by the other of any provision of this Servicing
Agreement shall in no way affect that party’s right to enforce such provision,
nor shall the waiver by any party of any breach of any provision of this
Servicing Agreement be taken or held to be a waiver of any further breach of
the same provision or any other provision.

 

7.03.                        Notices.  All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered personally
or mailed by first-class registered or certified mail, postage prepaid, or by
telephonic facsimile transmission and overnight delivery service, postage
prepaid, in any case addressed as follows:

 

To the
Servicer:

 

First
Investors Servicing Corporation

c/o
First Investors Financial Services, Inc.

675
Bering, Suite 710

Houston,
Texas 77057

Attention:
Bennie H. Duck

Telephone:
(713) 977-2600

Fax:
(713) 260-0028

 

35

 

To the
Indenture Trustee/Back-up Servicer:

 

Wells
Fargo Bank, National Association

MAC
N9311-161

Sixth
Street and Marquette Avenue

Minneapolis,
Minnesota 55479

Attention:
Corporate Trust Services – Asset-Backed Administration

Telephone:
(612) 667-8058

Fax:
(612) 667-3464

 

To the
Issuer:

 

First
Investors Auto Owner Trust 2005-A

c/o
Wells Fargo Delaware Trust Company, as Owner Trustee

919
North Market Street, Suite 700

Wilmington,
Delaware 19801

Attention:
Corporate Trust Administration, Ann Dukart

Telephone:
(302) 575-2004

Fax:
(302) 575-2006

 

To the
Rating Agencies:

 

Moody’s
Investors Service, Inc.

99
Church Street, 4th Floor

New York, New York 10007

Attn: Yan Yan

ServicerReports@moodys.com

 

With
an additional copy to:

 

Moody’s
Investors Service, Inc.

99
Church Street, 4th Floor

New
York, New York 10007

Attn:
ABS Monitoring Department

 

Standard &
Poor’s

55
Water Street

New
York, New York 10041

Attention:
David Bleakley

Phone:
(212) 438-2404

Fax:
(212) 438-2649

 

36

 

To the
Insurer:

 

MBIA
Insurance Corporation

113
King Street

Armonk,
New York 10504

Attention:
Insured Portfolio Management-

Structured
Finance (IPM-SF)

Phone:
(914) 273-4545

Fax:
(914) 765-3810

 

Such
notice, request, consent or other communication shall be deemed given when so
delivered, or if mailed, two days after deposit with the U.S. Postal Service.

 

7.04.                        Severability of
Provisions.  If one or
more of the provisions of this Servicing Agreement shall be held invalid for
any reason, such provisions shall be deemed severable from the remaining
provisions of this Servicing Agreement and shall in no way affect the validity
or enforceability of such remaining provisions. To the extent permitted by law,
the parties hereto hereby waive any law which renders any provision of this
Servicing Agreement prohibited or unenforceable.

 

7.05.                        Rights
Cumulative.  All rights
and remedies under this Servicing Agreement are cumulative, and none is
intended to be exclusive of another. No delay or omission in insisting upon the
strict observance or performance of any provision of this Servicing Agreement,
or in exercising any right or remedy, shall be construed as a waiver or
relinquishment of such provision, nor shall it impair such right or remedy.
Every right and remedy may be exercised from time to time and as often as
deemed expedient.

 

7.06.                        No Offset.  Prior to the termination of this Servicing
Agreement, the obligations of the Back-up Servicer and the Servicer under this
Servicing Agreement shall not be subject to any defense, counterclaim or right
of offset which the Back-up Servicer or the Servicer may have against the other
or against the Issuer, the Seller, the Insurer, any Noteholder or the Indenture
Trustee, whether in respect of this Servicing Agreement, any Contract or
otherwise.

 

7.07.                        Inspection and
Audit Rights.  The
Servicer agrees that, upon prior written notice, it will permit the Issuer, the
Insurer, the Back-up Servicer, or the Indenture Trustee and their respective
representatives, during the Servicer’s normal business hours, to examine the
Servicer Files, all the books of account, records, reports and other papers of
the Servicer relating to the Contracts, to make copies and extracts therefrom,
to cause such books to be audited by independent public accountants selected by
the Issuer, and to discuss its affairs, finances and accounts relating to the
Contracts with its officers, employees and independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. Any expense incident to the exercise by the Issuer, the Insurer or
the Indenture Trustee of any right under this Section 7.07 shall be
borne by the Servicer. The Servicer shall allow such examination within two (2) Business
Days of receipt of the required notice if so requested by the requesting party.

 

37

 

7.08.                        Powers of
Attorney.  The Issuer
shall, from time to time, provide to the employees of the Servicer and the
Indenture Trustee limited, revocable powers of attorney or other such written
authorizations as may be appropriate to enable the Servicer and the Indenture
Trustee to perform its respective obligations under this Servicing Agreement
and the Indenture; provided, however, that the Issuer shall not
be required to provide such powers with respect to any matter for which the
Issuer does not have authority to perform itself.

 

7.09.                        Assignment and
Binding Effect.  Except with
respect to the pledge of its rights under this Servicing Agreement by the
Issuer to the Indenture Trustee pursuant to the Indenture and as expressly
provided herein, this Servicing Agreement may be assigned by the Issuer only
with the written consent of the parties hereto and the Insurer or, if an
Insurer Default has occurred and is continuing, Noteholders evidencing not less
than 51% of the Class A Note Balance; however, in the event of an
assignment, all provisions of this Servicing Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the parties
hereto.

 

7.10.                        Captions.  The article, paragraph and other headings
contained in this Servicing Agreement are for reference purposes only, and
shall not limit or otherwise affect the meaning hereof.

 

7.11.                        Counterparts.  This Servicing Agreement may be executed 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.

 

7.12.                        Governing Law.  This Servicing Agreement shall be deemed
entered into under and shall be governed by and interpreted in accordance with
the laws of the State of New York without reference to its conflict of law
provisions, and the obligations, rights and remedieis of the parties hereunder
shall be deterimined in accordance with such laws.

 

7.13.                        Parties.  Except as set forth in Section 7.16
hereof, this Servicing Agreement shall inure solely to the benefit of and shall
be binding upon the parties hereto, and their respective successors, legal
representatives and assigns, and no other Person shall have or be construed to
have any equitable right, remedy or claim under or in respect of or by virtue
of this Servicing Agreement or any provision contained herein.

 

7.14.                        Relationship of
the Parties.  The
relationship of the parties to this Servicing Agreement is that of independent
contractors. Neither this Servicing Agreement nor any of the activities
contemplated hereby shall be deemed to create any partnership, joint venture,
agency or employer/employee relationship among the Back-up Servicer, the
Servicer and the Issuer.

 

7.15.                        No Bankruptcy
Petition Against the Issuer or Depositor.  The Back-up Servicer, the Servicer and the
Indenture Trustee agree that, prior to the date that is one year and one day
after the payment in full of the Notes, none of them will institute against or
join any other Person in instituting against, the Issuer or the Depositor, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other proceedings under the laws of the United States or any state of the
United States. This Section 7.15 shall survive the termination of
this Servicing Agreement.

 

38

 

7.16.                        Third Party
Beneficiaries.  This
Servicing Agreement shall inure to the benefit of the Noteholders and the
Insurer and their respective successors and assigns. Without limiting the
generality of the foregoing, all covenants and agreements in this Servicing
Agreement which expressly confer rights upon the Insurer or the Noteholders
shall be for the benefit of and run directly to them, and each shall be
entitled to rely on and enforce such covenants to the same extent as if it were
a party hereto.  Notwithstanding the
foregoing, the Noteholder shall have no rights to enforce the provisions of
this Servicing Agreement so long as there is no Insurer Default that has
occurred and is continuing.

 

7.17.                        Other
Agreements.  The
Servicer and the Back-up Servicer will not be obligated or bound by any
provision or term of any other agreement, including the Indenture and the Sale
and Allocation Agreement, except to the extent, and only to the extent,
expressly stated herein or therein.

 

7.18.                        Purchase and
Subsequent Pledge.  The
Servicer hereby acknowledges that the Issuer will acquire the Contracts and the
other items included in the Collateral pursuant to the Sale and Allocation
Agreement and will pledge the Contracts and the other items included in the
Collateral along with the Issuer’s rights under this Servicing Agreement, the
Contribution Agreement and the Sale and Allocation Agreement to the Indenture
Trustee for the benefit of the Noteholders and the Insurer pursuant to the
terms of the Indenture, and that the representations and warranties contained
in the Contribution Agreement, Sale and Allocation Agreement, this Servicing
Agreement and the Indenture and the rights of the Issuer under the Indenture,
this Servicing Agreement, the Contribution Agreement and the Sale and Allocation
Agreement are intended to benefit the Noteholders and the Insurer.

 

7.19.                        Exercise of
Rights by Insurer.  All rights
granted to the Insurer pursuant to this Servicing Agreement shall terminate
during the pendency of an Insurer Default and during such time the Insurer’s
rights may be exercised by Noteholders evidencing not less than 51% of the Class A
Note Balance; provided, however, the Insurer’s rights shall be
reinstated in full, immediately upon the cure of such Insurer Default.

 

7.20.                        Limitation of
Liability. 
Notwithstanding any other provision herein or elsewhere, this Servicing
Agreement has been executed and delivered by Wells Fargo Delaware Trust
Company, not in its individual capacity, but solely in its capacity as Owner
Trustee of the Issuer, in no event shall Wells Fargo Delaware Trust Company or
the Owner Trustee have any liability in respect of the representations,
warranties, or obligations of the Issuer hereunder or under any other
Transaction Document and for all purposes of this Agreement and each other
Transaction Document the Owner Trustee and Wells Fargo Delaware Trust Company
shall be entitled to the benefits of the Trust Agreement.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

39

 

IN
WITNESS WHEREOF, the Issuer, the Back-up Servicer, the Servicer, the Custodian
and the Indenture Trustee have caused this Servicing Agreement to be duly
executed by their respective authorized officers as of the date and year first
above written.

 

	
   

  	
  First Investors
  Auto Owner Trust 2005-A, as Issuer

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Wells Fargo
  Delaware Trust Company, not

  in its individual capacity but solely as Owner

  Trustee on behalf of the Trust

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Wells Fargo
  Bank, National Association, not in its

  individual capacity but solely as Back-up Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Wells Fargo
  Bank, National Association, not in its

  individual capacity but solely as Indenture Trustee

  and Custodian

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  First Investors
  Servicing Corporation, as Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					

 

 

Servicing Agreement Signature Page

 

 

SCHEDULE I

 

 

FIRST INVESTORS FINANCIAL
SERVICES

 

RETAIL COLLECTION POLICY &
OPERATING PROCEDURES

 

March 2003

 

 

	
  First Investors Financial Services

  	
   

  	
  Office Operating Procedures

  

 

Retail Collection Policy

 

Preface

 

This procedure explains the First Investors Financial
(FIFS) policy for collections.  In
addition, this section explains the various methods to be employed by
office personnel to maximize collection efforts; FIFS complies with the Fair
Debt Collection Practices Act and all applicable state and federal laws and
regulations.  (For specific requirements
or specific state legislation refer to Legal Procedures.)

 

Note:  Any exception to this policy manual needs to
be approved by a Manager or higher Authority.

 

Office Responsibilities

 

The office goals are:

 

•                                          Successful
and profitable liquidation of accounts receivables;

 

•                                          To
maintain client satisfaction- which leads to repeat business.

 

The office can meet these objectives by establishing
timely and effective collection practices.

 

The importance of immediate follow-up on a delinquent
account cannot be over-emphasized.  The
later in the delinquency cycle a customer is contacted, the fewer options are
available to FIFS and the customer.

 

Profitability on an account is effected by more than
the potential loss on repossession.  An
account that must be contacted every month for payment is incrementally less
profitable than an account that pays “as agreed,” even though all payments are
made in both cases.

 

Collections Unit Organization

 

FIFS organizes the collection department by utilizing
an online (auto dialer system) and offline system consisting of three steps:

 

•                                          Accounts
are assigned to collection queues determined by: 1) the delinquency of the
account (days past due), 2) the status of the account (repossession,
bankruptcy, skip, etc.) and 3) the balance of workloads.

 

•                                          Accounts
are assigned to in-house collectors titled Account Service Representatives.
(ASR’s) according to experience level and previous performance.

 

•                                          The
ASR is responsible for ensuring proper collection follow-up for all assigned
accounts.  The ASR’s are separated into
two departments.  The front-line collection
group handles accounts under 30 days past due. 
Back-end collectors handle accounts over 30 days past due until
resolution ( i.e. account brought

 

2

 

current, paid-in-full, repossessed or forwarded to a specialty unit
such as bankruptcy or litigation).

 

Account Distribution

 

The basis of the FIFS collection philosophy is that
all past due accounts not already awaiting resolution or another specific
strategy, will be reviewed for daily activity. 
This is the minimum requirement, but collectors are encouraged to follow
up as often as conditions warrant. Daily Routine will be governed by each
collection department to ensure best coverage and delinquency management for
all past due accounts.

