SALE AND SERVICING
AGREEMENT
among
NATIONAL AUTO FINANCE 1997-1 TRUST,
Issuer,
NATIONAL FINANCIAL AUTO FUNDING TRUST,
Seller,
NATIONAL AUTO FINANCE COMPANY, INC.,
Servicer
and
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
Trust Collateral Agent and Backup Servicer
Dated as of June 29, 1997
TABLE OF CONTENTS
ARTICLE I
Definitions
SECTION 1.1. Definitions....................................................1
SECTION 1.2. Other Definitional Provisions.................................23
SECTION 1.3. Usage of Terms................................................23
SECTION 1.4. Certain References............................................24
SECTION 1.5. No Recourse...................................................24
SECTION 1.6. Action by or Consent of Noteholders...........................24
SECTION 1.7. Material Adverse Effect.......................................24
SECTION 1.8. Calculations as to Principal and
Interest in Respect of Receivables.........................24
ARTICLE II
Conveyance of Receivables
SECTION 2.1. Conveyance of Initial Receivables.............................25
SECTION 2.2. Conveyance of Subsequent Receivables..........................27
SECTION 2.3. Further Encumbrance of Trust Property.........................29
ARTICLE III
The Receivables
SECTION 3.1. Representations and Warranties of Seller......................31
SECTION 3.2. Repurchase upon Breach........................................32
SECTION 3.3. Custody of Receivables Files..................................33
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.1. Duties of the Servicer........................................33
SECTION 4.2. Sub-Servicing Agreements between Servicer
and the Sub-Servicers......................................36
SECTION 4.3. Obligations of the Servicer...................................37
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SECTION 4.4. No Contractual Relationship between a
Sub-Servicer and Trust Collateral Agent
or Noteholders...............................................37
SECTION 4.5. Assumption or Termination of Sub-Servicing
Agreement by Trust Collateral Agent..........................37
SECTION 4.6. Collection of Receivable Payments.............................38
SECTION 4.7. Maintenance of Insurance......................................39
SECTION 4.8. Realization upon Defaulted Receivables........................39
SECTION 4.9. Total Servicing Fee; Payment of Certain Expenses
by Servicer..................................................40
SECTION 4.10. [Reserved]....................................................40
SECTION 4.11. Reports.......................................................40
SECTION 4.12. Annual Statement as to Compliance, Notice of
Servicer Termination Event...................................41
SECTION 4.13. Annual Independent Accountants' Report........................41
SECTION 4.14. Access to Certain Documentation and Information
Regarding Receivables........................................42
SECTION 4.15. Monthly Tape..................................................42
SECTION 4.16. Retention and Termination of Servicer.........................43
SECTION 4.17. Custodial Arrangement.........................................42
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ARTICLE V
Trust Accounts; Distributions; Statements to Noteholders
SECTION 5.1. Establishment of Trust Accounts...............................43
SECTION 5.2. Pre-Funding Period Reserve Account............................47
SECTION 5.3. Certain Reimbursements to the Servicer........................48
SECTION 5.4. Application of Collections....................................48
SECTION 5.5. Withdrawals from Series 1997-1 Spread Account.................48
SECTION 5.6. Additional Deposits...........................................49
SECTION 5.7. Distributions.................................................49
SECTION 5.8. Note Distribution Account.....................................52
SECTION 5.9. Pre-Funding Account...........................................53
SECTION 5.10. Statements to Noteholders....................................53
SECTION 5.11. Optional Deposits by the Insurer.............................54
ARTICLE VI
The Note Policy
SECTION 6.1. Claims Under Note Policy......................................54
SECTION 6.2. Preference Claims.............................................55
SECTION 6.3. Surrender of Policy...........................................56
SECTION 6.4. Spread Account................................................56
ARTICLE VII
RESERVED
ARTICLE VIII
The Seller
SECTION 8.1. Representations, Warranties and Covenants of
the Seller.................................................56
SECTION 8.2. Corporate Existence...........................................59
SECTION 8.3. Liability of Seller; Indemnities..............................60
SECTION 8.4. Merger or Consolidation of, or Assumption of the
Obligations of, Seller.....................................60
SECTION 8.5. Limitation on Liability of Seller and Others..................61
SECTION 8.6. Seller May Own Notes..........................................61
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ARTICLE IX
The Servicer
SECTION 9.1. Representations, Warranties and Covenants of the
Servicer.....................................................61
SECTION 9.2. Liability of Servicer; Indemnities............................63
SECTION 9.3. Merger or Consolidation of, or Assumption of the
Obligations of the Servicer or the Trust Collateral
Agent........................................................65
SECTION 9.4. Limitation on Liability of Servicer, Trust Collateral
Agent and Others.............................................66
SECTION 9.5. Delegation of Duties..........................................68
SECTION 9.6. Servicer and Trust Collateral Agent Not to Resign.............68
ARTICLE X
Default
SECTION 10.1. Servicer Termination Event...................................69
SECTION 10.2. Consequences of a Servicer Termination Event.................70
SECTION 10.3. Additional Consequences of a Servicer Termination
Event.......................................................72
SECTION 10.4. Appointment of Successor.....................................72
SECTION 10.5. [RESERVED]...................................................72
SECTION 10.6. Notification to Noteholders and Rating Agencies..............73
SECTION 10.7. Waiver of Past Defaults......................................74
SECTION 10.8. Termination of Trust Collateral Agent........................74
SECTION 10.9. Successor to Servicer........................................75
ARTICLE XI
Termination
SECTION 11.1. Optional Purchase of All Receivables.........................75
ARTICLE XII
Administrative Duties of the Servicer
SECTION 12.1. Administrative Duties........................................76
SECTION 12.2. Records......................................................78
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SECTION 12.3. Additional Information to be Furnished to the Issuer.........79
ARTICLE XIII
Miscellaneous Provisions
SECTION 13.1. Amendment....................................................79
SECTION 13.2. Protection of Title to Trust.................................80
SECTION 13.3. Notices......................................................82
SECTION 13.4. Assignment...................................................83
SECTION 13.5. Limitations on Rights of Others..............................83
SECTION 13.6. Severability.................................................84
SECTION 13.7. Separate Counterparts........................................84
SECTION 13.8. Headings.....................................................84
SECTION 13.9. Governing Law................................................84
SECTION 13.10. Assignment to Trustee.......................................84
SECTION 13.11. Nonpetition Covenants.......................................84
SECTION 13.12. Limitation of Liability of Owner Trustee and
Trustee....................................................85
SECTION 13.13. Independence of the Servicer................................85
SECTION 13.14. No Joint Venture............................................86
SECTION 13.14. Insurer as Controlling Party................................84
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SALE AND SERVICING AGREEMENT dated as of June 29, 1997, among NATIONAL
AUTO FINANCE 1997-1 TRUST, a Delaware business trust (the "Issuer"), NATIONAL
FINANCIAL AUTO FUNDING TRUST, a Delaware business trust (the "Seller"), and
NATIONAL AUTO FINANCE COMPANY, INC., a Delaware corporation (the "Servicer"),
and ▇▇▇▇▇▇ TRUST AND SAVINGS BANK, an Illinois banking association, in its
capacity as Trust Collateral Agent and Backup Servicer.
WHEREAS the Issuer desires to purchase a portfolio of receivables arising
in connection with motor vehicle retail installment sale contracts acquired by
National Auto Finance Company, Inc. directly or indirectly through motor vehicle
dealers;
WHEREAS the Seller has acquired such receivables from National Financial
Auto Funding Trust II and National Auto Finance Company, Inc. and is willing to
sell such receivables to the Issuer;
WHEREAS the Issuer desires to acquire additional receivables arising in
connection with motor vehicle retail installment sale contracts to be acquired
by National Auto Finance Company, Inc. directly or indirectly through motor
vehicle dealers;
WHEREAS the Seller has an agreement to purchase such additional
receivables from National Auto Finance Company, Inc. and is willing to sell such
receivables to the Issuer;
WHEREAS the Servicer is willing to service all such receivables;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.1. Definitions. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:
"Accountants' Report" means the report of a firm of nationally
recognized independent accountants described in Section 4.14.
"Actuarial Method" means the method of allocating a fixed level
payment on an obligation between principal and interest, pursuant to which the
portion of such payment that is allocated to interest is equal to the product of
(a) 1/12, (b) the fixed rate of interest on such obligation and (c) the
outstanding principal balance of such obligation.
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"Addition Notice" means, with respect to any transfer of Subsequent
Receivables to the Trust pursuant to Section 2.2 of this Agreement, notice of
the Seller's election to transfer Subsequent Receivables to the Trust, such
notice to designate the related Subsequent Transfer Date and the aggregate
Principal Balance of the Subsequent Receivables to be transferred on such
Subsequent Transfer Date.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a Liquidated Receivable during the related Due
Period and (ii) any Receivable that became a Purchased Receivable during the
related Due Period) as of the date of determination.
"Agreement" means this Sale and Servicing Agreement, as the same may
be amended and supplemented from time to time in accordance with the terms
hereof.
"Amount Financed" means, with respect to a Receivable, the original
principal balance of such Receivable reduced by the portion of each payment
received thereon before the applicable Cut-off Date that would represent
principal if such payments were allocated to the principal of and interest on
such Receivable based on the amortization method provided in such Receivable.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
percentage rate of finance charges or service charges, as stated in the related
Contract.
