Document:

Exhibit
10.128(u)

 

EXECUTION
COPY

 

 

SERVICING
AGREEMENT

 

by and among

 

First Investors
Auto Owner Trust 2006-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

 

January 26, 2006

 

 

	
  ARTICLE I

  	
  DEFINITIONS

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  1.01.

  	
   

  	
  Defined Terms

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  ADMINISTRATION AND SERVICING OF CONTRACTS

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  2.01.

  	
   

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

  	
  3

  
	
  2.02.

  	
   

  	
  Collection of Contract Payments; Defaulted
  Contracts; Reporting Obligations

  	
  6

  
	
  2.03.

  	
   

  	
  Realization Upon Contracts

  	
  8

  
	
  2.04.

  	
   

  	
  Physical Damage Insurance

  	
  9

  
	
  2.05.

  	
   

  	
  Maintenance of Security Interests in Financed
  Vehicles and Contracts

  	
  9

  
	
  2.06.

  	
   

  	
  Covenants of Servicer; Notices

  	
  10

  
	
  2.07.

  	
   

  	
  Repurchase of Contracts by Seller and Depositor Upon
  Breach

  	
  11

  
	
  2.08.

  	
   

  	
  Monthly Servicing Fee; Back-up Servicing Fee

  	
  11

  
	
  2.09.

  	
   

  	
  Annual Statement as to Compliance

  	
  11

  
	
  2.10.

  	
   

  	
  Financial Statements; Annual Servicing Review

  	
  12

  
	
  2.11.

  	
   

  	
  Costs and Expenses

  	
  13

  
	
  2.12.

  	
   

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

  	
  14

  
	
  2.13.

  	
   

  	
  Delivery of Documents to Custodian

  	
  14

  
	
  2.14.

  	
   

  	
  Maintenance of Copies of Documents by the Servicer

  	
  15

  
	
  2.15.

  	
   

  	
  Possession of Servicer Files

  	
  16

  
	
  2.16.

  	
   

  	
  Processing of Information

  	
  16

  
	
  2.17.

  	
   

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

  	
  16

  
	
  2.18.

  	
   

  	
  Standard of Care

  	
  16

  
	
  2.19.

  	
   

  	
  Records

  	
  17

  
	
  2.20.

  	
   

  	
  Inspection

  	
  17

  
	
  2.21.

  	
   

  	
  Enforcement

  	
  18

  
	
  2.22.

  	
   

  	
  Payment in Full on Contract

  	
  19

  
	
  2.23.

  	
   

  	
  Duties of Back-up Servicer

  	
  19

  
	
  2.24.

  	
   

  	
  Assumption of Duties by Back-up Servicer

  	
  20

  
	
  2.25.

  	
   

  	
  Errors and Omissions Insurance

  	
  21

  
	
  2.26.

  	
   

  	
  Responsibilities of Back-up Servicer and Servicer

  	
  21

  
	
  2.27.

  	
   

  	
  Re-Liening

  	
  22

  
	
  2.28.

  	
   

  	
  Repurchase by Servicer Upon Breach

  	
  23

  
	
  2.29.

  	
   

  	
  Liability of Successor Servicer

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  ACCOUNTS; COLLECTIONS

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  3.01.

  	
   

  	
  Accounts

  	
  24

  
	
  3.02.

  	
   

  	
  Collections

  	
  24

  
	
  3.03.

  	
   

  	
  Collection Account and Acknowledgment Letter

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS AND WARRANTIES

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  4.01.

  	
   

  	
  Representations and Warranties of the Servicer

  	
  24

  
	
  4.02.

  	
   

  	
  Representations and Warranties of the Back-up
  Servicer

  	
  25

  

 

 

	
  4.03.

  	
   

  	
  Representations and Warranties of the Issuer

  	
  26

  
	
  4.04.

  	
   

  	
  Survival of Representations and Warranties

  	
  27

  
	
  4.05.

  	
   

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

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  DEFAULT, REMEDIES AND INDEMNITY

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  5.01.

  	
   

  	
  Event of Servicing Termination

  	
  28

  
	
  5.02.

  	
   

  	
  Remedies

  	
  29

  
	
  5.03.

  	
   

  	
  Indemnity by the Servicer

  	
  32

  
	
  5.04.

  	
   

  	
  Procedure for Indemnification

  	
  32

  
	
  5.05.