 

Account Tracking

 

FIFS uses an automated collection system that tracks
all delinquent accounts.  The system is
extremely flexible and allows FIFS maximum ability to organize collection
follow-up.  The collection system
contains data on all accounts and provides collector “queues” based on a number
of variables including, balance, days past due, behavioral score, test group,
and credit score.

 

On the first day of delinquency, accounts are placed
in the collection system for follow-up. 
Each ASR is given a collection queue to manage on a daily basis.  The accounts are randomly distributed to each
queue based on delinquency level and ASR experience.  Accounts remain with the assigned collector
until a point is reached requiring designation of another ASR or department.

 

Telephone Collection Concept

 

Emphasis is placed on the use of the telephone as the
primary tool for customer contact.  It is
the most effective collection tool. 
Telephone contact is quick and provides immediate results.  Poor follow-up results in the loss of revenue
and potential repeat customers.

 

•                                          The
advantages of telephone collection follow-up are:

 

•                                          Efficiency-The collector is able to contact more customers
during a given time period.

 

•                                          Low Cost-In comparison to travel and direct contact
expenses.

 

•                                          Privacy-The collector is able to take notes and refer to
records without distracting the customer.

 

The Collection Call

 

An effective collection call is made up of a series of
logical steps.  These steps assure that
all the information needed from customers is obtained, while also meeting all
of FIFS legal and ethical requirements.

 

3

 

The steps of an effective collection call are listed
and described below.  Always follow and
complete the steps as the customer and the nature of the individual call
dictate.  This will ensure a thorough and
successful contact.

 

	
  Four Steps to an
  Effective Collection Call

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Step One

  	
   

  	
  Greeting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Step Two

  	
   

  	
  Facts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Step Three

  	
   

  	
  Negotiations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Step Four

  	
   

  	
  Power
  Close

  	
   

  

 

Step One – Greeting

 

•                                          Confirm
that it is our customer

•                                          Develop
Right Party Contact (RPC) if the contact is not our customer

•                                          Identify
yourself and the company (i.e. This is          
with First Investors Financial Services....)

•                                          Clearly
state the purpose of the call

•                                          PAUSE

 

Special
note:  Maintain a professional tone
and always maintain control of conversation.

 

Step Two – Facts

 

•                                          Gather
key Facts / Reasons for delinquency

•                                          Stick
with the topic of conversation

•                                          Verify
information – Address, place of employment, contact numbers, income, debt
statement, and location of collateral

•                                          Resolve
any conflicts or disputes

•                                          Ask
for the Total Due

 

Special
note:  Tone reflects sincere empathy
for the customer and his/her situation.

 

Step Three - Negotiate

 

•                                          Overcome
objections

•                                          Identify
all customer benefits

•                                          Create
a solution

•                                          Obtain
customer commitment

 

Special
note:  Listen to what the customer is
saying. Emphasize customer benefits such as: 
to eliminates additional action, stop collection calls and notices, and
promotes good CBR rating.

 

4

 

Step Four – Power Close

 

•                                          Urgency

•                                          Reconfirmation
of arrangements

•                                          Stress
confidence in arrangements

•                                          Thank
customer

•                                          Set
customer expectations

 

Before ending the call, verify pertinent customer
information such as residence address and telephone, current employment and
telephone and any mobile or pager numbers, to facilitate the next contact.  Always determine the
location of and who is in possession of our collateral.

 

If the customer states the delinquent payment was
mailed, the ASR should confirm the amount of the payment mailed, type of
payment (check, cashier check, etc.), and source of the funds.  The customer should be
reminded that there is no grace period and to allow for mailing time.

 

If the customer has not mailed a payment to bring the
loan current, arrangements for bringing the account current should be
made.  Arrangements for all past due
monies as well as future payments should be set-up by the collector and agreed
upon by the customer.  On all collection calls the reason for delinquency (RFD) should be
discussed and noted.

 

The ASR should attempt to use urgency payments on all
past due payments.  Western Union Quick
Collect should be the main source of urgency suggested (express mail is another
good delivery tool).  Phone Pay should be offered on EVERY collection call.

 

The customer benefits of using phone pay are: 1)it is
less expensive than Western Union Quick Collect, 2) the customer’s voided check
provides them with a permanent record and 3) the customer receives a
confirmation letter from Western Union.

 

It is important that all details of the collection
call be noted for future use.

 

Working with the Customer

 

Proper account handling is critical to the success of
First Investors Financial Services.  The
first step in providing quality account servicing is to recognize who the
customer is.  Virtually every person whom
we come in contact with while acting as a FIFS employee is our customer.  The next step is to understand the elements
that comprise Quality Customer Service – service that not only meets, but also
exceeds our customers’ expectations.

 

The Three C’s

 

Quality Customer Service consist of three basic
elements:

 

•                                          Competence

•                                          Concern

•                                          Courtesy

 

5

 

Competence

 

The ability to deliver quality customer service
depends on the employee’s competence – having the knowledge and skill necessary
to do the job properly.

 

Simply having job knowledge and skills is just the
starting point.  Each employee must also demonstrate to both internal and external customers that
he/she can do the job- that the employee can deliver on our promise of quality
customer service.  Few things are more
frustrating to a customer than dealing with a company whose employees lack
competence.  When competence is missing
in a customer contact, the customer doubts the ability of the employee to
provide quality service.

 

The specific knowledge and skill required to perform a
task completely differ from job to job, but there are four broad competency
standards that apply to any job:

 

1.                                       Demonstrate efficient job skill:  Every job at FIFS has a set of job skills
necessary for performance of the job.  It
is important to understand that whatever a person’s job, our customers expect
employees to know how to perform the skills for which they are responsible in
quick and efficiently manner.

 

2.                                       Demonstrate knowledge of FIFS, its policies and procedures.  To the customer, each employee is FIFS.
Therefore, employees will often be in the position of having to explain company
policies and procedures in a way that makes them sound logical and
customer-oriented, rather than arbitrary. 
This includes understanding your own span of authority.  Know when it is appropriate to get others
involved when helping customers (i.e. when customers request exceptions to
settlement policy requirements).

 

3.                                       Provide complete information.  Customers expect that FIFS will provide all
the information they will reasonably need about its’ processes, procedures and
policies.  It is every employee’s
responsibility to know these things and to be able to tell the customer what
they need to know.  We should never leave
it up to the customer to discover things on his or her own.

 

4.                                       Know where to get information.  Another requirement of competency is to know
what resources to consult, whether those resources are manuals or fellow
employees.  An employee is not expected
to know everything.  Even the most
demanding customers will understand that the person they’re speaking with may
not have the answer to a problem, as long as an answer can be obtained within a
timely fashion.

 

Show concern.  All customers want to feel the companies they
deal with have a genuine concern for them and their needs.  Without concern, the positive impression
created by Competence will quickly disappear. 
When concern is missing, customers feel like they are just a number and
are not valued.  Showing concern involves
following a few simple guidelines:

 

1.                                       Project a warm, friendly presence.  A smile goes a long way toward making
customer’s feel that their concerns really matter.  That may seem obvious when dealing with a

 

6

 

customer face-to-face, but it
is equally true over the telephone. Studies have shown that when people smile
while talking on the telephone, the person on the other end of the line “hears
the smile” in their voice.  An added
benefit is that smiling tends to make a person more relaxed and less stressed.

 

2.                                       Use the customer’s name.  All people like to be recognized and
respected.  One simple way to show
respect and recognition of customers as individuals with their own unique
identity is by using their names.  When
using customers’ names, do so at times when it is natural.  Do not use names so frequently that it
becomes forced or insincere.  A good rule of
thumb is to try to use the customer’s name two to three times during a
conversation.

 

3.                                       Express empathy. 
Empathy is the ability for the ASR to put him/herself in the “customers’
shoes” – to show understanding of their points of views and concerns.  Expressing empathy requires careful listening
to what the customer says, and sincere understanding of his/her underlying
feelings of frustration, fear, or anger. 
A simple “I’m sorry that happened” when mistakes occur goes a long way
toward defusing customer anger, and shows that the ASR understands the customer’s
point of view.  It is possible to show we
understand a customer’s problem without accepting fault on the part of the
company.

 

4.                                       Take responsibility for customer satisfaction.  When contact is made with a customer, the ASR’s
job is not finished until the customer’s needs have been met.  If the ASR can not personally satisfy the
need, the customer should be directed to someone who can.  Also, when the ASR is presented with a
problem that the customer perceives to be “our” fault, it is extremely
important to avoid blaming someone else in the company.  We all “own” customer problems and blaming
others simply appears to the customer as “passing the buck”.  Whatever agreement is made with a customer be
sure that the agreement is carried through and followed-up as stated.

 

5.                                       The ASR should give the customer their undivided attention.  No one is more important than the
customer.  No office activity is more
important than a conversation with a customer. 
To make sure customers get this message loudly and clearly, the ASR will
need to take precautions to ensure that when serving a customer, they keep
interruptions to an absolute minimum.  In
particular, they should avoid side conversations with other employees unless it
is directly related to the customer’s need. 
If it becomes necessary to leave the customer to obtain information,
clearly explain where you are going, and how long it will take.

 

Courtesy

 

Practicing courtesy towards a customer sounds like
simple common sense.  Who would be
intentionally rude to a customer?  However,
one’s behavior can sometimes appear discourteous unintentionally.  Unprofessional greetings, abrupt, unexplained
holds, and long waits equal bad business conduct because customers perceive
these behaviors as rude.

 

7

 

Courtesy is almost synonymous with respectfulness.  Being courteous in a business setting is a
matter of following rules of etiquette designed to show respect.

 

Greet and respond to customers quickly and
properly.  It is common
courtesy that the ASR responds quickly and properly to any customer who calls
on the telephone. Remember that customers are not interruptions.  Taking care of customers is our primary
job.  If the person who normally greets
customers is not available, the ASR should take it upon his/herself to greet
the customer.

 

When using the customers’ name, use their title
and last name.  For
example, “Good afternoon, Mr. Marks.” 
Do not address customers by their first names.

 

Listen to customers.  Listening without interrupting may be the
most important element of quality customer service.  Listening to customers is a matter of
respect.  It is virtually impossible to
show concern, demonstrate competence, or practice courtesy if the ASR does not
first listen to what the customer has to say.

 

Listening to customers goes beyond hearing what they
have to say.  An important part of
listening is to assure customers that they are being listened to.  This means that the ASR
needs to actively listen. 
Questions should be asked to get customers to explain situations
fully.  Summarize what the customers says
to show that they are understood.  Once
the ASR has demonstrated active listening, it will be possible to express
empathy, take responsibility for customer satisfaction, and provide complete
information.

 

Ensure the customers’ understanding.  In order to ensure that the ASR has
successfully handled a customer’s request or need to its resolution, The
collector should discuss the interaction with the customer.  Unless both the ASR and
the customer come away from the contact with the same understanding of what has
occurred or been decided, we have not provided quality customer service.

 

Reconfirm the action that you or the customer will
take.  For example, “Okay,
Mr. Carr, you are going to talk to your banker about a consolidation loan
so that we can get your account settled.”

 

Know and use telephone etiquette.  The majority of contacts with customers occur
via telephone, so it is essential to know and use the rules of telephone
etiquette.

 

Telephone Etiquette

 

Be professional.  Talk in a friendly tone and control your rate
of speech.

 

To convey competence, concern, and courtesy when
handling telephone calls, each ASR should use the following:

 

•                                          Answer promptly. 
Answer calls between the first and third ring.  Generally, the optimal point to answer is
after the second ring.

 

8

 

•                                          Greet the caller. 
When answering the telephone say: 
“Thank you for calling FIFS. This is [your name], how may I help you?”  This will usually cause the customer to
provide the information you need to be able to respond, either by helping the
customer yourself, or by directing the call to the appropriate person.

 

•                                          Handle or direct the call. 
Either handle the call yourself or direct the call to the employee who
can best serve the customer’s needs. 
Identify the caller and obtain the account number when appropriate.

 

•                                          Use holds when necessary. 
If it is necessary to put callers on hold, proceed as follows:

 

Request and obtain caller’s
permission to put them on hold.  For example, “It will take a minute to look up your payment
information.  Will you please hold?”

 

•                                          Do not leave callers on hold for longer than on minute without
returning to the line.  If it
is necessary to extend the hold, explain the delay, and ask callers if they
will continue to hold.  If this is other
than a collection call, offer to have the appropriate person call back if the
hold will have to continue for more than a minute.

 

•                                          When picking up a call that was on hold, thank the customer for
holding.  For example,
“Thank you for holding, Mr. Carr.  I
have the information for you now.”

 

•                                          Always use the hold feature on your telephone so that the customer
cannot hear office conversation while waiting.

 

•                                          Transfer when appropriate. 
When referring a call to another employee for handling: Tell the callers
the first and last name of the person whom they will be speaking.  For example, “Mr. Carr,
I’ll be transferring you to Marge Sands.

 

•                                          Thank the customer.

 

Use the holds skill to transfer the call

 

Tell the employee the caller’s name and the reason for
the call.  For example, “Marge, I have Mr. Carr
on the line.  He wants to know about the
settlement offer he faxed to you.”