"Assignment Agreement" means the agreement, dated as of June 29,
1997, between Bankers Trust Company, not in its individual capacity but solely
as Trustee of the National Financial Auto Receivables Master Trust, and National
Financial Auto Funding Trust II, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
"Available Amount" means, with respect to any Distribution Date, an
amount equal to the sum of (i) the amount on deposit in the Distribution Account
on the preceding Distribution Date after giving effect to all withdrawals
therefrom on such preceding Distribution Date, (ii) the amount, if any, to be
transferred by the Trust Collateral Agent to the
2
Distribution Account from the Pre-Funding Period Reserve Account and/or the
Pre-Funding Account, if any, as provided herein, (iii) the amount to be
transferred by the Trust Collateral Agent to the Distribution Account from the
Collection Account on such Distribution Date pursuant to Section 5.1(c), and
(iv) any amounts paid by the Insurer to the Trust Collateral Agent pursuant to
Section 5.11 hereof for distribution on such Distribution Date.
"Average Default Rate" means, with respect to any Distribution Date,
the arithmetic average of the Default Rates for each of the three Due Periods
immediately preceding the Due Period in which such Distribution Date occurs.
"Average Delinquency Ratio" means, with respect to any Distribution
Date, the arithmetic average of the Delinquency Ratios for each of the three Due
Periods immediately preceding the Due Period in which such Distribution Date
occurs.
"Average Net Loss Rate" means, with respect to any Distribution
Date, the arithmetic average of the Net Loss Rates for each of the three Due
Periods immediately preceding the Due Period in which such Distribution Date
occurs.
"Backup Servicer" means, ▇▇▇▇▇▇ Trust and Savings Bank, as the
Backup Servicer hereunder, including in its capacity as Servicer, in the event
NAFI resigns or is removed as Servicer.
"Bankruptcy Loss" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
the scheduled payments to be made on a Receivable, an amount equal to the excess
of the principal balance of such Receivable immediately prior to such order over
the principal balance of such Receivable as so reduced or the net present value
(using as the discount rate the higher of the APR on such Receivable or the rate
of interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A "Bankruptcy Loss" shall be deemed to
have occurred on the date of issuance of such order.
"Base Servicing Fee" means, with respect to any Due Period, the fee
payable to the Servicer for services rendered during such Due Period, which
shall be equal to one-twelfth of the Servicing Fee Rate multiplied by the Pool
Balance as of the close of business on the last day of the preceding Due Period.
"Business Day" means a day other than a Saturday, a Sunday or other
day on which commercial banks located in New York, Illinois, Delaware or Florida
are authorized or obligated to be closed.
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"Certificateholder" or "Certificateholders" means a Person in whose
name a Trust Certificate is registered in the Certificate Register maintained
pursuant to the Trust Agreement.
"Closing Date" means July 23, 1997.
"Collateral Agent" means ▇▇▇▇▇▇ Trust and Savings Bank, in its
capacity as Collateral Agent under the Spread Account Agreement.
"Collection Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"Computer Tape" means the computer tapes or other electronic media
furnished by the Seller to the Issuer and its assigns describing certain
characteristics of the Initial Receivables as of the Initial Cut-off Date and of
the Subsequent Receivables as of the related Subsequent Cut-off Date.
"Contract" means a motor vehicle retail installment sale contract.
"Controlling Party" means the Insurer, so long as no Insurer Default
shall have occurred and be continuing, and, in the event the Insurer Default
shall have occurred and be continuing, the Trust Collateral Agent for the
benefit of Section 5.10.
"Conveyance Agreements" means the Purchase Agreement, the Sale
Agreement and the Assignment Agreement.
"Corporate Trust Office" means (i) with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee, which at the
time of execution of this agreement is ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇- 0001, Attention: Corporate Trust
Administration, and (ii) with respect to the Trustee and the Trust Collateral
Agent, the principal corporate trust office of the Trustee, which at the time of
execution of this agreement is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇.
"Custodial Agreement" means the Custodial Agreement, dated as of
July 23, 1997, between NAFI and OFSA, as assigned to the Trust Collateral Agent
pursuant to Section 4.17 hereof.
"Custodian" means OFSA and any other Person named from time to time
as custodian in any Custodian Agreement acting as agent for the Trust Collateral
Agent, which
4
Person must be acceptable to the Controlling Party (the Custodian as of the
Closing Date is acceptable to the Insurer as of the Closing Date).
"Custodian Agreement" means the Custodial Agreement and any other
Custodian Agreement from time to time in effect between the Custodian named
therein and the Trust Collateral Agent, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with the terms thereof,
which Custodian Agreement and any amendments, supplements or modifications
thereto shall be acceptable to the Controlling Party (the Custodian Agreement
which is effective on the Closing Date is acceptable to the Controlling Party).
"Cut-off Date" means the Initial Cut-off Date or any Subsequent
Cut-off Date, as applicable.
"Dealer" means a dealer who sold a Financed Vehicle and who
originated and assigned the respective Receivable to NAFI or an Originator under
a Dealer Agreement.
"Dealer Agreement" means any agreement between NAFI or an Originator
and a Dealer relating to the acquisition of Receivables from a Dealer by NAFI or
an Originator.
"Dealer Assignment" means, with respect to a Receivable, the
executed assignment executed by a Dealer conveying such Receivable to an
Originator.
"Dealer Underwriting Guide" means either, (i) the underwriting
guidelines used by or on behalf of NAFI in the origination and purchase of
Receivables as amended from time to time or (ii) the underwriting guidelines
used in the origination of Receivables as reviewed by NAFI prior to the purchase
of Receivables by NAFI.
"Default Rate" means, with respect to any Due Period, the product of
(i) twelve and (ii) the quotient, expressed as a percentage, obtained by
dividing (a) the sum of (x) the aggregate outstanding Principal Balance of all
Defaulted Receivables which became Defaulted Receivables during such Due Period
and (y) the aggregate outstanding Principal Balance of all Receivables that
became Purchased Receivables during such Due Period and were 30 days or more
past due as of the date such Receivables were retransferred hereunder by (b) the
arithmetic average of the Pool Balance as of the end of such Due Period and the
Pool Balance as of the end of the preceding Due Period.
"Defaulted Receivable" means, with respect to any Due Period, a
Receivable with respect to which any of the following has occurred during such
Due Period: (i) all or a part of any Scheduled Payment is 90 days or more
delinquent as of the end of such Due
5
Period, (ii) such Receivable is in default and the Servicer (or Sub-Servicer)
has in good faith determined that payments thereunder are not likely to be
resumed, or (iii) the Financed Vehicle that secures the Receivable has been
repossessed without reinstatement of the Receivable on or before the last day of
such Due Period and any applicable redemption period has expired.
"Deficiency Claim Amount" shall have the meaning set forth in
Section 5.5.
"Deficiency Claim Date" means, with respect to any Distribution
Date, the fourth Business Day immediately preceding such Distribution Date.
"Deficiency Notice" shall have the meaning set forth in Section 5.5.
"Delinquency Rate" means, with respect to any Due Period, the
quotient, expressed as a percentage, obtained by dividing (a) the aggregate
Principal Balance of all Receivables with respect to which a scheduled payment
is 30 or more days past due as of the end of such Due Period, by (b) the Pool
Balance as of the end of such Due Period.
"Delivery" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Trust Collateral Agent or its
nominee or custodian by physical delivery to the Trust Collateral Agent or
its nominee or custodian endorsed to, or registered in the name of, the
Trust Collateral Agent or its nominee or custodian or endorsed in blank,
and, with respect to a certificated security (as defined in Section 8-102
of the UCC) transfer thereof (i) by delivery of such certificated security
endorsed to, or registered in the name of, the Trust Collateral Agent or
its nominee or custodian or endorsed in blank to a financial intermediary
(as defined in Section 8-313 of the UCC) and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trust Collateral Agent or its
nominee or custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the Trust
Collateral Agent or its nominee or custodian, or (ii) by delivery thereof
to a "clearing corporation" (as defined in Section 8-102(3) of the UCC) and
the making by such clearing corporation of appropriate entries on its books
reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of a financial intermediary
by the amount of such certificated security, the identification by the
clearing corporation of the certificated securities for the sole and
exclusive account of the financial intermediary, the maintenance of such
certificated securities by such clearing corporation or a "custodian bank"
(as defined in Section 8-102(4) of the UCC) or the nominee of either
subject to the clearing corporation's exclusive control, the sending of a
confirmation by the financial intermediary of the purchase by the Trust
Collateral
6
Agent or its nominee or custodian of such securities and the making by such
financial intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trust Collateral Agent or its
nominee or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the
name of the Trust Collateral Agent or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate to
effect the complete transfer of ownership of any such Trust Account
Property to the Trust Collateral Agent or its nominee or custodian,
consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable
Federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Trust Account Property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a financial intermediary
which is also a "depository" pursuant to applicable Federal regulations and
issuance by such financial intermediary of a deposit advice or other
written confirmation of such book-entry registration to the Trust
Collateral Agent or its nominee or custodian of the purchase by the Trust
Collateral Agent or its nominee or custodian of such book-entry securities;
the making by such financial intermediary of entries in its books and
records identifying such book-entry security held through the Federal
Reserve System pursuant to Federal book-entry regulations as belonging to
the Trust Collateral Agent or its nominee or custodian and indicating that
such custodian holds such Trust Account Property solely as agent for the
Trust Collateral Agent or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect
complete transfer of ownership of any such Trust Account Property to the
Trust Collateral Agent or its nominee or custodian, consistent with changes
in applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed
by clause (b) above, registration on the books and records of the issuer
thereof in the name of the financial intermediary, the sending of a
confirmation by the financial intermediary of the purchase by the Trust
Collateral Agent or its nominee or custodian of such uncertificated
security, the making by such financial intermediary of entries on its books
and records identifying such uncertificated certificates as belonging to
the Trust Collateral Agent or its nominee or custodian.
