SERVICING AGREEMENT
This Servicing Agreement (this "Agreement"), effective as of January 31,
1998, is entered into by and between Sovereign Associates, Inc., a Texas
corporation (the "Servicer"), and Sovereign Credit Finance II, Inc., a Texas
corporation ("Buyer").
BACKGROUND STATEMENT
This Agreement shall govern the collection and servicing responsibilities
with respect to any and all of the Purchased Contracts purchased by Buyer
from Servicer pursuant to that certain Master Contract Purchase Agreement
(herein so called) by and between Buyer and Servicer of even date herewith.
STATEMENT OF AGREEMENT
In consideration of the mutual covenants contained herein and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Buyer and Servicer agree as follows:
1. Appointment of and Acceptance by the Servicer of Servicing
Obligations.
(a) The Servicer, on behalf of Buyer, shall during the term of
this Agreement manage, administer and collect each of the Purchased Contracts
(as defined in the Master Contract Purchase Agreement), shall exercise
discretionary powers involved in such management, administration and
collection, and shall bear all costs and expenses incurred in connection
therewith that may be necessary or advisable in carrying out this Agreement.
In the management, administration and collection of the Purchased Contracts,
the Servicer shall use at least the same care and apply the same policies
that it would exercise if it owned the Purchased Contracts, including but not
limited to the servicing criteria as set forth in EXHIBIT A attached hereto.
(b) The Servicer shall have full power and authority to do those
things in connection with such servicing, administration and collection
activities which it may deem necessary or desirable in order to maximize
receipts collected from Obligors or foreclosure and sale of Financed Vehicles
underlying the Purchased Contracts. Without limiting the generality of the
foregoing, the Servicer is hereby authorized and empowered to execute and
deliver, on behalf of Buyer, instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable
instruments, in order to evidence payments received with respect to the
Purchased Contracts and, after the delinquency of any Purchased Contracts and
to the extent permitted under and in compliance with applicable law and
regulations, to commence enforcement proceedings with respect to such
Purchased Contracts; PROVIDED, HOWEVER, that the Servicer shall not commence
any legal action against an Obligor in the name of Buyer without the prior
written consent of the Buyer. Buyer shall furnish the Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder.
(c) The Servicer may contract with industry-qualified third
parties to perform its obligations hereunder. The performance by any third
party will not relieve the Servicer from
liability for its obligations under this Agreement.
2. TERM. This Agreement shall commence as of the date first written
above and shall continue until terminated upon 30 days written notice by
either party to the other.
3. COMPENSATION. In exchange for the services provided to Buyer as
described and governed herein, SAI shall be paid, on or before the 15th day
of the month following a month in which such services are provided, a
Contract Servicing Fee (herein so called) equal to $20.00 times the aggregate
number of Purchased Contracts serviced by SAI during such prior month. Such
aggregate number of Purchased Contracts shall equal the sum of all Purchased
Contracts less all Purchased Contracts that have been previously paid in full
by their Obligors, and less all Purchased Contracts in which an Obligor
default has occurred and the Servicer has assigned the related Financed
Vehicle for repossession, and less any Purchased Contract that has been
charged off.
Additionally, the Servicer shall be reimbursed by Buyer for any
third-party expenditures with respect to any particular Contract, which
expenditures may, at the option of the Servicer, be paid from the proceeds
from collection or from resale of the repossessed Financed Vehicle relating
to that Contract.
4. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The Servicer
represents and warrants to Buyer as follows:
(a) ORGANIZATION AND GOOD STANDING. Servicer is a corporation
duly organized, validly existing and in good standing under the laws of
Texas, and has full corporate power, authority and legal right to own its
properties and conduct its business as such properties are presently owned
and such business is presently contemplated, and to execute, deliver and
perform its obligations under this Agreement.
(b) DUE QUALIFICATION. The Servicer is duly qualified and has
registered as a foreign corporation in each state where such qualification is
required in order to perform its obligations pursuant to this Agreement and
has obtained all necessary licenses, approvals or consents as are required
under applicable law to perform its duties hereunder.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement has been duly authorized by the Servicer by all necessary
corporate action on the part of the Servicer.
(d) BINDING OBLIGATION. This Agreement constitutes a legal, valid
and binding obligation of the Servicer, enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect which affect the enforcement of creditors' rights in
general, and except as such enforceability may be limited by general
principles of equity (whether considered in a proceeding at law or in
equity).