 

Pick-up Transfers properly.  When picking up a call that was transferred:

 

1)  Greet the caller by name.

 

2)  Tell the
caller your name (must be done within the first 60 seconds of a call)

 

3)  Restate the purpose of the call.

 

9

 

 

For example, “ Hello, Mr. Carr.  This is Marge Sands.  I understand you have a question about the
letter you received this morning.”  This
lets the caller know that the ASR has been informed of the reason for their
call.

 

•                                          Take messages.  Always
try to take care of the caller or direct the call to someone who can do
so.  When it is not possible, take
complete and accurate messages.  Follow
these guidelines:

 

•                                          Obtain
the caller’s name, telephone number, and nature of the call.

 

•                                          If
the caller has a difficult name, ask for the correct spelling and not the
correct pronunciation phonetically.

 

For
example, “Stawiarski” would be correctly spelled on
the message and then the phonetic spelling, “Stavarski”, would be noted in
parentheses.

 

•                                          Conclude the call positively.  End each telephone call on a positive note:

 

•                                          Thank the customer for calling.

 

Voice Quality

 

When the ASR talks to someone over the telephone,
personality is conveyed entirely through voice. 
Because we do not have the advantage of facial expression and body
language when speaking on the phone, our voice needs to communicate warmth,
friendliness, and a desire to be of service to all callers.  If the ASR is smiling, the smile will be
reflected in his/her voice by a friendly tone. 
If the ASR is slouched in their chair, their voice is likely to have an
indifferent, lackadaisical quality, instead of sounding eager to serve.

 

To help communicate competence, concern and courtesy
for customers while speaking over the phone, 
the ASR should speak as thought the caller were seated across the desk
from them.  Smile when appropriate, even
though the caller can’t see the smile. 
ASR’s should sit up straight, and focus attention to the caller.

 

Voice Quality

 

There are four elements to a professional businesslike
voice quality:

 

Tone, Rate, Volume and Diction

 

Following is a description of each element and
suggestions for effective use.

 

Tone

 

This should be friendly, warm, and courteous without
being overly familiar or formal.  An ASR
should always smile.  Even when speaking
about a serious matter and the customer has become upset, continue to be
friendly and professional.

 

10

 

Rate

 

Generally, it is best that the ASR match rate of
speech to that of the customer.  If the
ASR speaks much faster than the customer does, the customer may get the
impression that rushing to them off the telephone.  Speaking slower than the customer, on the
other hand, can give the impression that the ASR is unsure or perhaps bored and
do not place high priority on the callers needs.

 

Volume

 

The ASR should Speak as though they were speaking to
someone seated across the desk, unless the caller has difficulty hearing at
this normal volume.  A low volume makes
the ASR sound timid and uncertain.  A
high volume makes the ASR sound harsh and insensitive.

 

Diction

 

Pronounce each worked clearly to make sure that what
is being said is understood and sounds professional.  Be careful not to use run on words or “swallow”
word endings.

 

Reasons for Delinquency

 

There are two things to keep in mind about customers
with delinquent accounts.  First,
customers whose accounts have become delinquent and have had their account
placed with our office are not our adversaries. 
These are the same people who we investigated and to whom we extended
credit not long ago based on the facts that this customer had the ability and
the willingness to repay their obligations. One of the ASR’s key
responsibilities, then, is to determine what has changed since that time and
how we can work with the customer to resolve the situation to our mutual
benefit.

 

Second, keep in mind that there are many reasons why
an account may become delinquent.  These
Include:

 

Unemployment or Reduction in Income – Layoffs,
strikes, slow times in business resulting in fewer hours and lower pay,
termination, disability, or retirement can all seriously affect a customer’s
ability to meet payment obligations.

 

Unforeseen Expenses / Over obligation – A
sudden or unforeseen jump in expenses such as medical costs, car repairs or
dental bills can affect the customer’s ability to repay their loan or
bills.  Also, a customer who does not
handle his or her money well many incur more debt than can be reasonably
managed with available resources.

 

Vehicle Purchase Dispute – Sometimes,
customers encounter problems with the vehicle they purchased.  When this occurs, customers will often stop
paying and never have the matter resolved.

 

Divorce or Separation – A change
in the customer’s marital status can significantly affect his or her income due
to the pressures of alimony, new housing expenses, child support, loss of a
spouse’s financial contribution to a household, etc.

 

11

 

Illness – If a customer becomes
ill and cannot work for a period of time, or if illness strikes a member of his
or her family, a loss of income and the cost of medical expenses can affect his
or her ability to meet financial obligations.

 

Helping Find Solutions

 

While all of these circumstances are regrettable, most
are temporary.  Even in cases of
bankruptcy or death, it is possible to collect on the account.  Generally, we will find that customers would
like to repay their obligations if they could only figure out how to do it in
light of their altered circumstances.

 

The ASR can offer a valuable service to these
customers and to FIFS by helping them find the best solution that will let them
pay the money they owe.  This includes
finding the reason behind why the are not paying, and letting the customer know
that FIFS wants to help them solve the problem. 
The next step for the ASR is to work on a plan that will allow then to
pay off their account as soon as possible.

 

The most effective way to prevent delinquency is to
manage each account on a daily basis.  To
do this, the ASR must keep account records up to date, anticipate problems
whenever possible, and communicate with customers frequently to ensure promises
are kept.

 

Objective is to educate the customer and resolve
delinquency.  There are several practices
to remember while you work towards resolution.

 

•                                          Telephone
is the primary tool

•                                          Work
accounts daily

•                                          Firm
communication, keep control

•                                          Follow
up on broken promises

•                                          Always
obtain reason for delinquency

•                                          Stress
urgency to get account paid

•                                          Educate
customers on payment options

•                                          Repeat
arrangements

•                                          Verify
account information

•                                          Educate
follow up

•                                          Set
the customers Expectations.

 

Right Party Contacts (customer)

 

•                                          Who
you spoke with (the person’s name).

•                                          Actual
Reason for delinquency.

•                                          When
they will be paying.

•                                          The
amount of the payment.

•                                          The
source from where the funds for the payment is coming form.

•                                          When
they will be making their next payment.

•                                          Any
other relative facts that will help collect the account now and in the future.

•                                          Verify
home address, telephone number and any employment information

 

12

 

Third Party Contacts

 

•                                          Who
you spoke with (the person’s name and relation to customer).

•                                          When
the customer will be home for a return call.

•                                          If
you did or did not leave a message.

•                                          Where
the customer is at the time of the call.

•                                          Any
other information provided by the person you spoke with that will help with
future collections.

 

All notes should be clear and easy to understand.

 

Opinions about the customer should not be formed or
noted on the collection record.  Stick to
the facts and details of the call.

 

If the customer is not reached after reasonable
attempts and messages have been left for return calls, the customer file should
be pulled and references should be contacted. 
If the ASR is able to contact a reference, the ASR should attempt to
update the customer’s file, verifying home address, telephone and any
employment information.  A call back
number should be left with the reference for the customer.

 

* When speaking with a third party, ALWAYS ask for
permission to call them in the future with respect to confirming information
regarding our customer.  Once they give
permission, document it clearly in the notes.

 

*FDCPA states only to contact a 3rd party again if
requested by the third party or if you have reason to believe information is
erroneous.

 

After references have been worked, the ASR should
obtain a neighbor and related name list for location calls and messages.  A neighbor should only verify our customer’s
address.

 

If attempts to reach the customer are unsuccessful,
the ASR should confirm that we have the best possible address and employment
information.  This information should
help to assist in the repossession process.

 

If the above have been completed, the unit supervisor
should review the account for final resolution.

 

Record all ISDN (caller ID number) numbers supplied in
permanent text.

 

Input the appropriate activity code and associated
note into the collection system.  The
system automatically assigns the current date and time.  The note should recap the results of the
contact.

 

Follow-up on any promises or commitments on
agreed-upon dates.

 

Note:  It is recommended that headsets be used by all
collectors.

 

13

 

The office must avoid conducting telephone
activities, which fall into the following categories:

 

1.                                       Hours of collections – Telephone
calls to customers can be made from 8:00 AM to 9:00 PM in their respective time
zones Monday through Friday. Calls are also made on weekends and holidays. If
the customer specifically requests contact outside the 8:00 AM to 9:00 PM
window, and there is no conflict with that states laws, then calls can be made.

 

2.                                       Calls to friends, neighbors, relatives, and
children - The only reason for such calls is an attempt to
locate a customer who has moved without advising FIFS of his new address.  In that case, discussion of the account is not permissible since it could
embarrass the customer and violate federal and/or state privacy laws.

 

3.                                       Calls making a variety of threats -
Threats should never be made, stated, or implied.  Discussions of the possibility of
repossession might be considered a form of threat and should not be used in
such manner.  Repossession is and should
be the last resort.  Unless FIFS is ready
and has the present intent to take legal action, this possibility should not be
mentioned.

 

4.                                       Calls asserting falsely that credit ratings will
be hurt - Offices must be careful of this because it is
difficult to define.  Discussion of such
a possibility might also be considered a form of threat.  Use language such as “are you aware that
information concerning your account is regularly reported to credit reporting
agencies.” Threats should never be made, stated, or implied.

 

5.                                       Calls falsely saying that legal process is about
to be served - Unless FIFS is ready, willing, and has the
present intent to take legal action, this possibility should not be
mentioned.  Threats should never be made,
stated, or implied.

 

6.                                       Calls to places of employment  -
When calling the customer’s employment care must be taken to ensure that the
customer is able and willing to discuss the account freely, so as to avoid
possible embarrassment with his fellow workers. 
Do not contact the customer at place of employment if it actually known,
or if there is any such reason to know that the customer’s employer prohibits
such calls or if restricted by state law.

 

7.                                       Phone messages
should include collector name, company phone number and extension ONLY.

 

•                                          Calls after office receives written request to
cease communication- If the customer notifies the office in
writing to cease communication, or that they refuse to pay the debt, the office
will not communicate further, except to:

 

•                                          Advise
the customer that the office collection efforts are being terminated;

 

•                                          Notify
the customer that the office will invoke specific remedies which are ordinarly
invoked.

 

14

 

•                                          Where
applicable, notify the customer that the office intends to invoke a specific
remedy.

 

•                                          Representative by an attorney- If
it is known that the customer is represented by an attorney with regard to the
debt, communication should be made only with the attorney.  The customer may be contacted if the attorney
so agrees, or the attorney does not respond within a reasonable time.  In general, five business days are the
maximum amount of time necessary to make the determination unless legal counsel
has advised otherwise.

 

Misrepresentation, Harassment, Abuse

 

In addition to the above-prohibited activities, listed
below are the other collection approaches that must not be used.

 

•                                          The
use of threat of violence, to harm the person, the person’s family, the person’s
reputation, or the person’s property.

 

•                                          The
use of obscene or profane language, or language which the receiving party could
consider abusive.

 

•                                          Causing
a telephone to ring continuously or telephoning a person repeatedly.

 

•                                          The
placement of telephone calls without disclosing your identity except as
provided in Procedure 419, Skip Tracing.

 

•                                          Continuous
attempts to contact a customer through his employer thereby jeopardizing his
continued employment.

 

•                                          Failure
to reveal to the customer that the purpose of the communication is to collect a
debt.

 

•                                          The
circulation of a list of customers who refuse to pay their debts (a “dead-beat”
list).  Valid account information
provided on specific accounts to a credit bureau or to the selling dealer is
not prohibited.

 

•                                          Threats
to take action (s) that cannot legally be taken, or that are not actually
intended to be taken.

 

•                                          Implying
that non-payment will result in arrest, imprisonment, or garnishment of wages.

 

•                                          The
false representation of the amount or status of an account, or the penalties or
service charges which may be assessed because of non-payment.

 

15

 

•                                          Communicating,
or threatening to communicate to any person, false credit information about the
customer or the account.  This includes
the failure to communicate that an account is disputed.

 

•                                          The
use of any deceptive means, or false representations to attempt to collect an
account or to obtain information concerning the customer.

 

•                                          Placing
collect telephone calls to the customer.

 

•                                          Bringing
legal action against the customer in court purposely chosen to inconvenience or
disadvantage the customer.  Assure that
local counsel initiates legal action only in the judicial district in which:

 

•                                          The
customer signed the contract, or

 

•                                          The
customer resides at the time the action is commenced.

 

•                                          Representing
that you are affiliated with any federal, state, or local government.

 

•                                          Attempting
to shame a customer by falsely implying he has committed a crime or acted
disgracefully.

 

•                                          Using
documents purported to be issued or authorizes by a court, governmental agency,
or official.

 

*In some states, representation that a phone call is of an “urgent”
nature is prohibited.  (Refer to the
applicable state(s) in Legal Procedure).

 

*We should not use phrases such as: 
“urgent”, “very important”, “We have good news, it is imperative that
you call us back...”  A phone message
should include the collector’s name, company name, phone number and extension
only.

 

•                                          The
use of any business, company, or organization names other than that of FIFS.