(d) in each case of delivery contemplated herein, the Trust Collateral
Agent shall make appropriate notations on its records, and shall cause the
same to be made on the
7
records of its nominees, indicating that such securities are held in trust
pursuant to and as provided in this Agreement.
"Depositor" shall mean the Seller in its capacity as Depositor under
the Trust Agreement.
"Determination Date" means, with respect to a Distribution Date, the
last day of the Due Period immediately preceding such Distribution Date.
"Distribution Account" means the account established pursuant to
Section 5.1(a)(iv) hereof.
"Distribution Date" means, with respect to each Due Period, the
twenty first day of the following calendar month, or if such day is not a
Business Day, the immediately following Business Day, commencing August 21,
1997.
"Draw Date" means, with respect to any Distribution Date, the fourth
Business Day (as defined in the Note Policy) immediately preceding such
Distribution Date.
"Due Date" means, with respect to a Receivable, the date in each Due
Period on which a scheduled payment on such Receivable is due.
"Due Period" means , with respect to the first Distribution Date,
the period beginning on the close of business on the Initial Cut-off Date and
ending on the close of business on July 31, 1997. With respect to each
subsequent Distribution Date, the period from and including the first day of the
calendar month preceding the month in which such Distribution Date occurs to and
including the last day of the calendar month preceding the month of such
Distribution Date.
"Electronic Ledger" means the electronic master record of the retail
installment sales contracts or installment loans of the Servicer.
"Eligible Bank" means any depository institution (which shall
initially be the Trust Collateral Agent) acceptable to the Insurer (so long as
an Insurer Default shall not have occurred and be continuing), organized under
the laws of the United States of America or any one of the states thereof or the
District of Columbia (or any United States branch or agency of a foreign bank),
which is subject to supervision and examination by federal or state banking
authorities and which at all times (a) has a net worth in excess of $50,000,000
and (b) has either (i) a rating of P-1 from Moody's and A-1 from S&P with
respect to short-term deposit obligations, or (ii) if such institution has
issued long-term unsecured debt obligations, a rating
8
of A2 or higher from Moody's and AA from S&P with respect to long-term unsecured
debt obligations. Such depository institution (other than the Trust Collateral
Agent) shall have been approved in writing by the Controlling Party, operating
in its discretion, by written notice to the Trust Collateral Agent.
"Eligible Deposit Account" means (i) a segregated trust account that
is maintained with the corporate trust department of a depository institution or
trust company acceptable to the Insurer (unless a Insurer Default has occurred
and is continuing, in which case such institution shall be one subject to
regulations regarding fiduciary funds on deposit substantially similar to 12 CFR
Section 9.10(b)), or (ii) a segregated direct deposit account maintained with a
depository institution or trust company organized under the laws of the United
States of America, or any of the States thereof, or the District of Columbia,
having a certificate of deposit, short-term deposit or commercial paper rating
of at least "A-1+" from Standard & Poor's and "P-1" from Moody's and (unless a
Insurer Default has occurred and is continuing) acceptable to the Insurer.
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct interest-bearing obligations of, and interest-bearing
obligations fully guaranteed as to timely payment of principal and interest by,
the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company organized under the laws of the United
States of America or any state thereof or the District of Columbia (or any
domestic branch of a foreign bank) and subject to supervision and examination by
Federal or state banking or depository institution authorities (including
depository receipts issued by any such institution or trust company as custodian
with respect to any obligation referred to in clause (a) above or portion of
such obligation for the benefit of the holders of such depository receipts);
provided, however, that at the time of the investment or contractual commitment
to invest therein (which shall be deemed to be made again each time funds are
reinvested following each Distribution Date), the commercial paper or other
short-term senior unsecured debt obligations (other than such obligations the
rating of which is based on the credit of a Person other than such depository
institution or trust company) of such depository institution or trust company
shall have a credit rating from Standard & Poor's of AAA and from Moody's of
Aaa;
(c) commercial paper and demand notes investing solely in commercial
paper that (i) is payable in United States dollars and (ii) has, at the time of
the investment or
9
contractual commitment to invest therein, a rating from Standard & Poor's of
A-1+ and from Moody's of P-1;
(d) investments in money market funds (including funds for which the
Trust Collateral Agent or the Owner Trustee in each of their individual
capacities or any of their respective Affiliates is investment manager or
advisor) having a rating from Standard & Poor's of AAA-m or AAAm-G and from
Moody's of Aaa and (other than funds for which the Trust Collateral Agent or the
Owner Trustee in each of their individual capacities or any of their respective
Affiliates is investment manager or advisor) having been approved in writing by
the Insurer;
(e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) repurchase obligations pursuant to a written agreement (i) with
respect to any obligation described in clause (a) above, where the Trustee has
taken actual or constructive delivery of such obligation, and (ii) entered into
with the corporate trust department of a depository institution or trust company
organized under the laws of the United States or any State thereof, the deposits
of which are insured by the Federal Deposit Insurance Corporation and the
short-term unsecured debt obligations of which are rated "A-1+" by Standard &
Poor's and "P-1" by Moody's (including, if applicable, the Trustee or any agent
of the Trustee acting in its respective commercial capacities);
(g) any other investment which is consistent with the ratings of the
Notes and acceptable to the Rating Agencies and which, so long as no Insurer
Default shall have occurred and be continuing, has been approved by the Insurer.
Any of the foregoing Eligible Investments may be purchased by or
through the Owner Trustee or the Trust Collateral Agent or any of their
respective Affiliates.
"Eligible Servicer" means the Servicer, the Backup Servicer or
another Person that, at the time of its appointment as Servicer, (i) is
servicing a portfolio of motor vehicle retail installment sales contracts and/or
motor vehicle installment loans, (ii) is legally qualified and has the capacity
to service the Receivables and (iii) has demonstrated the ability professionally
and competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care.
"Eligible Sub-Servicer" means (x) OFSA or (y) any Person which at
the time of its appointment as Sub-Servicer, (i) is servicing a portfolio of
motor vehicle retail installment
10
sales contracts and/or motor vehicle installment loans, (ii) is legally
qualified and has the capacity to service the Receivables, (iii) has
demonstrated the ability professionally and competently to service a portfolio
of motor vehicle retail installment sales contracts and/or motor vehicle
installment loans similar to the Receivables with reasonable skill and care, and
(iv) is qualified and entitled to use, pursuant to a license or other written
agreement, and agrees to maintain the confidentiality of, the software which the
Servicer uses in connection with performing its duties and responsibilities
under this Agreement or otherwise has available software which is adequate to
perform its duties and responsibilities under this Agreement.
"Final Scheduled Distribution Date" means the Distribution Date
occurring in November, 2003.
"Financed Vehicle" means an automobile or light-duty truck, van or
minivan, together with all accessions thereto, securing an Obligor's
indebtedness under the respective Receivable.
"Funding Trust II" means National Auto Funding Trust II, a Delaware
business trust.
"Governmental Authority" means (a) any federal, state, county,
municipal or foregin government or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court or administrative
tribunal or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to the jurisdiction of which such Person has
consented.
"Indenture" means the Indenture dated as of June 29, 1997, among the
Issuer and ▇▇▇▇▇▇ Trust and Savings Bank, as Trust Collateral Agent and Trustee,
as the same may be amended and supplemented from time to time.
"Initial Cut-off Date" means June 29, 1997.
"Initial Receivables" means any Receivable conveyed to the Trust on
the Closing Date.
"Initial Spread Account Deposit" has the meaning set forth in the
Spread Account Agreement.
"Insurance Agreement" means the Insurance and Indemnity Agreement,
dated as of July 23, 1997, among the Insurer, the Trust, the Seller and NAFI, as
such agreement may
11
be amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof.
"Insurance Agreement Event of Default" means an "Event of Default"
as defined in the Insurance Agreement.
"Insurance Policy" means, with respect to a Receivable, any
insurance policy (including the insurance policies described in Section 4.4
hereof) benefiting the holder of the Receivable providing loss or physical
damage, credit life, credit disability, theft, mechanical breakdown or similar
coverage with respect to the Financed Vehicle or the Obligor.
"Insurer" means Financial Security Assurance Inc., a monoline
insurance company incorporated under the laws of the State of New York, or any
successor thereto, as issuer of the Note Policy.