  	
   

  	
  Liability of the Back-up Servicer

  	
  33

  
	
  5.06.

  	
   

  	
  Notification

  	
  33

  
	
  5.07.

  	
   

  	
  Waiver of Event of Defaults

  	
  33

  
	
  5.08.

  	
   

  	
  Survival

  	
  34

  
	
  5.09.

  	
   

  	
  Servicer and Back-up Servicer Not to Resign

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  TERMINATION OF AGREEMENT

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  6.01.

  	
   

  	
  Term

  	
  34

  
	
  6.02.

  	
   

  	
  Effect of Termination

  	
  34

  
	
  6.03.

  	
   

  	
  Transfer of Servicing

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  MISCELLANEOUS PROVISIONS

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  7.01.

  	
   

  	
  Amendment

  	
  35

  
	
  7.02.

  	
   

  	
  Waivers

  	
  35

  
	
  7.03.

  	
   

  	
  Notices

  	
  35

  
	
  7.04.

  	
   

  	
  Severability of Provisions

  	
  37

  
	
  7.05.

  	
   

  	
  Rights Cumulative

  	
  37

  
	
  7.06.

  	
   

  	
  No Offset

  	
  37

  
	
  7.07.

  	
   

  	
  Inspection and Audit Rights

  	
  37

  
	
  7.08.

  	
   

  	
  Powers of Attorney

  	
  38

  
	
  7.09.

  	
   

  	
  Assignment and Binding Effect

  	
  38

  
	
  7.10.

  	
   

  	
  Captions

  	
  38

  
	
  7.11.

  	
   

  	
  Counterparts

  	
  38

  
	
  7.12.

  	
   

  	
  Governing Law

  	
  38

  
	
  7.13.

  	
   

  	
  Parties

  	
  38

  
	
  7.14.

  	
   

  	
  Relationship of the Parties

  	
  38

  
	
  7.15.

  	
   

  	
  No Bankruptcy Petition Against the Issuer or
  Depositor

  	
  38

  
	
  7.16.

  	
   

  	
  Third Party Beneficiaries

  	
  39

  
	
  7.17.

  	
   

  	
  Other Agreements

  	
  39

  
	
  7.18.

  	
   

  	
  Purchase and Subsequent Pledge

  	
  39

  
	
  7.19.

  	
   

  	
  Exercise of Rights by Insurer

  	
  39

  
	
  7.20.

  	
   

  	
  Limitation of Liability

  	
  39

  

 

2

 

SERVICING AGREEMENT

 

This Servicing Agreement (“Servicing
Agreement”) is made as of the 26th day of January, 2006, by and among First
Investors Auto Owner Trust 2006-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 .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,
the Issuer or the Noteholders evidencing not less than 51% of the Class A Note
Balance, 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

 

4

 

of Contract payments pursuant to Section 2.02 hereof, shall be
acting as agent for the Indenture 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

 

5

 

related vehicle auction process, (vii) tracking titles to and liens on
the Financed Vehicles and (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

 

6

 

date of any Contract by one month (an “Extension”); provided,
however, that (i) no Extension 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-4 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 2006. 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 Indenture
Trustee, the Owner Trustee or the Noteholders for any Extension that causes a
Contract to remain outstanding on the Final Note Payment Date of the Class A-4
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 Owner Trustee and the Indenture Trustee, and the Indenture Trustee shall
deliver to the Issuer, the Back-up

 

11

 

Servicer, the Insurer, 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 90 days after the end of each fiscal
quarter of FIFSGI (commencing with the quarter ending January 31, 2006), 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
120 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,
reckless disregard 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

 

22

 

Servicing Corporation becomes the Servicer, First Investors 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 each constitute 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 required payment, transfer or deposit to the Indenture
Trustee 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 in
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 cease 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 under the Indenture with respect to the Servicer occurs which has not
been waived by the Insurer;

 

(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 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

 

29

 

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 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

 

30

 

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

 

31

 

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, 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

 

32

 

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 Class A Note Payment Account, the Class B Note Payment Account or
the Reserve Account in accordance with this Servicing Agreement.
Notwithstanding the preceding sentence, the Insurer (if no Insurer Default
shall have occurred and be continuing) may, on behalf of all Noteholders, waive
any Event of Servicing Termination. Upon any such waiver of an Event of

 

33

 