 

•                                          Discussing
the delinquency status of an account with any party other than the buyer or
co-buyer unless written authorization to communicate with a third party is
provided by the buyer or co-buyer.

 

•                                          Taking,
or threatening to take, repossession action if:

 

•                                          FIFS
has no present right to take possession of the property,

 

•                                          You
do not actually intend to repossess the property, or

 

•                                          The
property is exempt by law from repossession.

 

16

 

Attitude Towards Customers

 

Treat all customers in a fair and equitable
manner.  Delinquent customers need, and
are entitled to receive, helpful assistance in a courteous manner.  This is not only the best way to conduct business,
but also the most effective way to collect delinquent accounts.  A customer may overreact to even the most
businesslike collection contact by raising their voice or using profane
language.  Never reply in kind.

 

An invitation to discuss the delinquency problem with
a supervisory associate may prompt a response that leads to continued payment
on the account thereby avoiding further collection activity.

 

If the ASR has a negative attitude, the images are
negative and the results tend to be negative.

 

If the ASR has a positive attitude, the reverse tends
to be true.  Their attitude determines
their images, their images (mental practice) determines their actions and their
actions determine reality.

 

The ASR spends a big part of their day talking about money
with people that they have never seen or spoken to before. Contact with them is
brief, and yet they need something important from them – money.  In this kind of delicate situation, the wrong
assumptions can cause problems.

 

The thing to do after a difficult conversation with a
customer is wall off that call.  In other
words, do what needs to do to done to let go of the stress and strain.  Do not let if spill over into the next call,
assuming unconsciously that the next customer is going to be just as uncooperative
as the last one.

 

Past Due Notices 

 

In addition to telephone activity, a well-timed
collection letter can either reinforce previous conversation or begin the
process if there has been no previous contact.

 

•                                          System Generated Letters 

 

There are a number of collection letters that are available for the
colector to send out on past due accounts. These letters have a range of
urgency to them, and are generated through our computer system.

 

•                                          Form Notices and Form Letters

 

Several series of printed form letters designed to fit various types of
collection situations are available for use to reinforce other collection
activity and not as a substitute.

 

17

 

Individually Written Letters

 

We should only use pre-approved letters on company letterhead.  Any individually composed letter must be
signed by a department Manager before forwarding to customer.

 

•                                          Notifying Guarantors, Additional Endorsers, or
Co-Buyers

 

Notifying the co-buyer or guarantor of the default is necessary and
should result in strengthening follow-up as the co-buyer or guarantor would be
interested in protecting his/her interest. 
Every possible consideration should be extended to the second party.  Some states require written notice to co-buyers
and guarantors in order to hold them liable for the account. See Legal
Procedures.

 

Pre-Repossession Notice/Cure Letter

 

Depending on individual state regulations (Legal
Procedure), the buyer, as well as the co-buyer/guarantors, if applicable, will
be notified of the right to cure a default by a pre-repossession notice/cure
letter.  This will be sent by regular
mail unless otherwise specified by state regulation.

 

A Right to Cure letter should be sent immediately once
the account becomes 30 days past due (in all applicable states).

 

The customer must be given a period of time (depending
on state regulations) from the date the notice is mailed to cure the
default.  During this period, the branch
will not:

 

•                                          Attempt
repossession;

 

•                                          Take
court action against the customer;

 

•                                          Accelerate
the balance

 

Accounts, which do not respond satisfactorily to the
pre-repossession notice/cure letter, revert to normal handling following
expiration of the specified period.

 

Selecting Accounts for Cure Notice Issuance

 

The buyer and co-signer/guarantor should be selected
for pre-repossession notice/cure letter issuance when such notice is required
by state law or when the office believes that the account falls into one of the
following categories:

 

•                                          FIFS
is aware that the customer is withholding payment because of a product
complaint against the dealer or the manufacturer.

 

•                                          An
impasse situation is encountered due to the customer’s inability to pay and
unwillingness to admit it.

 

18

 

•                                          The
office is unable to contact a customer with previous satisfactory paying
experience.

 

•                                          The
customer is not a skip hazard, but all previous collection effort has failed to
produce customer payment.  The cure
notice may cause payment or result in voluntary surrender of the collateral.

 

•                                          The
account is chronically delinquent and repossession is considered necessary to
resolve the problem.

 

•                                          When
the office can no longer tolerate a chronic collection account, a
pre-repossession notice/cure letter warns the customer that FIFS will no longer
accept habitual late payment.  The use of
the notice will preclude a claim by the customer that, by accepting previous
payments on a late basis, FIFS had established a pattern of conduct leading the
customer to believe that FIFS should continue to accept late payments without
exercising its contractual remedies.

 

•                                          To
minimize unnecessary delays, the office should select most accounts for
pre-repossession notice/cure letter issuance during the office phase of
collection activity.  (Normally no later
than 45 days past due).

 

Note:   The office should avoid the indiscriminate
use of cure letters as a collection tool.

 

Customer Contact

 

The automated collection system has many features,
which enhance the daily procedure and routines in retail collections.

 

This section will highlight some of these
features and explain how they facilitate customer contact.  For further detail or additional explanation
refer to the Collection System Reference Guide.

 

It is important to set the tone and gain control of
the collection call by using an opening line that is clear and direct.  Your opening statement sets the tone for the
entire call.  The ASR should sound
professional, serious and non-threatening.

 

The standard greeting on initial contacts is: (after
we have determined that we have a right party contact)

 

“Mr. Rodgers,
this is Bob Wade with First Investors Financial Services.  According to my records you are past due on
your account with us and now due for $500. 
What time today can I expect you to send your payment?”                   ** Pause ***

 

When an opening statement is brief, clear and to the
point, your professionalism and the seriousness of the call will be evident.

 

19

 

Account Review

 

The ASR will review their queue on a daily basis and
attempt to work all accounts.  If an
account cannot or should not be called by that ASR, it should be assigned to
the individual or party who can contact the customer.

 

Manager and Supervisor reviews – Accounts worked by an
ASR will be randomly selected and reviewed by management staff.  These account reviews will ensure that
accounts are being handled by the guidelines set by this policy manual and
departmental standards.  These reviews
will be completed on a weekly basis.

 

Telephone Communication Principles

 

When the ASR is talking on the telephone, the customer
is forming a mental picture of them. 
Therefore, it is important that the ASR get a “smile” into their
voice.  Remember that the customer is the
reason that we are in business.  So,
maintain enthusiasm, a positive attitude, and open mind.

 

	
  Pitch

  	
   

  	
  Speech experts recommend a low pitch because it
  projects & carries better, and is more pleasant.

  
	
   

  	
   

  	
   

  
	
  Inflection

  	
   

  	
  Don’t talk in monotone - Use feeling to express
  attitude.

  
	
   

  	
   

  	
   

  
	
  Courtesy

  	
   

  	
  Common courtesy applies the same as face to face -
  Even more important when on the telephone.

  
	
   

  	
   

  	
   

  
	
  Tone

  	
   

  	
  Often it isn’t what you say, but how you say it.
  Your voice should reflect sincerity, pleasantness, confidence &
  interest.

  
	
   

  	
   

  	
   

  
	
  Understandability

  	
   

  	
  Avoid talking with anything in your mouth.

  
	
   

  	
   

  	
   

  
	
  Rate

  	
   

  	
  The rate of speech should be matched to that of your
  audience. Avoid extremes, either way.

  

 

The telephone is a two-way communication tool, which
has the capacity to provide instant understanding.  Listening properly will help to fully
comprehend our customer’s needs.  Do not
assume or guess.

 

20

 

Making Silence Work to Your Advantage

 

The ASR needs to use a pause in their opening
statement in the conversations.  They can
express this opening statement in many different ways, but all of them need to
be followed by a pause, silence.  What
can a collector accomplish through the first pause in the conversation?  First, he communicates through the silence
that the customer is supposed to say something. 
At this point, the ball is in the customer’s court.

 

Second, he gives the customer an opportunity to think
about what the collector has said. Few people can listen and think at the same
time.  The silence gives the customer an
opportunity to digest what was said and think of a response.

 

Third, the silence enables the collector to avoid
making additional assumptions about the customer.

 

Fourth, the ASR silence communicates that he is
willing to listen.

 

Finally, the silence tells the customer that the ASR
is comfortable with silence, and that he is in control of the
conversation.  The ASR will have greater
power over the call if the customer know this from the start.

 

Fact Finding Questions

 

Often in the course of our conversation with the
customer we hear objections to paying or “hard luck stories” on why a customer
cannot pay.  The following are some
questions to ask the customer to help find a way to bring the account current.

 

Unemployed or Lay-Off

 

How long have you been unemployed?

If recently unemployed – Have you received your last
paycheck?

Are you receiving unemployment?

If yes, how often are you receiving the unemployment
checks?

Do you have other sources of income? (Spouse, P/T Job,
etc.)

Do you have any job prospects?

Who can you borrow from? (Family or friends)

How are you paying your bills? (Rent, utilities, car
loans, etc.)

What are you monthly expenses?

 

Overobligated / Medical Bills / IRS

 

What has caused the over extension?

Is this short term or long term? (Recent repairs short
term, heavy credit card spending long term)

Who can you borrow from?

Do you have any other sources of income?

Are you able to get a P/T job?  Have you applied anywhere?

 

21

 

Are you past due with other creditors?

Have you considered applying for a consolidation loan
for you other bills?

If Medical – Is this causing you to miss work?

If yes – Are you eligible for government
assistance?  Are you eligible for
disability?

IRS – are you set up to pay them monthly?  When will the IRS be paid off?

What are your monthly expenses?

 

Reduction in income – Long term / Short term

 

When do you expect to return to full hours?

Do you have any other sources of income?

Are you behind with all creditors?

Have you looked into CCCS for your other bills?

Who can you borrow from?

What are your monthly expenses?

 

The above fact finding questions are just a few of the
many that can be asked to customers when they are stating they cannot pay on
their bill.  Utilizing these questions
will help the ASR work with the customer on arrangements and also to let them
know that we want to help them with their situation.  The more information we obtain the better
chance we have in collecting the account.

 

Discuss Budget and Negotiate

 

Telephone collecting is sales.  The ASR must be creative and convince the
customer why he should pay you and not someone else.  The more imaginative creditor will get the
money.  The customer must be convinced
that his account is the most important thing right now.  If he thinks that he is just another number
to FIFS, he is more likely not to pay. 
In addition, as in any other sales interaction, the ASR should never
allow his words or your manner to reflect that slightest uncertainty about the
eventual outcome.

 

During any of the stages of collecting, an ASR should
be aware of the options other than just getting a payment.  Almost any collector can get one payment out
of a customer, but only the truly skillful collector can help the problem
customer back on the road to recovery. 
Some customers can be rehabilitated if they are handled with patience
and persistence.  Others may never be
rehabilitated and must be handled firmly, but persuasively.

 

If the ASR is convinced
that the customer can not pay you in full, they should work out the best
possible budget with the customer – one that enables the customer to pay you as
quickly as possible.

 

The ASR must be specific in making the
arrangement.  Most important is the
amount the customer can pay.  The ASR
must have a firm schedule of payments with definite deadlines.  Vague promises will only result in more
follow-up calls.  Our goal, of course, is
to make the best arrangements possible. 
As we work out your agreements or new payment terms, make notes.  By doing this, we will make sure that we have
thought of all the important details.

 

22

 

It is seldom that the ASR gets more than what they ask
for, so they should never start off by asking for a partial payment.  Only consider a partial payment when the
customer is having problems.  Encourage
partial payments only to prevent the customer from missing a payment
entirely.  We want the customer to
develop the habit of paying FIFS. 
Regulation of payments helps ensure continuation.  We do not want the customer to feel the
relief, or benefit, of not paying us anything.

 

Definition of a Promise to Pay:

 

An account should be labeled as a Promise to Pay when
the customer makes solid and clear arrangements to pay on their account.  The promise should be the best possible
arrangement to assure that the promise is kept. 
When setting up arrangements to pay with the customer the ASR should
strive for affordable and reasonable payment arrangements.  A reasonable arrangement would be the best
possible payment to work towards paying the debt off.  An affordable arrangement would be a payment
that meets our customers current income needs and would insure that the
customer would be able to keep the promise to pay.  Keep in mind that our goal in every
conversation is to get the customer to pay off their account.

 

When we talk to the customer and they state that they
will try or might keep the arrangements agreed upon, this would NOT be considered
a promise to pay.  When talking to a
customer the ASR needs to make sure that they have firm and solid payment
arrangements.  The customer should give
the ASR information on the exact date of payment, the method of payment, and
where the funds are coming from.  The
customer should sound confident when they agree to a promise amount.

 

Account Update

 

Good collection records must be kept for each
account.  Even if the ASR has a small
volume of accounts, information should be recorded each and every time a
contact, oral or written, is made with the customer.

 

People who owe money have a tendency to keep poor
records.  Our good collection records
indicate to the customer that the ASR is a professional and intends to be
paid.  Records give us credibility.  The customer must believe that this debt is
the most important matter to FIFS or he will not take the matter seriously
himself.

 

When noting an account it is imperative that the ASR
has documented all the information.  The
following information should be in the ASRs notes.