"Insurer Default" means the occurrence and continuance of any of the
following events:
(a) the Insurer shall have failed to make a payment required under
the Note Policy in accordance with its terms;
(b) the Insurer shall have (i) filed a petition or commenced any
case or proceeding under any provision or chapter of the United States
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made
a general assignment for the benefit of its creditors, or (iii) had an order for
relief entered against it under the United States Bankruptcy Code or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a final and
nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Insurer or for all or any material portion of its
property or (ii) authorizing the taking of possession by a custodian, trustee,
agent or receiver of the Insurer (or the taking of possession of all or any
material portion of the property of the Insurer).
"Insurer Optional Deposit" means, with respect to any Distribution
Date, an amount delivered by the Insurer pursuant to Section 5.11, at its sole
option, other than amounts in respect of a Note Policy Claim Amount to the Trust
Collateral Agent for deposit into the Collection Account for any of the
following purposes: (i) to provide funds in respect of the
12
payment of fees or expenses of any provider of services to the Trust with
respect to such Distribution Date; or (ii) to include such amount as part of the
Distribution Amount for such Distribution Date to the extent that without such
amount a draw would be required to be made on the Note Policy.
"Interest Rate" means 6.35% per annum (computed on the basis of a
360-day year of twelve 30-day months).
"Investment Earnings" means, with respect to any Distribution Date
and Trust Account, the investment earnings on amounts on deposit in such Trust
Account on such Distribution Date.
"Issuer" means National Auto Finance 1997-1 Trust.
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind.
"Lien Certificate" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification issued
by the Registrar of Titles of the applicable state to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is recorded
on the original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
"Liquidated Receivable" means, with respect to any Due Period, a
Receivable with respect to which any of the following has occurred during such
Due Period: (i) 90 days have elapsed since Repossession of the related Financed
Vehicle, (ii) the Servicer (or Sub-Servicer) has in good faith determined that
all amounts that it expects to recover under such Receivable have been received,
or (iii) 90% of any Scheduled Payment on such Receivable is 120 days or more
(or, if the related Obligor is a debtor under Chapter 13 of the U.S. Bankruptcy
Code, 180 days or more) delinquent as of the end of such Due Period.
"Liquidation Expenses" means, reasonable out-of-pocket expenses
which are incurred by the Servicer or any Sub-Servicer in connection with the
liquidation of any Defaulted Receivable. Such expenses shall include, without
limitation, legal fees and expenses, any unreimbursed amount expended by the
Servicer or any Sub-Servicer pursuant to Section 4.8 (to the extent such amount
is reimbursable under the terms of Section 4.8) respecting the related
Receivable, and any related and unreimbursed expenditures for property
restoration or preservation.
13
"Liquidation Proceeds" means, with respect to a Liquidated
Receivable, all amounts realized with respect to such Receivable (other than
amounts withdrawn from the Series 1997-1 Spread Account and drawings under the
Note Policy), including any proceeds from any Insurance Policies, net of amounts
that are required to be refunded to the Obligor on such Receivable; provided,
however, that the Liquidation Proceeds with respect to any Receivable shall in
no event be less than zero.
"Lockbox Account" means any bank account maintained at a Lockbox
Bank into which collections under the Receivables are deposited in accordance
with Section 4.6.
"Lockbox Agreement" means a letter agreement among a Lockbox Bank,
the Seller, the Trust Collateral Agent, the Servicer and, if applicable, any
Sub-Servicer, relating to one or more Lockbox Accounts, as the same may be
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with the terms thereof. So long as no Insurer Default shall
have occurred and be continuing, any Lockbox Agreement is also required to be
acceptable to the Insurer.
"Lockbox Bank" means any bank at which a Lockbox Account is
maintained from time to time and whose short-term debt securities are rated A-1+
by S&P and P-1 by Moody's. So long as no Insurer Default shall have occurred and
be continuing, any Lockbox Bank is also required to be acceptable to the
Insurer.
"Mandatory Redemption Date" means the Distribution Date relating to
the Reporting Date next succeeding the last day of the Pre-Funding Period.
"Master Trust" means National Financial Auto Receivables Master
Trust.
"Monthly Pre-Funding Period Reserve Amount" means, with respect to
any Distribution Date occurring on or prior to the Distribution Date next
succeeding termination of the Pre-Funding Period, an amount equal to the excess,
if any, of (i) the product of (a) 1/12th, (b) the Interest Rate and (c) the
average daily balance of funds on deposit in the Pre-Funding Account from and
including the preceding Distribution Date (or, in the case of the first
Distribution Date, the Closing Date) to but not including the current
Distribution Date, over (ii) the amount of interest accrued on Permitted
Investments on deposit in the Pre-Funding Account from and including the
preceding Distribution Date (or, in the case of the first Distribution Date, the
Closing Date) to but not including the current Distribution Date.
"Monthly Records" means all records and data maintained by the
Servicer with respect to the Receivables, including the following with respect
to each Receivable: the account number; the originating Dealer; Obligor name;
Obligor address; Obligor home phone number;
14
Obligor business phone number; original Principal Balance; original term; Annual
Percentage Rate; current Principal Balance; current remaining term; origination
date; first payment date; final scheduled payment date; next payment due date;
date of most recent payment; new/used classification; collateral description;
days currently delinquent; number of contract extensions (months) to date;
amount of Scheduled Payment; current Insurance Policy expiration date; and past
due late charges.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc., or its successor.
"NAFI" means National Auto Finance Company, Inc and its permitted
successors and assigns hereunder in accordance with the terms hereof.
"Net Liquidation Proceeds" means, with respect to a Liquidated
Receivable, all Liquidation Proceeds net of all Liquidation Expenses.
"Net Loss Rate" means, with respect to any Due Period, the product,
expressed as a percentage, of (i) twelve and (ii) a fraction, the numerator of
which equals the excess of (A) the sum of (1) the aggregate Principal Balance of
all Receivables that became Liquidated Receivables in such Due Period and (2)
accrued and unpaid interest on such Principal Balance through the end of such
Due Period and (3) the amount of any Bankruptcy Losses, over (B) the Net
Liquidation Proceeds received by the Trust during such Due Period with respect
to all Liquidated Receivables in the Trust (including Liquidated Receivables
that became Liquidated Receivables in a prior Due Period) and the denominator of
which equals the arithmetic average of the Pool Balance as of the end of such
Due Period and the Pool Balance as of the end of the preceding Due Period.
"Note" or "Notes" has the meaning assigned to such term in the
Indenture.
"Note Balance" means initially, the aggregate principal amount of
Notes issued on the Closing Date and, thereafter, such principal amount reduced
by all amounts distributed to the Noteholders in respect of the Noteholders'
Principal Distributable Amount.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"Note Majority" means a majority by aggregate outstanding principal
balance of the Noteholders so long as the Notes are outstanding.
15
"Note Policy" means the financial guaranty insurance policy number
50609-N issued by the Insurer to the Trust Collateral Agent, as agent for the
Trustee, for the benefit of the Noteholders.
"Note Policy Claim Amount" means, for any Distribution Date, shall
equal the lesser of (i) the sum of the Scheduled Payments (as defined in the
Policy, including any endorsements thereto) for such Distribution Date and (ii)
the excess, if any, of (x) the amount required to be distributed pursuant to
clauses (i) through (iii) of Section 5.7(b) hereof (other than any Note
Prepayment Amount) over (y) the sum of the Available Amount and Deficiency Claim
Amount with respect to such Distribution Date.
"Note Pool Factor" for the Notes as of the close of business on a
Distribution Date means a seven-digit decimal figure equal to the outstanding
principal amount of such Notes (after giving effect to any distributions
reducing the Note Balance of the Notes on such Distribution Date) divided by the
original outstanding principal amount of such Class of Notes on the Closing
Date.
"Note Prepayment Amount" means, as of the Distribution Date on or
immediately following the last day of the Pre-Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount equal
to the remaining Pre-Funded Amount on deposit in the Pre-Funding Account.
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Noteholders' Interest Carryover Shortfall on such preceding Distribution Date,
over the amount in respect of interest that was actually deposited in the Note
Distribution Account on such preceding Distribution Date.
"Noteholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Noteholders' Interest
Carryover Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of (i) thirty (30) days of interest
(or, in the case of the initial Distribution Date, the number of days from and
including the Closing Date to but not including such initial Distribution Date)
at the Interest Rate on the Note Balance on such
16
Distribution Date (before reduction of the Note Balance by any distributions
made on such Distribution Date) and (ii) interest on the Noteholders' Interest
Carryover Shortfall at the Interest Rate from the preceding Distribution Date
through the current Distribution Date, to the extent permitted by law.
"Noteholders' Principal Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Noteholders' Principal Distributable
Amount and any outstanding Noteholders' Principal Carryover Shortfall from the
preceding Distribution Date over the amount in respect of principal that was
actually deposited in the Note Distribution Account on such Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to
(i) any Distribution Date prior to the Final Scheduled Distribution Date, the
sum of (a) 91% of the Principal Distributable Amount, (b) amounts transferred
from the Pre-Funding Account to the Note Distribution Account on such
Distribution Date, if any, pursuant to Section 5.7(a)(ii), and (c) the
Noteholders' Principal Carryover Shortfall with respect to such Distribution
Date, and (ii) the Final Scheduled Distribution Date, the Note Balance (before
giving effect to any distribution on the Notes on such Final Scheduled
Distribution Date).
"Notice of Claim" means the notice required to file a claim under
the Policy.
"Obligor" on a Receivable means the purchaser or co-purchasers of
the Financed Vehicle and any other Person who owes payments under the
Receivable.