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 rights of the Noteholders or the
Insurer with respect to subsequent Events of Servicing Termination 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 2006-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: Amy Martin

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
Noteholders 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 2006-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

 

 

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 2006-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 January 26, 2006 by and among First Investors Auto Owner Trust 2006-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 2006-A

 

Date:

 

TO:         DISTRIBUTION
LIST ATTACHED

 

RE:

 

This certificate is
furnished pursuant to Section 2.02(d) of the Servicing Agreement (the “Agreement”),
dated January 26, 2006, 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 10.129(u)

 

EXECUTION COPY

 

 

 

FIRST
INVESTORS AUTO OWNER TRUST 2006-A,

as Issuer,

 

 

FIRST
INVESTORS FINANCIAL SERVICES, INC.,

as Administrator,

 

 

and

 

 

WELLS
FARGO BANK, NATIONAL ASSOCIATION,

as Indenture Trustee

 

 

ADMINISTRATION
AGREEMENT

Dated as of January 26, 2006

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1.

  	
  Definitions

  	
  2

  
	
  Section 2.

  	
  Duties of the Administrator

  	
  2

  
	
  Section 3.

  	
  Records

  	
  7

  
	
  Section 4.

  	
  Compensation

  	
  7

  
	
  Section 5.

  	
  Additional Information To Be Furnished to the Issuer

  	
  8

  
	
  Section 6.

  	
  Independence of the Administrator

  	
  8

  
	
  Section 7.

  	
  No Joint Venture

  	
  8

  
	
  Section 8.

  	
  Other Activities of Administrator

  	
  8

  
	
  Section 9.

  	
  Term of Agreement; Resignation and Removal of Administrator

  	
  8

  
	
  Section 10.

  	
  Action upon Termination, Resignation or Removal

  	
  9

  
	
  Section 11.

  	
  Notices

  	
  10

  
	
  Section 12.

  	
  Amendments

  	
  10

  
	
  Section 13.

  	
  Successors and Assigns

  	
  10

  
	
  Section 14.

  	
  GOVERNING LAW

  	
  11

  
	
  Section 15.

  	
  Counterparts

  	
  11

  
	
  Section 16.

  	
  Severability

  	
  11

  
	
  Section 17.

  	
  Not Applicable to First Investors Financial Services, Inc. in Other
  Capacities

  	
  11

  
	
  Section 18.

  	
  Limitation of Liability of Owner Trustee and Indenture Trustee

  	
  11

  
	
  Section 19.

  	
  Third-Party Beneficiary

  	
  11

  
	
  Section 20.

  	
  Successor Servicer and Administrator

  	
  11

  
	
  Section 21.

  	
  Nonpetition Covenants

  	
  12

  

 

i

 

ADMINISTRATION AGREEMENT,
dated as of January 26, 2006 (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 2006-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 4.5685% Asset-Backed Class A-1 Notes (the “Class A-1 Notes”), 4.87% Asset-Backed
Class A-2 Notes (the “Class A-2 Notes”),
4.93% Asset-Backed Class A-3 Notes (the “Class
A-3 Notes”) and 5.00% Asset-Backed Class A-4 Notes (the “Class A-4 Notes” and, together
with the Class A-1 Notes, Class A-2 Notes and Class A-3 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 January 26, 2006 (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 January 26, 2006 (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 January 25, 2006 (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 January 10, 2006 (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 January 26, 2006 (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 January 26, 2006 (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 January 26, 2006 (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,

 

1

 

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);

 

2

 

(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);

 

3

 

(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);

 

4

 

(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).

 

5

 

(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.

 

6

 

(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 (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.

 

7

 

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:

 

8

 

(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.

 

9

 

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 2006-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 give 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 not 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

 

10

 

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

 

11

 

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.

 

12

 

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 2006-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

 

January
26, 2006

 

Reference is made to (i) the
Contribution Agreement, dated as of January 26, 2006 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 January 26, 2006, by and among First Investors Servicing Corporation, the
Depositor, Wells Fargo Bank, National Association (the “Indenture Trustee”) and
First Investors Auto Owner Trust 2006-A (the “Issuer”), (iii) the Indenture,
dated as of January 26, 2006, by and between the Indenture Trustee and the
Issuer and (iv) the Administration Agreement (the “Administration Agreement”),
dated as of January 26, 2006, 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 all 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 January, 2006, 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:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00099-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00099-of-00352.parquet"}]]