 

Who – Name of the person you spoke to.

What – What are the arrangements?

Where – Where will payment be sent?

When – When will the payment be made (source of
payment, check, quick collect, etc...)?

Why – Why is the customer past due?  REASON FOR DELINQUENCY!

 

23

 

Don’ts

 

•                                          Do
not document personal feelings or opinions in notes.

•                                          Do
not note any foul language, put the customer was rude and used foul language.

•                                          Do
not put verified information if you in fact did not do so.

•                                          Never
falsify any information.

 

When contacting a customer; the personal information
should be updated to facilitate future contact. 
This is to include (as appropriate) address, phone number, employer
name, employee phone number, etc.  All
changes must be updated into the retail note system.

 

Once contact is made, the ASR should take every
measure to make the current collection call the last collection contact
necessary.  To accomplish this, the
collector must not only talk about the delinquent payments plus accumulated
late charges, but make it clear to the borrower that there is no grace period,
that the payments are due on the due date and secure a commitment that future
payments will be paid as they mature.

 

When collecting the delinquent payment (s), the first
thing the ASR must determine is why the payment(s) have not been made.  Once this reason is determined, the collector
will know how to overcome the objection to payment.

 

Set a reasonable period of time when the payment(s)
will be paid and validate the source of funds. 
It is important when the call is “closed” that the collector reminds the
customer of their commitment.  In fact,
the best “close” is to have the customer repeat (in his/her own words) the
promise.

 

The customer may refuse to make a payment or suitable
arrangements.  When this happens, the
customer must be reminded that he/she is forcing FIFS to “take further
collection action” and that until paid, the delinquency will be reported to the
credit bureau.  Do not say we will “repossess”
or that we will “ruin the customer’s credit”.

 

When a customer states they are unable to bring the
account completely current or they are candidates for an extension a financial
update should be completed and noted on the system.

 

1.                                       Anytime
customer requests an extension you must provide in the notes a complete
financial update for approval.

 

2.                                       Anytime
customer states they cannot make their monthly payment and/or bring the account
current, you must complete a financial update in the notes to determine the
recourse for the account.

 

Required Items for a Financial Update:

 

•                                          Income

 

Borrower’s Income and Spouses Income

 

24

 

(Should be their Monthly Net pay)

Any other source of Income, child support, alimony, side work, SSI,
etc.

 

•                                          Mortgage
or Monthly Rent

 

•                                          Utilities

 

Gas, Electric, Water, Garbage, Phone, Cable

 

•                                          Number
of Dependants ( children they are supporting)

 

•                                          Food

 

•                                          Car
Payments (including ours)

 

•                                          Car
Insurance (listed monthly)

 

•                                          Medical
Bills

 

•                                          Installment
Loans / Bank Loans

 

•                                          Visa,
MasterCard, Discover Credit Card Payments

 

•                                          Department
Store Credit Card Payments

 

•                                          Student
Loans

 

•                                          Miscellaneous
monthly payments

 

•                                          Cell
phones, pager bills, Internet, etc.

 

The collection notes should list the category the
customer is paying and the monthly amount. 
At the end of notes provide the following:

 

Total
Income subtracted by total monthly expenses, which will equal any extra money
the customer may have for day to day living and savings.

 

Special Conditions

 

In most cases, collection follow-up results in payment
and resolution of the customer’s delinquency problem.  On occasion, however, a situation may occur
when the customer cannot or will not pay. 
In this case, it is the responsibility of FIFS collection personnel to
initiate any and all possible corrective actions in a manner acceptable to FIFS
according to policy.  Final action, such
as repossession, is not to be taken until all other means to resole have been
exhausted.  Problems/situations, which
are most often the reason the customer will not or cannot pay, are:

 

25

 

Disputed Accounts

 

Occasionally, a customer may believe that they no
longer must make payments on their account because of a dispute over the
balance owing, the performance of the collateral, the service of the dealer, or
similar situation. It is FIFS’s responsibility to record the Customer Complaint
Report, the details of the dispute and to assist the customer in resolving the
problem promptly.  The office must avoid
taking severe collection actions, such as repossession, until the legitimacy of
the dispute is determined and all possible corrective actions have been
attempted.  As these accounts have high
possibility of legal action in the event we repossess prematurely, approval
must be obtained prior to repossession.

 

Customer Disability or Illness

 

If it is determined during the course of collection
follow-up that the customer’s delinquency is the result of illness or
disability, ensure that contacts with the customer are in a sensitive and
helpful manner.  Do not make commitments
regarding a possible insurance claim. 
Refer to Procedure 12 for specific instructions.

 

Customer Death

 

Whenever it is determined that the customer is
deceased, contact with the representative of the Estate is done in a helpful
and tactful manner.  If applicable, let
the insurance company involved resolve any matters regarding a credit life
insurance claim.  Refer to Procedure 413
for specific instructions.

 

Bankruptcy

 

All types of bankruptcies are considered special
situations.  See Bankruptcy
Administration in Procedure 417 for specific instructions.

 

Litigation

 

Litigation is considered to be a special situation
when a suit is actually filed by the customer against FIFS.  Refer such cases to the Legal Department –
and take action only a directed by legal counsel.

 

Damaged Collateral

 

A customer who becomes delinquent because the vehicle
has been damaged should be advised of their responsibility to continue making
payments.  Assist the customer in
expediting the insurance claim.  If the
collateral is damaged in an accident involving another party, attempt to learn
the identity of the other party and the details of the accident.  If the vehicle is a total loss see Procedure
426, Insurance Total Loss, for proper handling.

 

26

 

Military

 

Customers who enter the armed forces after entering
into a contract with FIFS are entitled to certain rights according to the “Soldiers’
and Sailors’ Civic Relief Act”.  Refer to
Procedure 418, Military Personnel, and Procedure 409, Soldiers’ and Sailors’
Relief Act, for specific instructions.

 

Devastated Areas

 

Occasionally, a specific section of the country
will experience a natural disaster (hurricane, flood, earthquake, etc.) that
hinders customers’ ability to pay.  First
Investors Financial Services policy with respect to collection from customer
resolves itself into observance of humanitarian principles, and furtherance of
customer, dealer and public good will.

 

The office should exercise sound judgment in the
application of this policy and be aware of the opportunity to demonstrate a
desire to be of genuine help for customers at a time when they are in need of
assistance.  Personal communication
should be established as promptly as circumstances permit, either by
representative or mail, preferably the former. 
Should the situation arise, specific instructions for the handling of
these accounts will be issued.

 

Product and Service Compliant

 

Occasionally, a customer will claim dissatisfaction
with the product or dealer as a reason to withhold payment from FIFS.  In these instances the associate should:

 

•                                          Explain
to the customer that FIFS is separate from the manufacturer, and is comparable
to any financial source, which would finance the customer’s purchase of the
vehicle.  The customer’s contractual
obligations to FIFS are enforceable, despite the type of compliant or dispute
the customer may have with a manufacturer or with a dealer.

 

Note:

 

Before
assigning the account out for repossession, the office should refer to the
procedures concerning specific state laws.

 

•                                          If
the customer claims that payments will not be made or insurance will not be maintained
for the period of time the customer is without the use of the vehicle,
emphasize to the customer that the responsibility to fulfill all contractual
obligations, including monthly payments and insurance requirements, remain the
customer’s responsibility, whether or not the customer has had the use of the
vehicle.

 

Indian Reservation Collection

 

When FIFS’s collateral is located on an Indian
Reservation and the customer refuses to make payment, determine if the value of
the vehicle warrants repossession.  If
so, contact our Legal

 

27

 

department.  If
not, refer to Procedure 427, Retail Repossession, for information relating to
Abandonment (page 2).

 

Collection Remedies

 

Delinquency that cannot be resolved by payment may be
resolved in a number of ways, such as:

 

•                                          Extension
and Due Date Changes

•                                          Rewrites

•                                          Transfer
of Equity

 

All remedies offered should hold a promise for a
permanent solution to the delinquency and should not be offered solely to
improve office collection performance. 
Repossession is considered only when no other solution is possible.

 

Reporting

 

There are numerous reports available daily to
management and supervisors via FIFSNET. These reports include, current
delinquency by portfolio, current delinquency by tier, daily delinquency by
portfolio, summary of days activity, month-over-month comparison of actual
delinquency, month-over-month comparison of potential delinquency,
month-over-month comparison of net potential delinquency, under 30 days past
due delinquency report, delinquency trigger performance, month to date
repossessions, phonepays by pool, phonepays by portfolio, phonepays by date,
extension report, net potential and net roll 30 plus days past due, list of
potential 30 plus days past due accounts, list of month-to-date repossessions,
list of out for repossession accounts, roll to 30 days past due, and phonepays
on the roll.

 

Preface

 

A customer may occasionally find it difficult to pay
an installment as originally scheduled on the precomputed retail installment
contract.  In deserving cases, one or
more of the remaining installments may by extended until the end of the
contract (an “Extension”), or the day of each month on which payments are due
may be changed (a “Due Date Change”). 
The customer will be required to pay an extension fee (were permitted by
law), prior to the extension being processed. 
No extensions should be granted that does not solve the current or
future inability of the customer to make payments and only puts off
repossession.

 

Simple Interest Contracts

 

Finance charges on a simple interest contact accrue on
the outstanding principal balance to the date of payment; therefore, the amount
of the final payment may vary.

 

Extensions

 

An extension of a contract defers one or more
installments without affecting the due dates on the remaining
installments.  The deferred installment
(s) are extended to the next due date 30 days

 

28

 

after the originally scheduled final maturity
date.  The due date is automatically
extended when an extension is processed.

 

•                                          A
collector must establish verbal or written contact with the customer.

•                                          The
customer must return to the office a signed Extension Agreement before the loan
can be presented for the extension.

•                                          All
extensions are to be documented by completing an Extension Agreement.

•                                          All
extensions must have a complete financial update for approval noted on the
system.

•                                          The
account must have at least one viable telephone contact number.

•                                          The
customer must have a positive cash balance on the financial update (greater
than zero)

•                                          The
account must be completely updated for all parties listed on loan.  Place of employment must include Company
name, address where customer works and telephone number.

•                                          References
and financial update must redone if 90 days has past since last update.

•                                          An
Extension Packet must be competed.

•                                          The
Extension Packet will include the following; Signed Extension Form by the
customer, Signed Extension checklist by the Collector and Supervisor, Proof of
Insurance (if necessary), any other supporting documentation.

•                                          Customer
must have full coverage auto insurance verified.

•                                          Only
one extension is allowed for every 12 months of a loans terms.

60 months = 5 months extend.

•                                          No
extension can be granted until the first 6 monthly installments are paid

•                                          All
extensions must be approved by a department manager or a high level.

 

After the collector offers and completes the necessary
paper work for an extension, they must forward all information to the
Supervisor (signed extension form, signed check sheet, proof of Insurance, any
other supporting documentation).  It is
the responsibility of the Supervisor to verify that all the information is
competed correctly and accurately.  The
Supervisor must verify that the customer is fully aware of the terms of the
extension, the months being extended, and any fees associated with the
extension.

 

The Collection Manager must receive the extension
packet that has been signed and approved by the Supervisor before approving any
extension.  Once the paper work is
received and reviewed by the Collection Manager he/she will approve or decline
the extension.  Unless otherwise approved
by the Collections Manager, the account must be brought current (no payment
due) at the time of the extension is granted. 
If the extension itself does not bring the account current, a payment
and any accumulated late charges must be collected at the time of the
extension.  No late charges may be
assessed on any payment amount being deferred.

 

Due Date Changes

 

The cumulative total of days deferred by all due date
changes processed must not exceed 15 days without Collection Managers approval.

 

29

 

•                                          Only
one due date changes are allowed within the life of the loan.

•                                          The
reason for due date change must be clearly noted on the account.

•                                          A
written request from the customer must be received and place in the customers
permanent file.

 

Guidelines for Extensions and Due Dates
Changes

 

Reasons for Granting

 

Remedies offered should fit customer and contracts
circumstances and hold a promise for a permanent solution in each case.  Do not adjust payment terms for reasons such
as adjusting delinquency ratios or simple customer preference.  If a customer has a legitimate reason for
needing a change in payment terms, consider the following factors before
granting the request:

 

•                                          Customer’s
desire and ability to pay

•                                          Past
payment experience

•                                          Condition
of the vehicle

•                                          Customer
equity in the vehicle

•                                          Actual
value of the vehicle

•                                          Date
the next payment will be made.

•                                          Income
source for making the next payment.

•                                          Validity
of reason for request

 

Note:

 

The
denial of an extension or due date change can under no circumstances be based
upon the race, color, religion, national origin, sex, marital status or age of
the customer, or on the fact that the customer receives any form of public
assistance income.

 

Extension Authority

 

Extensions and Due Date Changes may be granted within
certain limits as prescribed in the “Approval Authority Procedure”.

 

A Sr. Manager must approve all exceptions to this
policy.

 

General Guidelines 

 

The following general rules apply to all
extensions and due date changes:

 

•                                          Customer
must have completed extension agreement

•                                          A
extension can be granted after the first six installments

•                                          An
extension should not be granted if it does not bring the account current.