"Officers' Certificate" means a certificate signed by a Co-Trustee
of the Seller or Funding Trust II, as the case may be, or the Chairman of the
Board, President, Executive Vice President, Senior Vice President, Vice
President, or Assistant Vice President of the Custodian, NAFI, or by a Servicing
Official, as the case may be, and delivered to the Trust Collateral Agent, as
required by this Agreement.
"OFSA" means Omni Financial Services of America, Inc., a Florida
corporation, or any substitute Sub-Servicer performing substantially the same
services on behalf of the Servicer as OFSA performs pursuant to the Amended
Restated Servicing Agreement, dated as of December 8, 1994, between the Servicer
and World Omni Financial Corp. ("WOFCO"), as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and the terms of this Agreement, and the Assignment and Assumption
Agreement dated as of October 23, 1995 between WOFCO and OFSA pursuant to which
WOFCO assigned its subservicing duties to OFSA.
17
"Opinion of Counsel" means a written opinion in form reasonably
satisfactory to the Trust Collateral Agent (and the Insurer if such opinion is
addressed to the Insurer) of counsel reasonably satisfactory to the Trust
Collateral Agent (and the Insurer if such opinion is addressed to the Insurer).
Any such counsel may be counsel to the Seller.
"Original Pool Balance" means the sum, as of any date, of the Pool
Balance as of the Initial Cut-off Date.
"Originator" means consumer finance companies, depository
institutions and other financial institutions engaged in the financing of motor
vehicle retail installment sale contracts from whom NAFI acquired Receivables;
provided, however, that "Originators" shall not include Dealers.
"Originator Agreement" means an agreement pursuant to which NAFI
acquired Receivables from an Originator, as any of such agreements has been and
may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof..
"Other Conveyed Property" means all property conveyed by the Seller
to the Trust pursuant to Section 2.1(b) through (h) and Section 2.2(a)(ii)
through (x) of this Agreement.
"Owner Trust Estate" has the meaning assigned to such term in the
Trust Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, its
successors in interest or any successor Owner Trustee under the Trust Agreement.
"Person" means any individual, corporation, estate, partnership,
joint venture, association, joint stock company, trust (including any
beneficiary thereof), unincorporated organization or government or any agency or
political subdivision thereof or any other entity.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Pool Balance" means, as of any date of determination, the Original
Pool Balance, plus the aggregate Principal Balance of the Subsequent
Receivables, if any, sold to the Trust, reduced by any principal amounts
previously paid (excluding Purchased Receivables and Liquidated Receivables).
18
"Preference Claim" has the meaning set forth in Section 6.2 hereof.
"Pre-Funded Amount" means, with respect to any Distribution Date,
the amount on deposit in the Pre-Funding Account, (exclusive of Pre-Funding
Earnings) which initially shall be $6,689,091.18
"Pre-Funding Account" has the meaning specified in Section 5.1.
"Pre-Funding Earnings" means any Investment Earnings on amounts on
deposit in the Pre-Funding Account.
"Pre-Funding Period" means the period beginning on and including the
Closing Date and ending on the first to occur of (a) the first date on which the
amount on deposit in the Pre-Funding Account (after giving effect to any
transfers therefrom in connection with the transfer of Subsequent Receivables to
the Issuer on such date) is less than $100,000, (b) the date on which an Event
of Default occurs under the Indenture or a Servicer Termination Event occurs and
(c) the close of business on October 30, 1997.
"Pre-Funding Period Reserve Account" means the account designated as
such, established and maintained pursuant to Section 5.2.
"Pre-Funding Period Reserve Account Initial Deposit" means
$86,824.40 deposited on the Closing Date.
"Principal Balance" means, with respect to any Receivable, as of any
date, the Amount Financed minus (i) the principal portion of each payment
applied to such Receivable on or after the applicable Cut-off Date in accordance
with the terms of such Receivable and processed by the Servicer or a
Sub-Servicer on or before such date and (ii) any Bankruptcy Loss in respect of
such Receivable; provided, however, that for any date following the Due Period
in which the remaining principal balance of such Receivable was included in the
Principal Distributable Amount as a Liquidated Receivable or was subject to a
principal prepayment in full (including a repurchase pursuant to Sections 2.2,
2.5, 3.2 or 4.1), the Principal Balance for such Receivable shall be zero.
"Principal Distributable Amount" means, with respect to any
Distribution Date (other than the Final Scheduled Distribution Date), the sum of
(i) that portion of all collections on the Receivables (other than Liquidated
Receivables and Purchased Receivables and, to the extent included in clause (iv)
below, the Principal Balance of all Retransfer Default Receivables) allocable to
principal, including all full and partial principal prepayments, deposited into
the Collection Account during the related Due Period, (ii) the Principal Balance
19
of all Receivables that became Liquidated Receivables during the related Due
Period (other than Liquidated Receivables that became Purchased Receivables
during such Due Period and, to the extent included in clause (iv) below, the
Principal Balance of all Retransfer Default Receivables), (iii) the portion of
the Purchase Amount allocable to principal of all Receivables that became
Purchased Receivables on or prior to the related Reporting Date and subsequent
to the preceding Reporting Date, (iv) in the sole discretion of the Insurer, the
Principal Balance as of the related Reporting Date of all or any part of the
Receivables that were required to be purchased pursuant to Sections 2.2, 2.5,
3.2 and 4.1 but were not purchased, and (v) the aggregate amount of Bankruptcy
Losses that occurred during the related Due Period.
"Purchase Agreement" means the Purchase and Contribution Agreement
between the Seller and NAFI, dated as of July 23, 1997, as such Agreement may be
amended from time to time.
"Purchase Amount" means, with respect to any Receivable required to
be retransferred pursuant to Sections 3.2 or 4.1, an amount equal to the sum of
(I) 100% of the Principal Balance thereof on the date of retransfer and (ii)
unpaid accrued interest thereon from the date to which interest was last paid by
the Obligor to the due Date in the Due Period in which such retransfer occurs.
For purposes of determining the Purchase Amount of any Receivable, the Principal
Balance thereof on the date of retransfer shall not be reduced to zero as a
result of its classification as a Liquidated Receivable.
"Purchased Receivable" means a Receivable purchased as of the close
of business on the last day of a Due Period by the Servicer pursuant to Section
4.7 or repurchased by the Seller or NAFI pursuant to Section 3.2 or Section
11.1(a).
"Rating Agency" means Moody's and Standard & Poor's. If no such
organization or successor maintains a rating on the Notes, "Rating Agency" shall
be a nationally recognized statistical rating organization or other comparable
Person designated by the Insurer.
"Rating Agency Condition" means, with respect to any action, that
each Rating Agency shall have been given 10 days' (or such shorter period as
shall be acceptable to each Rating Agency) prior notice thereof and that each of
the Rating Agencies shall have notified the Seller, the Servicer, the Insurer,
the Owner Trustee and the Trust Collateral Agent in writing that such action
will not result in a reduction or withdrawal of the then current rating of the
Notes.
"Receivable" means each motor vehicle retail installment sale
contract and security agreement (including any and all rights to receive
payments thereunder on and after
20
the applicable Cut-off Date and security interests in the Financed Vehicle
securing such contract or note) assigned and transferred to the Issuer hereunder
as of the Closing Date or a Subsequent Transfer Date and not reassigned,
retransferred or otherwise released in accordance herewith, each such Receivable
being identified in a Receivable Schedule attached to a Subsequent Transfer
Agreement.
"Receivable Documents" means, with respect to a Receivable, all
papers and documents (including those contained in the Receivable File) and all
other papers and records (including computerized data) of whatever kind or
description, whether developed or originated by NAFI, a Dealer, an Originator,
the Servicer or another Person, required to document the Receivable or to
service the Receivable.
"Receivable Files" means with respect to a Receivable, the fully
executed original of such Receivable; the assignment of such Receivable by a
Dealer or Originator to NAFI, the original Title Document or UCC financing
statement evidencing that the security interest in a Financed Vehicle granted to
NAFI under such Receivable has been perfected under applicable state law (except
for any Title Documents or UCC financing statements not returned from the
applicable public records office, in which case NAFI will deliver to National
Financial, on the Closing Date or the Subsequent Transfer Date, as the case may
be, an Officer's Certificate of NAFI indicating that the original of such Title
Document has been applied for at, or the original of such UCC financing
statement was delivered to, such public office and shows NAFI as the lienholder
or secured party and that NAFI will deliver the originals thereof when returned
from such office); the original of any assumption agreement or any modification,
extension or refinancing agreement; and the original application of the related
Obligor to obtain the financing extended by such Receivable.
"Receivable Rate" means the annual percentage rate (as such term is
used with respect to the federal Truth-in-Lending Act) of interest borne by, and
indicated on, a Contract.
"Receivables Schedule" means the schedule of Receivables attached
hereto as Schedule A and with respect to Subsequent Receivables delivered
concurrently with the execution and delivery of a Subsequent Transfer Agreement
to the Trust Collateral Agent and attached thereto as Schedule 1, such schedule
identifying each Receivable being transferred and assigned to the Trust pursuant
to this Agreement or the related Subsequent Transfer Agreement by the name of
the Obligor and setting forth as to each such Receivable its Principal Balance
as of the applicable Cut-off Date, loan number, Receivable Rate, scheduled
monthly payment of principal and interest, final maturity date and original
principal amount.