(e) NO VIOLATION. The execution and delivery of this Agreement by
the Servicer,
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and the performance of the transactions contemplated by this Agreement and
the fulfillment of the terms hereof applicable to the Servicer, will not
conflict with, violate, result in any breach of any of the material terms and
provisions of, or constitute (with or without notice or lapse of time or
both) a default under, any requirement of law applicable to the Servicer or
any indenture, contract, agreement, mortgage, deed of trust or other
installment to which the Servicer is a party or by which it is bound.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to Servicer as follows:
(a) ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Texas, and
has full corporate power, authority and legal right to own its properties and
conduct its business as such properties are presently owned and such business
is presently contemplated, and to execute, deliver and perform its
obligations under this Agreement.
(b) DUE QUALIFICATION. The Buyer is duly qualified and has
registered as a foreign corporation in each state where such qualification is
required in order to perform its obligations pursuant to this Agreement and
has obtained all necessary licenses, approvals or consents as are required
under applicable law to perform its duties hereunder.
(c) DUE AUTHORIZATION. The execution, delivery and
performance of this Agreement has been duly authorized by the Buyer by all
necessary corporate action on the part of the Buyer.
(d) BINDING OBLIGATION. This Agreement constitutes a legal, valid
and binding obligation of the Buyer, enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect which affect the enforcement of creditors' rights in
general, and except as such enforceability may be limited by general
principles of equity (whether considered in a proceeding at law or in
equity).
(e) NO VIOLATION. The execution and delivery of this Agreement by
the Buyer, and the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof applicable to the Buyer,
will not conflict with, violate, result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or lapse of
time or both) a default under, any requirement of law applicable to the Buyer
or any indenture, contract, agreement, mortgage, deed of trust or other
installment to which the Buyer is a party or by which it is bound.
6. COVENANTS OF THE SERVICER. The Servicer further warrants to and
covenants with Buyer as follows:
(a) COLLECTIONS ACCOUNT. From and after the date hereof until
such time as this
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Agreement terminates, Servicer shall at its own expense, direct all Obligors
on the Purchased Contracts to remit all collections and payments directly to,
or otherwise cause all payments on the Purchased Contracts to be deposited
in, a Collections Account (herein so called) in the name of the Buyer.
Servicer shall direct all Obligors to utilize payment books with remittance
instructions directing all payments to be remitted to the Collections
Account. Servicer agrees that all cash, checks, notes, drafts or other items
which it receives otherwise than through the Collections Account attributable
to the Purchased Contracts, including proceeds from resale of repossessed
Financed Vehicles and recoveries on insurance claims, shall be deposited in
the Collections Account within two business days of receipt. All collections
and payments attributable to the Purchased Contracts shall be transferred
from the Collections Account to the Buyer's operating account on at least a
weekly basis.
(b) OPERATIONS. The Servicer shall collect payments from the
Purchased Contracts in an orderly and efficient manner consistent with good
business practices and in accordance with all applicable federal, state and
local laws and regulations.
(c) RECORDS. So long as Buyer has not given notice of termination
pursuant to Section 2, the Servicer shall (i) hold in trust and safely keep
all Purchased Contract closing documents and such other documents as may be
required for the enforcement of the Purchased Contracts; (ii) keep such
accounts and other records as will enable Buyer to determine the status of
the Purchased Contracts; (iii) keep such books and records at its offices
identified in Section 14 herein; and (iv) permit Buyer and its
representatives at any time to inspect, audit, check and make abstracts from
Servicer's accounts, records, correspondence and other papers pertaining to
the Purchased Contracts. Servicer shall maintain its respective records with
respect to the Purchased Contracts in a manner such that the Servicer can
produce a computer file containing a listing (by Obligor) of all Purchased
Contracts, together with the account balance of such accounts and the payment
history related thereto. The Servicer shall provide Buyer with monthly
reports updating the information relating to account balances and activity
and the amounts collected on the Purchased Contracts during the proceeding
month.
(d) CONTINUATION STATEMENTS. If Buyer so requests, the Servicer
shall execute and file documents which shall create a first priority security
interest in favor of Buyer in Financed Vehicles, including registration of
the Certificates of Title in the name of Buyer, and/or any other documents
requested by Buyer or which may be required by law to preserve and protect
the interest of Buyer in and to the Purchased Contracts.
(e) PRINCIPAL EXECUTIVE OFFICE. The Servicer shall not, without
providing 30 days' notice to Buyer, and without filing such amendments to any
previously filed financing statements as Buyer may require, (i) change the
county where its principal executive office, or the office where the records
relating to the Purchased Contracts are kept, is located, or (ii) change its
name, identity or corporate structure in any manner which would, could or
might make any financing statement or continuation statement filed by Buyer
or the Servicer or any provision hereof seriously misleading within the
meaning of Section 9-402(g) of any applicable enactment of the Texas Uniform
Commercial Code.
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(f) NO IMPAIRMENT. The Servicer will duly fulfill all obligations
on its part to be fulfilled under or in connection with each Purchased
Contract and will do nothing to materially impair the rights of Buyer in the
Purchased Contracts.