•                                          The
original maturity of a monthly payment contract cannot be advanced by means of
extensions or due date changes more than 12 months total.

 

30

 

•                                          The
collector must obtain current information for the customer such as place of
employment and telephone number, residence address and telephone number, and a
new customer financial update. The account must have at least one viable
telephone contact number

•                                          Consistent
pay history must be observed after loan is extended.

•                                          Customer
can afford unit; and extension will correct the delinquency, not prolong it.

 

•                                          An
extension should not be granted if it does not bring the account current.

 

31

 

EXHIBIT A-1

 

 

Monthly Servicer Report

 

First Investors Auto Owner Trust 2005-A

 

A-1

 

EXHIBIT A-2

 

 

Certificate of Officer

 

First Investors Servicing Corporation

 

The
undersigned, a duly elected and qualified Officer of First Investors Servicing
Corporation, makes this certification pursuant to Section 2.02(c) of
the Servicing Agreement dated as of May 5, 2005 by and among First
Investors Auto Owner Trust 2005-A, as Issuer, Wells Fargo Bank, National
Association, as Back-up Servicer and Indenture Trustee, and First Investors
Servicing Corporation, as Servicer, and does hereby certify to the best of his
knowledge that the attached Monthly Servicer Report hereby being furnished to
the Indenture Trustee pursuant to Section 2.02(c) has been prepared
in accordance with the terms and conditions of the Transaction Documents, is
true and correct in all material respects and presents fairly the results
covered thereby for the Collection Period ended                       .
This certification is being provided as of the Determination Date of                      .

 

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
             Authorized
  Officer

  

 

A-2

 

EXHIBIT B

 

MONTHLY VERIFICATION CERTIFICATE

 

FIRST INVESTORS AUTO OWNER TRUST 2005-A

 

Date:

 

TO:                            DISTRIBUTION
LIST ATTACHED

 

RE:

 

This
certificate is furnished pursuant to Section 2.02(d) of the Servicing
Agreement (the “Agreement”), dated May 5, 2005, by Wells Fargo Bank,
National Association (the Back-up Servicer) as the Back-up Servicer for the
above-entitled issue. Terms used but not defined herein shall have the meanings
provided in the Agreement. The Back-up Servicer has made no independent
examination of the Monthly Servicer Report beyond the review specifically
required in the Agreement.

 

THE
UNDERSIGNED HEREBY CERTIFIES THAT:

 

1.                                       I am a duly
elected Corporate Trust Officer of Wells Fargo Bank, National Association.
(Back-up Servicer).

 

2.                                       The file
received by the Back-up Servicer on [insert date], is in readable and usable
form.

 

3.                                       The Back-up
Servicer has verified that the following obtained from the file is in agreement
with amount for such items reported in the Monthly Statement with respect to
the month ending [insert date], except as noted on the attached report:

 

(i)                                     Aggregate
Principal Balance of Contracts

 

(ii)                                  Delinquency
Ratio

 

(iii)                               Average
Delinquency Ratio

 

(iv)                              Cumulative Net
Loss Rate

 

The
foregoing certifications are delivered this [insert date].

 

	
   

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

B-1Exhibit 10.119

 

EXECUTION COPY

 

 

 

 

FIRST INVESTORS AUTO OWNER TRUST 2005-A,

as Issuer,

 

 

FIRST INVESTORS FINANCIAL SERVICES, INC.,

as Administrator,

 

 

and

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Indenture Trustee

 

 

ADMINISTRATION AGREEMENT

Dated as of May 5, 2005

 

 

 

 

TABLE OF CONTENTS

 

	
  Section 1.

  	
  Definitions

  	
   

  
	
  Section 2.

  	
  Duties of the
  Administrator

  	
   

  
	
  Section 3.

  	
  Records

  	
   

  
	
  Section 4.

  	
  Compensation

  	
   

  
	
  Section 5.

  	
  Additional
  Information To Be Furnished to the Issuer

  	
   

  
	
  Section 6.

  	
  Independence
  of the Administrator

  	
   

  
	
  Section 7.

  	
  No Joint
  Venture

  	
   

  
	
  Section 8.

  	
  Other
  Activities of Administrator

  	
   

  
	
  Section 9.

  	
  Term of
  Agreement; Resignation and Removal of Administrator

  	
   

  
	
  Section 10.

  	
  Action upon
  Termination, Resignation or Removal

  	
   

  
	
  Section 11.

  	
  Notices

  	
   

  
	
  Section 12.

  	
  Amendments

  	
   

  
	
  Section 13.

  	
  Successors and
  Assigns

  	
   

  
	
  Section 14.

  	
  GOVERNING
  LAW

  	
   

  
	
  Section 15.

  	
  Counterparts

  	
   

  
	
  Section 16.

  	
  Severability

  	
   

  
	
  Section 17.

  	
  Not
  Applicable to First Investors Financial Services, Inc

  	
   

  
	
  Section 18.

  	
  Limitation
  of Liability of Owner Trustee and Indenture Trustee

  	
   

  
	
  Section 19.

  	
  Third-Party
  Beneficiary

  	
   

  
	
  Section 20.

  	
  Successor
  Servicer and Administrator

  	
   

  
	
  Section 21.

  	
  Nonpetition
  Covenants

  	
   

  

 

 

ADMINISTRATION AGREEMENT, dated as of May 5, 2005 (as
the same may be amended, supplemented or otherwise modified and in effect from
time to time, this “Agreement”),
by and among FIRST INVESTORS AUTO OWNER TRUST 2005-A, a Delaware statutory
trust (the “Issuer” or the “Trust”), FIRST INVESTORS FINANCIAL
SERVICES, INC., a Texas corporation, as administrator (in such capacity, the “Administrator”), and WELLS FARGO
BANK, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity but solely as indenture trustee (in such capacity, the “Indenture Trustee”).

 

WHEREAS, the Issuer is issuing 3.57% Asset-Backed
Class A-1 Notes (the “Class A-1 Notes”)
and 4.23% Asset-Backed Class A-2 Notes (the “Class A-2
Notes” and, together with the Class A-1 Notes, the “Class A Notes”)
and the Class B Notes (the “Class B Notes”,
and together with the Class A Notes, the “Notes”)
pursuant to the Indenture, dated as of May 5, 2005 (as amended, supplemented or
otherwise modified and in effect from time to time, the “Indenture”),
among the Issuer, the Indenture Trustee and Wells Fargo Bank, National
Association, as custodian (in such capacity, the “Custodian”);

 

WHEREAS, the Issuer has entered into certain
agreements in connection with the issuance of the Notes and the issuance of
certain beneficial interests in the Issuer, including (i) a Sale and Allocation
Agreement, dated as of May 5, 2005 (as amended, supplemented or otherwise
modified and in effect from time to time, the “Sale and
Allocation Agreement”), among the Issuer, the Indenture Trustee,
Wells Fargo Bank, National Association, as securities intermediary (in such
capacity, the “Securities Intermediary”),
First Investors Auto Funding Corporation, as depositor (the “Depositor”) and First Investors
Servicing Corporation, as servicer (in such capacity, the “Servicer”),
(ii) a Letter of Representations, dated as of May 4, 2005 (as amended,
supplemented or otherwise modified and in effect from time to time, the “Note Depository Agreement”), among
the Issuer and The Depository Trust Company relating to the Class A Notes,
(iii) the Purchase Agreement, dated April 27, 2005 (as amended,
supplemented or otherwise modified and in effect from time to time, the “Purchase Agreement”) among the
Issuer, First Investors Financial Services, Inc., as seller (in such capacity,
the “Seller”) and Wachovia Capital
Markets, LLC, (iv) the Insurance Agreement, dated as of May 5, 2005 (as
amended, supplemented or otherwise modified and in effect from time to time,
the “Insurance Agreement”), by and among
the Seller, the Administrator, the Servicer, Wells Fargo Bank, National
Association, as back-up servicer (in such capacity, the “Back-up
Servicer”), the Issuer, the Depositor, Wells Fargo Delaware
Trust Company, as owner trustee (in such capacity, the “Owner
Trustee”), the Indenture Trustee and MBIA Insurance Corporation,
as insurer (the “Insurer”),
(v) the Servicing Agreement, dated as of May 5, 2005 (as amended, supplemented
or otherwise modified and in effect from time to time, the “Servicing Agreement”), by and among
the Issuer, the Indenture Trustee, the Back-up Servicer, the Custodian and the
Servicer, (vi) the Guaranty dated as of May 5, 2005 (as amended, supplemented
or otherwise modified and in effect from time to time, the “Guaranty”), by and among First
Investors Financial Services, Inc., as guarantor (in such capacity, the “Guarantor”), the Servicer, the
Back-up Servicer and the Indenture Trustee and (vii) the Indenture
(collectively with the Sale and Allocation Agreement, the Trust Agreement, the
Purchase Agreement, the Insurance Agreement, the Servicing Agreement, the
Guaranty and the Note Depository Agreement, the “Related
Agreements”);

 

 

WHEREAS, pursuant to the Related Agreements, the
Issuer, the Owner Trustee and the Indenture Trustee are required to perform
certain duties in connection with (i) the Notes and the collateral pledged to
secure the Notes pursuant to the Indenture (the “Collateral”),
(ii) the Related Agreements and (iii) the beneficial interests in the Issuer;

 

WHEREAS, the Issuer, the Owner Trustee and the
Indenture Trustee desire to have the Administrator perform certain of the
duties of the Issuer and the Indenture Trustee referred to in the preceding
clause and to provide such additional services consistent with the terms of
this Agreement and the Related Agreements as the Issuer, the Owner Trustee and
the Indenture Trustee may from time to time request; and

 

WHEREAS, the Administrator has the capacity to provide
the services required hereby and is willing to perform such services for the
Issuer and the Indenture Trustee on the terms set forth herein;

 

NOW, THEREFORE, in consideration of the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

Section 1.                                            Definitions.  All capitalized terms used but not defined in
this Agreement shall have the respective meanings set forth in, or incorporated
into, the Indenture.

 

Section 2.                                            Duties
of the Administrator.

 

(a)                                  Duties
with Respect to the Related Agreements.

 

(i)                                     The
Administrator shall consult with the Owner Trustee regarding the duties of the
Issuer or the Owner Trustee under the Related Agreements.  The Administrator shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer’s or the Owner Trustee’s duties under the
Related Agreements.  The Administrator
shall prepare for execution by the Issuer or the Owner Trustee, or shall cause
the preparation by other appropriate persons of, all such documents, reports,
filings, instruments, certificates and opinions that it shall be the duty of
the Issuer or the Owner Trustee to prepare, file or deliver pursuant to the
Related Agreements.  In furtherance of
the foregoing, the Administrator shall take all appropriate action that the
Issuer, the Indenture Trustee or the Owner Trustee is obligated to take
pursuant to the Indenture, including, without limitation, such of the foregoing
as are required with respect to the following matters under the Indenture
(references are to sections of the Indenture):

 

(ii)                                  the
duty to cause the Note Register to be kept and to give the Indenture Trustee
notice of any appointment of a new Note Registrar and the location, or change
in location, of the Note Register (Section 2.5);

 

(iii)                               the
notification to Noteholders of the final principal payment on their Notes (Section 2.8(e));

 

 

(iv)                              the
preparation or obtaining of the documents and instruments required for
authentication of the Notes and delivery of the same to the Indenture Trustee (Section 2.2);

 

(v)                                 the
preparation, obtaining or filing of the instruments, opinions, certificates and
other documents required for the release of collateral (Section 2.10);

 

(vi)                              the
maintenance of an office or agency in Minneapolis, Minnesota where the Notes
may be surrendered for registration of transfer or exchange by the Indenture
Trustee (Section 3.2) unless the Paying Agent is the Indenture Trustee;

 

(vii)                           the
duty to cause newly appointed Paying Agents, if any, to deliver to the
Indenture Trustee the instrument specified in the Indenture regarding funds
held in trust (Section 3.3);

 

(viii)                        the
direction to the Paying Agent to deposit monies with the Indenture Trustee
unless the Paying Agent is the Indenture Trustee (Section 3.3);

 

(ix)                                the
obtaining and preservation of the Issuer’s qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to protect
the validity and enforceability of the Indenture, the Notes, the Collateral and
each other instrument or agreement included in the Trust Estate (Section 3.4);

 

(x)                                   the
preparation of all supplements and amendments to the Indenture and all
financing statements, continuation statements, instruments of further assurance
and other instruments and the taking of such other action as is necessary or
advisable to protect the Trust Estate (Section 3.5);

 

(xi)                                the
delivery of the Opinion of Counsel on the Closing Date and the annual delivery
of Opinions of Counsel as to the Trust Estate, and the annual delivery of the
Officer’s Certificate and certain other statements as to compliance with the
Indenture (Sections 3.6 and 3.9);

 

(xii)                             the
identification to the Indenture Trustee in an Officer’s Certificate of a
Person, if any, with whom the Issuer has contracted to perform its duties under
the Indenture (Section 3.7(b));