"Record Date" with respect to each Distribution Date means the
Business Day immediately preceding such Distribution Date, unless otherwise
specified in the Agreement.
21
"Registrar of Titles" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"Reporting Date" means, with respect to a Distribution Date, the
earlier of (i) the 15th day of the calendar month in which such Distribution
Date occurs, and (ii) the fourth Business Day preceding such Distribution Date.
"Repossession" means any action taken or to be taken pursuant to the
UCC or other applicable laws in connection with recovery on a Defaulted
Receivable (including any Liquidated Receivable), including repossession of the
related Financed Vehicle with or without judicial proceedings, sale of such
Financed Vehicle at public or private sale, retention of such Financed Vehicle
in satisfaction of the Obligor's obligations under such Defaulted Receivable, or
a levy on and sheriff's sale of the related Financed Vehicle in enforcement of a
judgment on such Defaulted Receivable or by voluntary surrender or otherwise.
"Required Reserve Amount" means, with respect to any Distribution
Date, an amount equal to the product of (i) a per annum rate equal to the
Interest Rate less 250 basis points (2.5%), (ii) the amount of funds on deposit
in the Pre-Funding Account after giving effect to any withdrawals therefrom on
such Distribution Date and (iii) a fraction, the numerator of which is the
number of days from and including such Distribution Date to (but excluding) the
Distribution Date immediately following the end of the Pre-Funding Period, and
the denominator of which is 360.
"Requisite Amount" has the meaning specified in the Spread Account
Agreement.
"Responsible Officer" means, with respect to the Trust Collateral
Agent, any officer within the Corporate Trust Office of the Trust Collateral
Agent, including any Managing Director, Vice President, Assistant Vice
President, Assistant Treasurer, Assistant Secretary or any other officer of the
Trust Collateral Agent, customarily performing functions similar to those
performed by any of the above designated officers, and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
"Retransfer Default Receivable" means any Receivable with respect to
which the Seller or the Servicer is required to deposit in the Collection
Account the related Purchase Amount pursuant to Section 2.2, Section 2.5,
Section 3.2 or Section 4.1 and has not so deposited such amount on the Reporting
Date on which it is required to repurchase such
22
Receivable following receipt of notice from the Trust Collateral Agent that such
Receivable is required to be retransferred.
"Retransfer Receivable" means any Receivable retransferred to the
Seller or the Servicer pursuant to Sections 2.2, 2.5, 3.2 or 4.1 hereof.
"Sale Agreement" means the Sale Agreement, dated as of even date
herewith, between Funding Trust II and the Seller, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
"Schedule of Representations" means the Schedule of Representations
and Warranties attached hereto as Schedule B.
"Scheduled Payment" means, with respect to any Due Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Due Period. If after the Closing Date, the Obligor's
obligation under a Receivable with respect to a Collection Period has been
modified so as to differ from the amount specified in such Receivable as a
result of (i) the order of a court in an insolvency proceeding involving the
Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended, or (iii) modifications or extensions of the Receivable permitted by
Sections 4.2(b) and (c), the Scheduled Payment with respect to such Due Period
shall refer to the Obligor's payment obligation with respect to such Due Period
as so modified.
"Seller" means National Financial Auto Funding Trust, a Delaware
business trust, and its successors in interest to the extent permitted
hereunder.
"Series 1997-1 Spread Account" means the account designated as such,
established and maintained pursuant to the Spread Account Agreement.
"Servicer" means National Auto Finance Company, Inc., as the
servicer of the Receivables, and each successor Servicer pursuant to Section
10.3.
"Servicer Extension Notice" means the notice specified in Section
4.16.
"Servicer Termination Event" means an event specified in Section
10.1.
"Servicing Fee" has the meaning specified in Section 4.9.
"Servicing Fee Rate" means 2.00% per annum.
23
"Servicing Official" means any employee of the Servicer involved in,
or responsible for, the administration and servicing of the Receivables whose
name appears on a list of servicing employees furnished to the Trust Collateral
Agent and the Insurer by the Servicer, as such list may from time to time be
amended.
"Servicer's Certificate" means an Officers' Certificate of the
Servicer delivered pursuant to Section 4.12, substantially in the form of
Exhibit B.
"Simple Interest Method" means the method of allocating a fixed
level payment on an obligation between principal and interest, pursuant to which
the portion of such payment that is allocated to interest is equal to the
product of the fixed rate of interest on such obligation multiplied by the
period of time (expressed as a fraction of a year, based on the actual number of
days in the calendar month and 365 days in the calendar year) elapsed since the
preceding payment under the obligation was made.
"Simple Interest Receivable" means a Receivable under which the
portion of the payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"Spread Account Agreement" means the Spread Account Agreement dated
as of July 23, 1997 among the Insurer, the Seller, the Trust Collateral Agent
and the Collateral Agent, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, Inc., or its successor.
"Subsequent Cut-off Date" means, with respect to any Subsequent
Transfer Date, the third Business Day prior thereto.
"Subsequent Purchase Agreement" means an agreement by and between
the Seller and NAFI pursuant to which the Seller will acquire Subsequent
Receivables.
"Subsequent Receivables" means the Receivables transferred to the
Issuer pursuant to Section 2.2, which shall be listed on Schedule A to the
related Subsequent Transfer Agreement.
"Subsequent Transfer Agreement" means the agreement among the
Issuer, the Seller and the Servicer, substantially in the form of Exhibit A.
24
"Subsequent Transfer Date" means, with respect to Subsequent
Receivables, any date, occurring not more frequently than once a month, during
the Pre-Funding Period on which Subsequent Receivables are to be transferred to
the Trust pursuant to this Agreement, and a Subsequent Transfer Agreement is
executed and delivered to the Trust and the Insurer.
"Sub-Servicer" means any Eligible Sub-Servicer with whom NAFI has
entered into a Sub-Servicing Agreement. Initially, the Sub-Servicer will be
OFSA.
"Sub-Servicer Account" means the account maintained by OFSA with
Mellon Financial Services to which Obligors have been or will be instructed to
remit payments in respect of the Receivables.
"Sub-Servicing Agreement" means the written contract between NAFI
and any Sub-Servicer relating to servicing and/or administration of the
Receivables as permitted by Section 4.2 hereof.
"Supplemental Servicing Fee" means, with respect to any Due Period,
any payments received from an Obligor or a Dealer in connection with any
application fees, tax processing fees, wire transfer fees, express mail fees,
insurance premiums, late charges, taxes, fees or other charges imposed by any
Governmental Authority (other than any extension fees).
"Term of the Note Policy" has the meaning specified for "Term of
This Policy" in the Note Policy.
"Title Documents" means, with respect to any Financed Vehicle, the
actual motor vehicle title or certificate of title for such Financed Vehicle
issued by the Registrar of Titles or other government agency in the jurisdiction
in which such Financed Vehicle is registered; alternatively, in those certain
jurisdictions whose law requires that the original of the actual motor vehicle
title or certificate of title be possessed by the Obligor, then, in lieu of the
actual title or certificate of title, Title Documents shall mean such duplicate
titles, certificates or other documents as are permitted, required and/or
contemplated to be possessed by the secured party under the laws of such
jurisdiction.
"Transaction Documents" shall have the meaning assigned thereto in
the Insurance Agreement.
"Trigger Event" has the meaning assigned thereto in the Spread
Account Agreement.
"Trust" means the Issuer.
25
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.1.
"Trust Agreement" means the Trust Agreement dated as of July 21,
1997, between the Seller and the Owner Trustee, as the same may be amended and
supplemented from time to time.
"Trust Certificates" means the certificates issued pursuant to the
Trust Agreement evidencing beneficial ownership interests in the Trust.
"Trust Collateral Agent" means the Person acting as Trust Collateral
Agent hereunder, its successors in interest and any successor Trust Collateral
Agent hereunder.
"Trust Officer" means, (i) in the case of the Trust Collateral
Agent, any officer within the Corporate Trust Office of the Trust Collateral
Agent, including any Managing Director, Vice President, Assistant Vice
President, Assistant Treasurer, Assistant Secretary or any other officer of the
Trust Collateral Agent, customarily performing functions similar to those
performed by any of the above designated officers, and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject., and
(ii) in the case of the Owner Trustee, any officer in the Corporate Trust Office
of the Owner Trustee or any agent of the Owner Trustee under a power of attorney
with direct responsibility for the administration of this Agreement or any of
the Transaction Documents on behalf of the Owner Trustee.
"Trust Property" means the property and proceeds conveyed pursuant
to Section 2.1 and Section 2.2. Although the Seller has pledged the Series
1997-1 Spread Account to the Trust Collateral Agent and the Insurer pursuant to
the Spread Account Agreement, the Series 1997-1 Spread Account shall not under
any circumstances be deemed to be a part of or otherwise includable in the Trust
or the Trust Property.
"Trustee" means the Person acting as Indenture Trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction on the date of the Agreement.
26
"Unearned Finance Charge" means, with respect to any Receivable, the
amount of the add-on finance charge that, under the term of such Receivable,
would be required to be refunded or credited to the related Obligor in
accordance with such Receivable if such Receivable were then prepaid in full.
SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Indenture, or, if not defined therein,
in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.