(g) COMPLIANCE WITH LAW. The Servicer will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any governmental authority applicable to the Purchased Contracts or any part
thereof; PROVIDED, HOWEVER, that the Servicer may contest any act,
regulation, order, decree or direction in any reasonable manner which shall
not materially and adversely affect the rights of Buyer in the Purchased
Contracts. The Servicer will comply, in all material respects, with any
obligation of a holder of a Purchased Contract to the Obligor thereof arising
under such Purchased Contract or under applicable law.
7. MAINTENANCE OF INTERNAL CONTROL AND PROCEDURES. Servicer shall, at
all times during the term of this Agreement, follow internal control
procedures consistent with loan servicing industry standards and, at the
request of Buyer, will supply same in written form for review purposes.
8. COMPUTER. Servicer shall, at all times during the term of this
Agreement, utilize in the operation of its business the industry standard
computer software and contract information maintenance system.
9. SERVICER EVENTS OF DEFAULT. The occurrence and continuation of any
one of the following events shall be a "Servicer Event of Default" under this
Agreement:
(a) Failure on the part of the Servicer to remit collections on
the Purchased Contracts to the Collections Account or the Buyer's operating
account when due in accordance with Section 6(a) and continuance of such
failure for five business days. For purposes of this Agreement, "business
day" shall mean any day other than a Saturday, Sunday or legal holiday; or
(b) An involuntary case is commenced or filed against the Servicer
under the federal bankruptcy laws, as now or hereafter in effect, or any
other present or future federal or state bankruptcy, insolvency or similar
law, or for the appointment of a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Servicer or of any
substantial part of its property, or for the winding up of the affairs of,
liquidation, dissolution, or reorganization of the Servicer and the
continuance of such case or filing unstayed for a period of 30 consecutive
days; or
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(c) An order for relief shall be entered in a case under title 11
of the United States Code in which the Servicer is a debtor, or the
commencement by the Servicer of a voluntary case under the federal bankruptcy
laws, as now or hereafter in effect, or any other present or future federal
or state bankruptcy, insolvency or similar law, or the consent by the
Servicer to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Servicer or of any substantial part of its property or the
making by the Servicer of an assignment for the benefit of creditors.
(d) Failure by Servicer to service and collect amounts due from
Obligors under Purchased Contracts in accordance with the servicing criteria
described in EXHIBIT A attached hereto, and the continuance of such failure
for 30 days after written notice by Buyer of such failure.
10. REMEDIES. If a Servicer Event of Default shall have occurred and
be continuing, Buyer may, by notice given in writing to the Servicer,
immediately terminate all of the rights and obligations of the Servicer under
this Agreement. Notwithstanding any termination of the rights and
obligations of the Servicer, the Servicer shall remain responsible for any
acts or omissions to act by it as Servicer prior to such termination. In the
event of such termination:
(a) Buyer is hereby authorized and empowered (upon the failure of
the Servicer to cooperate) to execute and deliver, on behalf of the Servicer
as attorney-in-fact or otherwise, all documents and other instruments upon
the failure of the Servicer to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of a transfer of servicing rights to a
successor servicer;
(b) The Servicer agrees to cooperate with Buyer and any successor
servicer in effecting the termination of the responsibilities and rights of
the Servicer to conduct servicing hereunder, including, without limitation,
the transfer to such successor servicer of all authority of the Servicer to
service the Purchased Contracts provided for under this Agreement, including,
without limitation, all authority over all collections which shall on the
date of transfer be held by the Servicer for deposit or which shall
thereafter be received with respect to the Purchase Contracts; and
(c) The Servicer shall promptly transfer its records relating to
the Purchased Contracts to a successor servicer in such form as such
successor servicer may reasonably request and shall promptly transfer to such
successor servicer all other records, correspondence and documents necessary
for the continued servicing of the Purchased Contracts in the manner and at
such times as the successor servicer shall reasonably request. To the extent
that compliance with this Section shall require the Servicer to disclose to
such successor servicer information of any kind which the Servicer reasonably
deems to be confidential, such successor servicer shall be required to enter
into such customary licensing and confidentiality agreements as the Servicer
shall deem necessary to protect its interest.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successor and
assigns. The Servicer may contract with others for the performance of any or
all of its obligations arising hereunder but no such contract
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shall relieve Servicer from liability for its performance hereunder.