 

(xiii)                          the
notification of the Indenture Trustee and the Rating Agencies of an Event of
Servicing Termination under the Servicing Agreement and, if such Event of
Servicing Termination arises from the failure of the Servicer to perform any of
its duties or obligations under the Servicing Agreement with respect to the
Contracts, the taking of all reasonable steps available to remedy such failure
(Section 3.7(d));

 

(xiv)                         the duty
to cause the Servicer to comply with the Sale and Allocation Agreement and the
Servicing Agreement (Section 3.13);

 

(xv)                            the
preparation and delivery of written notice to the Indenture Trustee, the
Insurer and the Rating Agencies of each Event of Default under the Indenture
and each

 

 

Event of Default by the
Servicer or the Seller under the Sale and Allocation Agreement (Section 3.17);

 

(xvi)                         the
monitoring of the Issuer’s obligations as to the satisfaction and discharge of
the Indenture and the preparation of an Officer’s Certificate and the obtaining
of the Opinion of Counsel and the Independent Certificate relating thereto (Section 4.1);

 

(xvii)                      the
compliance with any written directive of the Indenture Trustee with respect to
the sale of the Trust Estate at one or more public or private sales called and
conducted in any manner permitted by law if an Event of Default shall have
occurred and be continuing under the Indenture (Section 5.4);

 

(xviii)                   the preparation
and delivery of written notice to the Noteholders of the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee (Section 6.8);

 

(xix)                           the
preparation of any written instruments required to confirm more fully the
authority of any co-trustee or separate trustee and any written instruments
necessary in connection with the resignation or removal of any co-trustee or
separate trustee (Sections 6.8 and 6.10);

 

(xx)                              the
furnishing to the Indenture Trustee of the names and addresses of Noteholders
during any period when the Indenture Trustee is not the Note Registrar (Section 7.1);

 

(xxi)                           the
opening of one or more accounts in the Indenture Trustee’s name, the
preparation and delivery of Opinions of Counsel and all other actions necessary
with respect to the investment and reinvestment of funds in the Trust Accounts
(Sections 8.2 and 8.3);

 

(xxii)                        the
preparation and delivery of an Issuer Request and Officer’s Certificate and the
obtaining of an Opinion of Counsel for the release of the Trust Estate
(Sections 8.4 and 8.5);

 

(xxiii)                     the
preparation and delivery of Issuer Orders and the obtaining of an Opinion of
Counsel with respect to the execution of supplemental indentures and the
mailing to the Noteholders of notices with respect to such supplemental
indentures (Sections 9.1, 9.2 and 9.3);

 

(xxiv)                    the execution
and delivery of new Notes conforming to any supplemental indenture (Section 9.5);

 

(xxv)                       the duty to
notify Noteholders of redemption of the Notes or to cause the Indenture Trustee
to provide such notification (Section 10.2);

 

 

(xxvi)                    the
preparation and delivery of Officer’s Certificates and the obtaining of an
Opinion of Counsel and with respect to any requests by the Issuer to the
Indenture Trustee to take any action under the Indenture (Section 11.1(a));

 

(xxvii)                 the preparation
and delivery of Officer’s Certificates and the obtaining of Opinions of Counsel
and Independent Certificates for the release of property from the lien of the
Indenture (Section 11.1(b) and Section 11.1(c));

 

(xxviii)              the preparation and
delivery of written notice to the Indenture Trustee, the Issuer, the Insurer
and the Rating Agencies, upon the failure of the Indenture Trustee to give such
notification, of the information required pursuant to the Related Agreements (Section 11.4);

 

(xxix)                      the preparation
and delivery to the Noteholders and the Indenture Trustee of any agreements
with respect to alternate payment and notice provisions (Section 11.6);

 

(xxx)                         the
recording of the Indenture, if applicable (Section 11.14);

 

(xxxi)                      the
preparation of Definitive Notes in accordance with the instructions of the
Clearing Agency (Section 2.13); and

 

(xxxii)                   the monitoring
of the Issuer’s obligations to furnish Rule 144A information (Section 3.20).

 

(b)                                 The
Administrator shall, from its own funds and not from the funds of the Trust
Estate:

 

(i)                                     comply
with its obligations pursuant to Section 6.7(a) of the Indenture and
indemnify the Indenture Trustee, the Custodian and their respective agents for,
and hold them harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part arising out of or in connection with the
acceptance or administration of the transactions contemplated by the Indenture,
including the reasonable costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance of any of
their powers or duties under the Indenture; and

 

(ii)                                  to
the extent not promptly paid by the Issuer or the Depositor in accordance with
the Sale and Allocation Agreement or the Trust Agreement as the case may be
(including, without limitation, any obligation of the Issuer or Depositor, in
the event either does not have funds sufficient to make payment on such
obligation), indemnify the Owner Trustee, in its individual capacity and each
of its agents for, and defend and hold them harmless against, any loss,
liability or expense incurred without gross negligence or bad faith on their
part arising out of or in connection with the acceptance or administration of
the transactions contemplated by the Trust Agreement, including, without
limitation, the reasonable costs and expenses of defending themselves against
any claim or liability in connection with the exercise or performance of any of
their powers or duties under the Trust Agreement (the duties of the
Administrator under this paragraph shall survive the resignation or removal of
the Owner Trustee and the Administrator and the termination of this Agreement
and the Trust Agreement).

 

 

(c)                                  Additional
Duties.

 

(i)                                     In
addition to the duties of the Administrator set forth above, the Administrator
shall perform such calculations and shall prepare or shall cause the
preparation by other appropriate persons of, and shall execute on behalf of the
Issuer or the Owner Trustee, all such documents, reports, filings, instruments,
certificates and opinions that the Issuer or the Owner Trustee is obligated to
prepare pursuant to the Related Agreements and at the request of the Owner
Trustee shall take all appropriate action that the Issuer or the Owner Trustee
is obligated to take pursuant to the Related Agreements.  In furtherance of the foregoing, the Owner
Trustee shall, on behalf of itself and the Issuer, execute and deliver to the
Administrator and to each successor Administrator appointed pursuant to the
terms hereof, one or more powers of attorney substantially in the form of Exhibit
A hereto, appointing the Administrator the attorney-in-fact of the Owner
Trustee and the Issuer for the purpose of executing on behalf of the Owner
Trustee and the Issuer all such documents, reports, filings, instruments,
certificates and opinions.  Subject to Section 6
of this Agreement, and in accordance with the directions of the Owner Trustee,
the Administrator shall administer, perform or supervise the performance of
such other activities in connection with the Collateral (including the Related
Agreements) as are not covered by any of the foregoing provisions and as are
expressly requested by the Owner Trustee and are reasonably within the
capability of the Administrator.

 

(ii)                                  Notwithstanding
anything in this Agreement or the Related Agreements to the contrary, the
Administrator shall be responsible for promptly notifying the Owner Trustee, in
writing, in the event that any withholding tax is imposed on any payment (or
allocation of income) by the Issuer to the Depositor as contemplated in Section 5.2(b)
of the Trust Agreement, to the extent that the Administrator has actual
knowledge thereof.  Any such notice shall
specify the amount of any withholding tax required to be withheld pursuant to
such provision.

 

(iii)                               The Administrator shall
perform the duties of the Administrator specified in Section 10.2 of the
Trust Agreement required to be performed in connection with the resignation or
removal of the Owner Trustee, and any other duties expressly required to be
performed by the Administrator under the Trust Agreement or any other Related
Agreement.

 

(iv)                              The
Administrator shall perform the duties specified in Section 2.10 of the
Trust Agreement required to be performed by the Administrator or the Owner
Trustee in connection with the characterization of the Trust for tax purposes.

 

(v)                                 In
carrying out the foregoing duties or any of its other obligations under this
Agreement, the Administrator may enter into transactions or otherwise deal with
any of its affiliates; provided, however, that the terms of any
such transactions or dealings shall be in accordance with any directions
received from the Issuer and shall be, in the Administrator’s opinion, no less
favorable to the Issuer than would be available from unaffiliated parties.

 

 

(d)                                 Non-Ministerial
Matters.

 

(i)                                     The
Administrator shall not take any action with respect to matters that, in the
reasonable judgment of the Administrator, are non-ministerial unless the Insurer
shall have consented in writing thereto (unless an Insurer Default has then
occurred and is continuing) and within a reasonable time before the taking of
such action the Administrator shall have notified the Owner Trustee of the
proposed action and the Owner Trustee shall not have withheld consent, which
consent shall not be unreasonably withheld or delayed, or provided an
alternative direction.  For the purpose
of the preceding sentence, “non-ministerial” matters shall include, without
limitation:

 

(A)                              the
amendment of or any supplement to the Indenture;

 

(B)                                the
initiation of any claim or lawsuit by the Issuer or the compromise of any
action, claim or lawsuit brought by or against the Issuer (other than in
connection with the collection of the Contracts or Eligible Investments);

 

(C)                                the
amendment, change or modification of the Related Agreements;

 

(D)                               the
appointment of successor Note Registrars, successor Paying Agents or successor
Indenture Trustees pursuant to the Indenture, the appointment of successor
Administrators or Successor Servicers or the consent to the assignment by the
Note Registrar, the Paying Agent or the Indenture Trustee of its obligations
under the Indenture; and

 

(E)                                 the
removal of the Indenture Trustee.

 

(e)                                  Except
as set forth in Section 2(b) of this Agreement and Section 6.7 of the
Indenture, the Administrator shall not (i) be obligated to or (A) make any
payments to the Noteholders under the Related Agreements or the Notes; or (B)
make any other payment required to be made by the Issuer under any Related
Agreement or the Notes, or (ii) take any other action that the Issuer directs
the Administrator not to take on its behalf, or which would result in a
violation or breach of the Issuer’s covenants, agreements or obligations under
any Related Agreement.

 

Section 3.                                            Records.  The Administrator shall maintain appropriate
books of account and records relating to services performed hereunder, which
books of account and records shall be accessible for inspection by the Issuer,
the Insurer and the Depositor at any time during normal business hours.

 

Section 4.                                            Compensation.  As compensation for the performance of the
Administrator’s obligations under this Agreement, and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to $500 per
month, which compensation shall be solely an obligation of the Seller.

 

 

Section 5.                                            Additional
Information To Be Furnished to the Issuer. 
The Administrator shall furnish to the Issuer or the Insurer from time
to time such additional information regarding the Collateral as the Issuer or
the Insurer may reasonably request.

 

Section 6.                                            Independence
of the Administrator.  For all
purposes of this Agreement, the Administrator shall be an independent
contractor and shall not be subject to the supervision of the Issuer, Indenture
Trustee or the Owner Trustee with respect to the manner in which it
accomplishes the performance of its obligations hereunder.  Unless expressly authorized by the Issuer,
the Administrator shall have no authority to act for or represent the Issuer,
the Indenture Trustee or the Owner Trustee in any way and shall not otherwise
be deemed an agent of the Issuer, the Indenture Trustee or the Owner Trustee.

 

Section 7.                                            No Joint
Venture.  Nothing contained in this
Agreement (a) shall constitute the Administrator and either the Issuer, Owner
Trustee or the Indenture Trustee as members of any partnership, joint venture,
association, syndicate, unincorporated business or other separate entity, (b)
shall be construed to impose any liability as such on any of them or (c) shall
be deemed to confer on any of them any express, implied or apparent authority
to incur any obligation or liability on behalf of the others.

 

Section 8.                                            Other
Activities of Administrator.  Nothing
contained in this Agreement shall prevent the Administrator or its affiliates
from engaging in other businesses or, in its sole discretion, from acting in a
similar capacity as an administrator for any other person or entity even though
such person or entity may engage in business activities similar to those of the
Issuer, the Owner Trustee or the Indenture Trustee.

 

Section 9.                                            Term of
Agreement; Resignation and Removal of Administrator.

 

(a)                                  This
Agreement shall continue in full force and effect until the termination of the
Issuer, upon which event this Agreement shall automatically terminate.

 

(b)                                 For
so long as any Notes are outstanding, the Issuer shall not remove the
Administrator without cause unless the Rating Agency Condition shall have been
satisfied in connection therewith and the Insurer shall have consented in
writing thereto.

 

(c)                                  Subject
to Sections 9(e) and 9(f), the Administrator may resign its duties hereunder,
with the prior written consent of the Insurer, by providing the Issuer and the
Insurer with at least sixty (60) days’ prior written notice.

 

(d)                                 Subject
to Sections 9(e) and 9(f), the Issuer may remove the Administrator without
cause with prior written consent of the Insurer by providing the Administrator
with at least sixty (60) days’ prior written notice.