(c) As used in this Agreement, in any instrument governed hereby and
in any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms not defined in this Agreement or in any such
instrument, certificate or other document, and accounting terms partly defined
in this Agreement or in any such instrument, certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such instrument, certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such instrument, certificate
or other document shall control.
(d) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
SECTION 1.3. Usage of Terms. With respect to all terms used in this
Agreement, the singular includes the plural and the plural includes the
singular; words importing any gender include the other gender; references to
"writing" include printing, typing, lithography, and other means of reproducing
words in a visible form; references to agreements and other contractual
instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
the terms "include" or "including" mean "include without limitation" or
"including without limitation; "the words
27
"herein", "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision, and Article, Section, Schedule and Exhibit references, unless
otherwise specified, refer to Articles and Sections of Schedules and Exhibits to
this Agreement.
SECTION 1.4. Certain References. All references to the Principal Balance of
a Receivable as of any date of determination shall refer to the close of
business on such day.
SECTION 1.5. No Recourse. Without limiting the obligations of NAFI
hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of NAFI, or
of any predecessor or successor of NAFI.
SECTION 1.6. Action by or Consent of Noteholders. Whenever any provision of
this Agreement refers to action to be taken, or consented to, by Noteholders,
such provision shall be deemed to refer to the Noteholder of record as of the
Record Date immediately preceding the date on which such action is to be taken,
or consent given, by Noteholders. Solely for the purposes of any action to be
taken, or consented to, by Noteholders, any Note registered in the name of NAFI
or any Affiliate thereof shall be deemed not to be outstanding; provided,
however, that, solely for the purpose of determining whether a Trust Officer of
the Trustee or the Trust Collateral Agent is entitled to rely upon any such
action or consent, only Notes which the Owner Trustee, the Trust Officer of the
Trustee or the Trust Collateral Agent, respectively, actually knows to be so
owned shall be so disregarded.
SECTION 1.7. Material Adverse Effect. Whenever a determination is to be
made under this Agreement as to whether a given event, action, course of conduct
or set of facts or circumstances could or would have a material adverse effect
on the Noteholders (or any similar or analogous determination), such
determination shall be made without taking into account the insurance provided
by the Note Policy.
SECTION 1.8. Calculations as to Principal and Interest in Respect of
Receivables. For all purposes of this Agreement the allocation of a payment on a
Receivable between principal and interest shall be made based upon the
amortization method provided in such Receivable. For purposes of allocating a
pay-ahead payment on a Receivable between principal and interest, the pay-ahead
shall be deemed to have been received on the date it was actually due. For all
purposes of this Agreement, no amount shall be treated as collected under a
Receivable until such amount has been deposited into the Collection Account.
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ARTICLE II
Conveyance of Receivables
SECTION 2.1. Conveyance of Initial Receivables. In consideration of the
Issuer's delivery to or upon the order of the Seller on the Closing Date of the
net proceeds from the sale of the Notes and the other amounts to be distributed
from time to time to the Seller in accordance with the terms of this Agreement,
the Seller does hereby sell, transfer, assign, set over and otherwise convey to
the Issuer, without recourse (subject to the obligations set forth herein), all
right, title and interest of the Seller in and to the following, whether now
owned or hereafter acquired:
(a) the Initial Receivables and all monies received thereon on or after
the Initial Cut-off Date (including amounts due on or before the Initial Cut-off
Date but received by NAFI, the Seller or the Issuer on or after the Initial
Cut-off Date);
(b) any proceeds and the right to receive proceeds with respect to the
Initial Receivables from claims on any physical damage, credit life, disability
insurance or other policies covering Financed Vehicles or Obligors, including
rebates of insurance premiums relating to the Receivables and any proceeds from
the liquidation of the Initial Receivables;
(c) all rights against Dealers pursuant to Dealer Agreements or against
Originators pursuant to Originator Agreements;
(d) the related Receivables Files and any and all other documents that
NAFI keeps on file in accordance with its customary procedures relating to the
Receivables, the Obligors or the Financed Vehicles;
(e) property (including the right to receive future Liquidation Proceeds)
that secures a Receivable and that has been acquired by or on behalf of the
Trust pursuant to liquidation of such Receivable;
(f) all funds on deposit from time to time in the Trust Accounts (less all
investments and proceeds thereof), and all rights of the Issuer therein;
(g) the rights and benefits, but none of its obligations or burdens, under
the Conveyance Agreements, including the delivery requirements, representations
and warranties and the cure and repurchase obligations of NAFI under the
Purchase Agreement; and
(h) the proceeds of any and all of the foregoing.
29
The foregoing transfer and assignment does not constitute and is not
intended to result in an assumption by the Trust Collateral Agent, any
Noteholder or the Insurer of any obligation of the Seller, the Master Trust,
Funding Trust II or NAFI to the Obligors, Dealers, insurers or any other Person
in connection with the Receivables, the Receivable Files, or the insurance
policies or any agreements or instruments relating to any of them. It is the
intention of the Seller that the transfer and assignment contemplated by this
Agreement shall constitute a sale of the Receivables and other Trust Property
from the Seller to the Issuer and the beneficial interest in and title to the
Receivables and the other Trust Property shall not be part of the Seller's
estate in the event of the filing of a bankruptcy petition by or against the
Seller under any bankruptcy law. In the event that, notwithstanding the intent
of the Seller, the transfer and assignment contemplated hereby is held not to be
a sale, this Agreement shall constitute a grant of a security interest in the
property referred to in this Section 2.1 for the benefit of the Noteholders and
the Insurer.
The Seller intends that the transfer and assignment of Receivables by the
Seller to the Trust constitute an absolute transfer to the Trust of all the
Seller's right, title, and interest in and to the Receivables and the remainder
of the Trust Property (other than the Note Policy); provided that, in the event
that, notwithstanding the intent of the Seller, the transfer is not held to be a
sale, then it is intended that the conveyance shall be deemed to be a grant of a
security interest in the Receivables and the remainder of the Trust Property. By
the transfer, assignment and set-over contemplated by this Section 2.1, the
Seller further grants and transfers to the Trust Collateral Agent, for the
benefit of all Noteholders and the Insurer, a first priority, perfected security
interest, as their respective interests appear in Section 5.7, in all of the
Seller's right, title and interest in, to and under the Receivables and the
remainder of the Trust Property, whether now existing or hereafter acquired, and
agrees that this Agreement shall also constitute a security agreement under
applicable law. Within two Business Days of the Closing Date, the Seller shall
have filed a UCC financing statement or statements, appropriate under the
applicable UCC, to reflect the assignment of the Receivables and the remainder
of the Trust Property (other than the Note Policy) by the Seller to the Trust
Collateral Agent and the Insurer and to protect the Noteholders' and the
Insurer's interest in the Receivables, their proceeds and the Financed Vehicles,
against all other Persons and shall thereafter file any appropriate continuation
statements in respect thereof. During the term of this Agreement, the Seller
shall not change its name, identity or structure or relocate its chief executive
office or principal place of business without first giving at least 30 days'
advance written notice to the Trust Collateral Agent, the Servicer and the
Insurer; provided however, that the Trust Collateral Agent, the Servicer and the
Insurer shall, subject to the last sentence of this paragraph, have no right or
power to prohibit a change in the Seller's name, identity or structure or a
relocation of, its chief executive office or principal place of business. If any
change in the Seller's name, identity or structure or the relocation of its
chief executive office or principal place of business would make any financing
or continuation statement or notice of
30
lien filed in connection with this Agreement misleading within the meaning of
applicable provisions of the UCC or any title statute, the Seller, promptly but
in no event later than thirty days after the effective date of such change,
shall file such amendments or take such other actions as may be required to
preserve and protect the Trust Collateral Agent's interest in the Receivables
and proceeds thereof and the Financed Vehicles and the remainder of the Trust
Property. Promptly after filing such amendments or taking such other action, the
Seller shall deliver to the Trust Collateral Agent and the Insurer an Opinion of
Counsel stating that all financing statements, continuation statements or
amendments thereto necessary to continue the perfection of the interest of the
Trust Collateral Agent in the Trust Property have been filed and reciting the
details thereof.
SECTION 2.2. Conveyance of Subsequent Receivables.
(a) Subject to the conditions set forth in paragraph (b) below, in
consideration of the Issuer's delivery on each related Subsequent Transfer Date
to or upon the order of the Seller of the amount described in Section 5.9(a) to
be delivered to the Seller, the Seller does hereby sell, transfer, assign, set
over and otherwise convey to the Issuer without recourse (subject to the
obligations set forth herein), all right, title and interest of the Seller in
and to:
(i) the Subsequent Receivables listed on Schedule A to the related
Subsequent Transfer Agreement and all monies received thereon on or after
the related Subsequent Cut-off Date (including amounts due on or before
the Subsequent Cut-off Date but received by NAFI, the Seller or the Issuer
on or after the Subsequent Cut-off Date);
(ii) any proceeds and the right to receive proceeds with respect to
such Subsequent Receivables from claims on any physical damage, credit
life, disability or other insurance policies covering the related Financed
Vehicles or Obligors, including rebating of insurance premiums relating to
the Receivables, and any proceeds from the liquidation of the Subsequent
Receivables;
(iii) all rights of the Seller against the Dealers pursuant to
Dealer Agreements; or against Originators pursuant to Originator
Agreements;
(iv) the related Receivables Files; and any and all other documents
that NAFI or the Seller keeps on file in accordance with its customary
procedures relating to the Receivables, the Obligors or the Financed
Vehicles;
(v) property (including the right to receive future Liquidation
Proceeds) that secures a Receivable and that has been acquired by or on
behalf of the Trust pursuant to liquidation of such Receivable;
31
(vi) all funds on deposit from time to time in the Trust Accounts
(less all investments and proceeds thereof), and all rights of the Issuer
therein;
(vii) all of the Seller's right, title and interest in its rights
and benefits, but none of its obligations or burdens, under each of the
Subsequent Purchase Agreements, including the delivery requirements,
representations and warranties and the cure and repurchase obligations of
NAFI under each of the Subsequent Purchase Agreements, on or after the
related Subsequent Cut-off Date; and
(viii) the proceeds of any and all of the foregoing.