12. BUYER EVENT OF DEFAULT; SERVICER'S REMEDIES. In the event that
Buyer should fail to pay any fees or compensation due under this Agreement,
within ten (10) days of the date they are due or are submitted for payment,
whichever is less, or shall fail to perform any of its duties or to observe
or perform any other term, covenant, condition or agreement provided within
this Agreement, said failure shall constitute an event of default by the
Buyer. In the event of such default, Servicer shall have the option of
immediately terminating this Agreement by written notice to Buyer in addition
to all remedies available in equity or law.
13. MODIFICATIONS AND WAIVERS. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder, nor
shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof, or the exercise of
any other right, power or privilege hereunder. All rights and remedies
herein provided are cumulative and are not exclusive of any rights or
remedies which the parties hereto may otherwise have at law or in equity. No
waiver shall be valid in the absence of the written and signed consent of the
party against which enforcement of such is sought.
14. NOTICE. Except as otherwise specifically provided herein, any
notice hereunder shall be in writing (including telecopy communication) and,
if mailed, shall be deemed to be given when sent by registered or certified
mail, postage prepaid or if telecopied when transmitted, or otherwise when
delivered in person to the addressee and a receipt given therefor, in all
such instances addressed to the respective parties as follows:
To Servicer: Sovereign Associates, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxxx X
Xxxxxx, Xxxxx 00000
Attn: X. Xxxxxx Xxxxxx, III, President
To Buyer: Sovereign Credit Finance II, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxxx X
Xxxxxx, Xxxxx 00000
Attn: X. Xxxxxx Xxxxxx, III, President
or at such other address as the addressee may, by written notice received by
the other party hereto, designate as the appropriate address for purposes of
notice hereunder.
15. AMENDMENT. This Agreement may be amended, supplemented or modified
only with the written consent of each of the parties hereto.
16. CHOICE OF LAW. THIS AGREEMENT AND THE VALIDITY AND
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ENFORCEMENT HEREOF, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE STATE OF TEXAS.
17. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective
during the term of this Agreement, the legality, validity and enforceability
of the remaining provisions of this Agreement shall not be affected thereby,
and in lieu of each such illegal, invalid or unenforceable provision there
shall be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision as may
be possible and be legal, valid and enforceable.
18. ENTIRE AGREEMENT. This instrument embodies the entire agreement
between the parties relating to the subject matter hereof and supersedes all
prior agreement and understandings, if any, relating to the subject matter
hereof.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which for all purposes is to be deemed an original.
20. SURVIVAL. All covenants, agreements, undertakings, indemnities,
representations and warranties made herein shall survive both the execution
and the termination hereof and shall not be affected by any investigation
made by any party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first hereinabove written.
BUYER:
SOVEREIGN CREDIT FINANCE II, INC.
By:
-------------------------------------
X. Xxxxxx Xxxxxx, III, President
SERVICER:
SOVEREIGN ASSOCIATES, INC.
By:
-------------------------------------
X. Xxxxxx Xxxxxx, III, President
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SERVICING AGREEMENT
EXHIBIT A
SERVICING CRITERIA
At all times during the term of the Servicing Agreement as set forth
in Section 2 therein, Servicer shall, in addition to its other duties under
the Servicing Agreement, observe the following covenants and criteria
(referred to as the "servicing criteria):
I. COLLECTION POLICY
1. All Obligors under related Contracts will be issued a preprinted
payment book or other\remittance advice or instructions which will
specifically request that all payments be made to the Buyer's Collections
Account lockbox.
2. Servicer shall contact any Obligor on a past due Contract within
ten days after the payment due date for the purpose of pursuing collection
and shall adequately update all credit and collection file records with
respect to such activities.
3. Any material extensions or modifications of Contracts, or
acceptances of partial payments of Obligors, and any related necessary
Contract amendments and/or default waivers by Servicer, shall be approved by
the chief credit officer or president of Servicer, and all necessary third
party charges and explanations relating thereto shall be documented in the
collection file records.
II. FORECLOSURE/REPOSSESSION POLICY
1. Servicer shall define as delinquent and pursue repossession action,
subject to compliance with all state and federal laws relating thereto,
against the Financed Vehicle underlying any Contract whose Obligor (i) is
three payments past due in the case of Contracts requiring biweekly or
semi-monthly payments, and has failed for 30 days to remit any sums against
payment obligations under the respective Contract, or (ii) is two payments
past due in the case of Contracts requiring monthly payments, and has failed
for 60 days to remit any sums against payment obligations under the
respective Contract. Nothing contained in this Section shall be construed to
limit Servicer from pursuing repossession or any other collection technique,
subject to related state and federal laws, sooner than the time contemplated
above if Servicer in its discretion deems such activity to be prudent and in
the best interests of Servicer or Buyer.
2. For each chargeoff of any material unpaid amount from an Obligor
under any Contract, Servicer shall document the reasons for such chargeoff
and shall maintain all third-party related documentation for such chargeoff.
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