 

(e)                                  Subject
to Section 9(f), at the sole option of the Issuer, with prior written
consent of the Insurer, the Issuer may and shall at the direction of the
Insurer, remove the Administrator immediately upon written notice of
termination from the Issuer to the Administrator if any of the following events
shall occur and be continuing:

 

 

(i)                                     the
Administrator shall default in the performance of any of its duties under this
Agreement and, after notice of such default, shall not cure such default within
ten (10) days (or, if such default cannot be cured in such time, shall not give
within ten (10) days such assurance of cure as shall be reasonably satisfactory
to the Issuer and the Insurer);

 

(ii)                                  a
court having jurisdiction in the premises shall enter a decree or order for
relief, and such decree or order shall not have been vacated within sixty (60)
days, in respect of the Administrator in any involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect or appoint a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official for the Administrator or any substantial
part of its property or order the winding-up or liquidation of its affairs; or

 

(iii)                               the
Administrator shall commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, shall consent to
the entry of an order for relief in an involuntary case under any such law,
shall consent to the appointment of a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official for the Administrator or any
substantial part of its property, shall consent to the taking of possession by
any such official of any substantial part of its property, shall make any
general assignment for the benefit of creditors or shall fail generally to pay
its debts as they become due.

 

If any of the events specified in clauses (ii) or
(iii) of this Section 9(e) shall occur, the Administrator shall give
written notice thereof to the Issuer, the Insurer and the Indenture Trustee
within seven (7) days after the occurrence of such event.

 

(f)                                    No
resignation or removal of the Administrator shall be effective until (i) a
successor Administrator acceptable to the Insurer shall have been appointed by
the Issuer and (ii) such successor Administrator shall have agreed in writing
to be bound by the terms of this Agreement in the same manner as the
Administrator is bound hereunder.

 

(g)                                 The
appointment of any successor Administrator shall be effective only after
satisfaction of the Rating Agency Condition with respect to the proposed
appointment.

 

Section 10.                                      Action upon
Termination, Resignation or Removal. 
Promptly upon the effective date of termination of this Agreement pursuant
to Section 9(a), the resignation of the Administrator pursuant to Section 9(c)
or the removal of the Administrator pursuant to Section 9(d) or (e), the
Administrator shall be entitled to be paid from the Seller all fees and
reimbursable expenses accruing to it to the date of such termination,
resignation or removal pursuant to Section 4.  The Administrator shall forthwith upon such
termination pursuant to Section 9(a) deliver to the Issuer all property
and documents of or relating to the Collateral then in the custody of the
Administrator.  In the event of the
resignation of the Administrator pursuant to Section 9(c) or the removal
of the Administrator pursuant to Section 9(d) or (e), the Administrator
shall cooperate with the Issuer and take all reasonable steps requested by the
Issuer to assist the Issuer in making an orderly transfer of the duties of the
Administrator.

 

 

Section 11.                                      Notices.
All demands, notices and other communications under this Agreement shall be in
writing, personally delivered, sent by telecopier, overnight courier or mailed
by certified mail, return receipt requested, and shall be deemed to have been
duly given upon receipt (i) in the case of the Issuer, to the First Investors
Auto Owner Trust 2005-A c/o the Owner Trustee at the following address:  Wells Fargo Delaware Trust Company, 919 North
Market Street, Suite 700, Wilmington, Delaware 19801, Attention: Corporate
Trust Administration, (ii) in the case of the Administrator, at the following
address: 675 Bering Drive, Suite 710, Houston, Texas 77057 Attention: Bennie H.
Duck, Treasury Department, (iii) in the case of the Indenture Trustee, at the
following address: Sixth Street and Marquette Avenue MAC N9311-161,
Minneapolis, Minnesota 55479, Attention: Corporate Trust Services -
Asset-Backed Administration, Corporate Trust and Agency Group - Structured
Finance, and (iv) in the case of the Insurer, at the following address: 113
King Street, Armonk, New York 10504, Attention: Insured Portfolio Management,
Structured Finance, or, in each case, to such other address as any party shall
have provided to the other parties in writing.

 

Section 12.                                      Amendments.  This Agreement may be amended from time to
time by the Issuer, the Administrator and the Indenture Trustee, with the prior
written consent of the Insurer and the Owner Trustee but without the consent of
the Noteholders and the Depositor, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Noteholders; provided,
however, that such amendment shall not, as set forth in an Opinion of
Counsel satisfactory to the Indenture Trustee and the Owner Trustee, materially
and adversely affect the interest of any Noteholder.  This Agreement may also be amended from time
to time by the Issuer, the Administrator and the Indenture Trustee, with the
prior written consent of the Owner Trustee, the Insurer and the Holders of
Notes evidencing at least 51% of the Class A Note Balance, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders; provided, however, that no such amendment may (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Contracts or distributions that are
required to be made for the benefit of the Noteholders or (ii) reduce the
aforesaid percentage of the Holders of Notes which are required to prior
written consent to any such amendment, without the consent of the Insurer and
the Holders of all the outstanding Notes. 
Notwithstanding the foregoing, the Administrator may not amend this
Agreement without the consent of the Seller, which consent shall not be
unreasonably withheld.

 

Section 13.                                      Successors and
Assigns.  This Agreement may not be
assigned by the Administrator unless such assignment is previously consented to
in writing by the Issuer, the Owner Trustee, the Indenture Trustee and the
Insurer (if an Insurer Default has not occurred and is continuing) and the
Rating Agency Condition has been satisfied with respect to such
assignment.  An assignment with such
consent and satisfaction, if accepted by the assignee, shall bind the assignee
hereunder in the same manner as the Administrator is bound hereunder.  Notwithstanding the foregoing, this Agreement
may be assigned by the Administrator without the consent of the Issuer, the
Indenture Trustee or the Owner Trustee to a corporation or other organization
that is a successor (by merger, consolidation or purchase of assets) to the
Administrator; provided, however, that such successor
organization executes and delivers to the Issuer, the Insurer, the Owner
Trustee and the Indenture Trustee an agreement in which such corporation or
other organization agrees to be bound hereunder by the terms of such assignment

 

 

in the same manner as the Administrator is bound
hereunder.  Subject to the foregoing,
this Agreement shall bind any successors or assigns of the parties hereto.

 

Section 14.                                      GOVERNING LAW.  THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

Section 15.                                      Counterparts.  This Agreement may be executed in two or more
counterparts and by different parties on separate counterparts, each of which
shall be an original, but all of which together shall constitute but one and
the same instrument.

 

Section 16.                                      Severability.  If any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality, and enforceability
of the remaining provisions of this Agreement shall not in any way be affected
or impaired thereby.

 

Section 17.                                      Not Applicable
to First Investors Financial Services, Inc. in Other Capacities.  Nothing in this Agreement shall affect any
obligation First Investors Financial Services, Inc. has in any other capacity.

 

Section 18.                                      Limitation of
Liability of Owner Trustee and Indenture Trustee.

 

(a)                                  Notwithstanding
anything contained herein to the contrary, this Agreement has been signed by
the Owner Trustee not in its individual capacity but solely in its capacity as
Owner Trustee of the Issuer, and in no event shall the Owner Trustee in its
individual capacity have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto or
contemplated hereby, as to all of which recourse shall be had solely to the
assets of the Issuer.  For all purposes
of this Agreement, the Owner Trustee (as such and in its individual capacity)
shall be subject to, and entitled to the benefits of, the Trust Agreement.

 

(b)                                 Notwithstanding
anything contained herein to the contrary, this Agreement has been
countersigned by the Indenture Trustee not in its individual capacity but
solely as Indenture Trustee, and in no event shall the Indenture Trustee in its
individual capacity have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.

 

Section 19.                                      Third-Party
Beneficiary.  The Owner Trustee, in
its individual capacity, and the Insurer are each a third-party beneficiary of
this Agreement and each is entitled to the rights and benefits hereunder and
may enforce the provisions hereof as if it were a party hereto.

 

Section 20.                                      Successor
Servicer and Administrator.  The
Administrator shall undertake, as promptly as possible after the giving of
notice of termination to the Servicer of the Servicer’s rights and powers
pursuant to Section 5.02 of the Servicing Agreement, to enforce the
provisions of such Section 5.02 with respect to the appointment of a
successor Servicer.  Such successor
Servicer shall, upon compliance with Section 5.02 of the Servicing
Agreement, become the

 

 

successor Administrator hereunder; provided, however,
that if the Indenture Trustee shall become such successor Administrator, the
Indenture Trustee shall not be required to perform any obligations or duties or
conduct any activities as successor Administrator that would be prohibited by
law and not within the banking and trust powers of the Indenture Trustee.  In such event, the Indenture Trustee may
appoint a sub-administrator acceptable to the Insurer to perform such
obligations and duties.

 

Section 21.                                      Nonpetition
Covenants.

 

(a)                                  Notwithstanding
any prior termination of this Agreement, the Seller, the Administrator, the
Owner Trustee and the Indenture Trustee shall not, acquiesce, petition or
otherwise invoke knowingly or intentionally cause or encourage the Issuer or
the Depositor or any other Person to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Issuer or the Depositor under any federal or state bankruptcy, insolvency
or similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Issuer or the
Depositor or any substantial part of its property, or ordering the winding up
or liquidation of the affairs of the Issuer or the Depositor.

 

(b)                                 Notwithstanding
any prior termination of this Agreement, the Issuer, the Administrator, the
Owner Trustee and the Indenture Trustee shall not, acquiesce, petition or
otherwise invoke knowingly or intentionally cause or encourage the Seller to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Seller under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Seller or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Seller.

 

 

IN WITNESS WHEREOF, the parties hereto have caused
this Administration Agreement to be duly executed by their respective officers,
thereunto duly authorized, all as of the day and year first above written.

 

 

	
   

  	
  FIRST INVESTORS
  AUTO OWNER TRUST 2005-A

  
	
   

  	
   

  
	
   

  	
  By:

  	
  WELLS FARGO
  DELAWARE TRUST

  COMPANY not in its individual capacity but solely

  as Owner Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  WELLS FARGO
  BANK, NATIONAL

  ASSOCIATION not in its individual capacity but

  solely as Indenture Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIRST INVESTORS
  FINANCIAL SERVICES, INC.

  
	
   

  	
  as Administrator

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

 

Administration Agreement Signature Page

 

 

EXHIBIT A

 

FORM OF POWER OF ATTORNEY

 

SPECIAL AND LIMITED POWER OF ATTORNEY

 

May 5, 2005

 

Reference
is made to (i) the Contribution Agreement, dated as of May 5, 2005 by and
between First Investors Financial Services, Inc. (“FIFS”) and First Investors
Auto Funding Corporation (the “Depositor”), (ii) the Sale and Allocation
Agreement, dated as of May 5, 2005, by and among First Investors Servicing
Corporation, the Depositor, Wells Fargo Bank, National Association (the “Indenture
Trustee”) and First Investors Auto Owner Trust 2005-A (the “Issuer”), (iii) the
Indenture, dated as of May 5, 2005, by and between the Indenture Trustee and
the Issuer and (iv) the Administration Agreement (the “Administration Agreement”),
dated as of May 5, 2005, by and among the Issuer, FIFS, as Administrator and
the Indenture Trustee.  All capitalized
terms used herein but not defined herein shall have the meanings given such
terms in the Administration Agreement.

 

Wells
Fargo Delaware Trust Company, a Delaware limited purpose trust company, not in
its individual capacity but solely as owner trustee of the Issuer (the “Owner
Trustee”) hereby makes, constitutes and appoints FIFS, as Administrator under
the Administration Agreement, acting through one or more of its duly authorized
officers, the true and lawful attorney in fact for the Owner Trustee, and FIFS
is hereby authorized and empowered in the name, place and stead of the Owner
Trustee to take any and all steps required to be performed by the Owner Trustee
pursuant to Section 2(c)(i) of the Administration Agreement, including
execution of certificates of title or any other documents in the name and stead
of the Owner Trustee.  The foregoing
power of attorney is for the limited purpose of enabling FIFS to comply with Section 2(c)(i)
of the Administration Agreement and shall be effective only so long as the
Administration Agreement is in full force and effect.

 

FIFS
is authorized to delegate said power of attorney to any person or persons it
deems appropriate, but only for the limited purposes set forth herein and in
accordance with the Administration Agreement.

 

For
value received, the receipt and sufficiency of which is hereby acknowledged,
the undersigned for and on behalf of the Owner Trustee does hereby intend that
this power of attorney be coupled with an interest, and declares this power of
attorney to be irrevocable by the Owner Trustee or otherwise, renouncing call
right to revoke this power or to appoint any other person to perform any of the
acts enumerated herein.

 

[Signature page follows]

 

 

IN
WITNESS WHEREOF, this Special and Limited Power of Attorney has been executed
as of the date and year first above written.

 

 

	
   

  	
  WELLS FARGO
  DELAWARE TRUST

  COMPANY, not in its individual capacity

  but solely as Owner Trustee of the Issuer

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

	
  STATE OF

  	
   

  	
   

  
	
  COUNTY OF

  	
   

  	
   

  
				

 

On the
         day of May, 2005, before me
personally appeared and came                                     ,
to me known to be the person who executed the foregoing instrument and who,
being duly sworn by me, did depose and day that he has an office at 919 North
Market Street, Suite 700, Wilmington, DE 19801; that he is the                                     
of Wells Fargo Delaware Trust Company, the limited purpose trust company which
executed the foregoing instrument; that (s)he signed his/her name thereto by
authority of said limited purpose trust company.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
   

  	
  My commission
  expires:

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