(b) The Seller shall transfer to the Issuer the Subsequent Receivables and
the other property and rights related thereto described in paragraph (a) above
during the Pre-Funding Period (but not more often than once during each calendar
month or as more frequently consented to in writing by the Insurer) only upon
the satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:
(i) the Seller shall have provided the Trust Collateral Agent, the
Owner Trustee, each Rating Agency and the Insurer with an Addition Notice
not later than ten days prior to such Subsequent Transfer Date and shall
have provided any information reasonably requested by any of the foregoing
with respect to the Subsequent Receivables;
(ii) the Seller shall have delivered the Receivables Schedule for
the Subsequent Receivables to be transferred to the Trust on such
Subsequent Transfer Date to each Rating Agency and the Insurer at least
three Business Days prior to such Subsequent Transfer Date, and the Trust
Collateral Agent and the Insurer shall have received, prior to 10:00 a.m.,
New York City time, on such Subsequent Transfer Date, written notice from
each Rating Agency to the effect that such transfer will result in the
downgrade or withdrawal of the rating then assigned by such Rating Agency
to the Notes;
(iii) the Seller shall have delivered to the Owner Trustee and the
Trust Collateral Agent a duly executed Subsequent Transfer Agreement which
shall include supplements to Schedule A, listing the Subsequent
Receivables and a copy thereof to the Insurer;
(iv) the Seller shall, to the extent required by Section 4.2, have
deposited or caused to be deposited in the Collection Account all
collections in respect of the Subsequent Receivables;
32
(v) as of each Subsequent Transfer Date, no Servicer Termination
Event or Insurance Agreement Event of Default shall have occurred and be
continuing;
(vi) after giving effect to any transfer of Subsequent Receivables
on a Subsequent Transfer Date, the Receivables transferred to the Trust
pursuant hereto shall meet the following criteria (based on the
characteristics of the Initial Receivables on the Initial Cut-off Date and
the Subsequent Receivables on the related Subsequent Cut-off Dates): (i)
the weighted average APR of the Receivables transferred to the Trust shall
not be less than 18.0%, unless, with the prior consent of the Rating
Agencies and the Insurer, the Seller increases the Initial Spread Account
Deposit with respect to such Subsequent Receivables by the amount required
by the Insurer; (ii) the weighted average remaining term of the
Receivables transferred to the Trust shall not be greater than 55 months;
(iii) not more than 80% of the Aggregate Principal Balance shall represent
loans to finance the purchase of used Financed Vehicles; and (iv) the
final scheduled payment date on the Receivable with the latest maturity
shall not be later than October 30, 2002;
(vii) each of the representations and warranties made by the Seller
pursuant to Section 8.1 and pursuant to Section 3.1 with respect to the
Subsequent Receivables to be transferred on such Subsequent Transfer Date
shall be true and correct as of the related Subsequent Transfer Date, and
the Seller shall have performed all obligations to be performed by it
hereunder on or prior to such Subsequent Transfer Date, including, without
limitation, its obligations set forth in Section 2.4(b);
(viii) the Insurer (so long as no Insurer Default shall have
occurred and be continuing), in its absolute and sole discretion, shall
have approved the transfer of such Subsequent Receivables to the Trust,
the Insurer shall have been reimbursed for any fees and expenses incurred
by the Insurer in connection with the granting of such approval;
(ix) on or before such Subsequent Transfer Date, the Seller shall
deliver to the Trust Collateral Agent (with copies to the Insurer) (A) an
Officer's Certificate of NAFI substantially in the form attached hereto as
Exhibit 2.2A, (b) an Officer's Certificate of the Seller substantially in
the form attached hereto as Exhibit 2.2B, and (C) a Subsequent Transfer
Agreement executed by the Seller and including, as an attachment thereto,
a Receivables Schedule identifying the Subsequent Receivables being
transferred and assigned to the Trust on such Subsequent Transfer Date;
and
33
(x) on or before such Subsequent Transfer Date, the Seller shall
have provided any information reasonably requested by the Rating Agencies,
the Insurer or the Trust Collateral Agent with respect to such Additional
Contracts.
The Seller covenants that in the event any of the foregoing conditions
precedent are not satisfied with respect to any Subsequent Receivable on the
date required as specified above, the Seller will immediately repurchase such
Subsequent Receivable from the Trust, at a price equal to the Purchase Amount
thereof, in the manner specified in Section 4.7.
(c) Within ten Business Days after the last day of the Pre-Funding Period,
the Seller shall, at its cost and expense, cause KPMG Peat Marwick or such other
nationally recognized firm of public accountants as may be acceptable to the
Insurer to deliver to the Insurer a report covering the Receivables then in the
Trust and addressing such procedures as the Seller and the Insurer may agree
upon.
SECTION 2.3. Further Encumbrance of Trust Property. (a) Immediately upon
the conveyance to the Trust by the Seller of any item of the Trust Property
pursuant to Section 2.1 or 2.2, all right, title and interest of the Seller in
and to such item of Trust Property shall terminate, and all such right, title
and interest shall vest in the Trust, in accordance with the Trust Agreement and
Sections 3802 and 3805 of the Business Trust Statute (as defined in the Trust
Agreement).
(b) Immediately upon the vesting of the Trust Property in the Trust, the
Trust shall have the sole right to pledge or otherwise encumber such Trust
Property. Pursuant to the Indenture and contemporaneously with such property
vesting in the Trust pursuant to clause (a) above, the Trust shall grant a
security interest in the Trust Property to secure the repayment of the Notes.
The Certificates shall represent the beneficial ownership interest in the Trust
Property, and the Certificateholders shall be entitled to receive distributions
with respect thereto as set forth herein.
(c) Prior to the payment in full on the Notes, the payment of all amounts
due to the Insurer under the Insurance Agreement, the end of the Term of the
Note Policy and the surrender of the Note Policy by the Collateral Agent to the
Insurer, the Trust Collateral Agent shall hold the Trust Property for the
exclusive benefit of the Trustee on behalf of the Noteholders and the Insurer.
Following the payment in full of the Notes and the release and discharge of the
Indenture, all covenants of the Trust contained in Article III of the Indenture
shall, until payment in full of the Certificates, remain as covenants of the
Trust for the benefit of the Certificateholders, enforceable by the
Certificateholders to the same extent that such covenants were enforceable by
the Noteholders prior to the discharge of the Indenture. Any
34
rights of the Trust Collateral Agent under Article III of the Indenture
following discharge of the Indenture shall thereupon vest in Certificateholders.
(d) The Trust Collateral Agent shall, at such time as there are no
Securities outstanding and all sums due to (i) the Trustee or any agent or
counsel thereof pursuant to the Indenture, (ii) the Insurer under the Insurance
Agreement and (iii) the Trust Collateral Agent pursuant to this Agreement, have
been paid, and the Term of the Note Policy has expired and the Trust Collateral
Agent has surrendered the Note Policy to the Insurer, release any remaining
portion of the Trust Property to the Seller.
SECTION 2.4. (a) The Servicer shall be responsible for maintaining, and
shall maintain and cause the respective Sub-Servicers, if any, to maintain, a
complete set of books and records (including tapes and disks for computer use)
for each Receivable to the extent that such books and records were delivered to
the Servicer or such Sub-Servicer or were developed by it during the course of
servicing such Receivable. The Servicer shall, and shall cause the respective
Sub-Servicers to, maintain such books of account and other records as will
enable the Trust Collateral Agent to determine the ownership status of each
Receivable; provided however, that neither the Servicer nor any Sub-Servicer
shall be required to physically ▇▇▇▇ or segregate any Receivables or other
Receivable Documents to indicate such ownership status. Promptly after the
Closing Date and each Subsequent Transfer Date, the Seller and the Servicer
shall deliver to the Custodian all Receivable Documents in its possession or
under its control, and shall promptly deliver to the Custodian any Receivable
Documents that subsequently come into its possession or within its control. NAFI
hereby warrants, represents and covenants to and with the Trust Collateral Agent
and the Insurer that recordation of the name of NAFI as lienholder in the Title
Documents respecting any Financed Vehicle as well as such lien itself is
maintained by NAFI as agent for the Trust Collateral Agent for the benefit of
the Trust and NAFI has no equitable ownership in the Receivables, except as it
may have by virtue of ownership of a Trust Certificate or an equity interest in
the Seller or any Noteholder.
(b) On the Closing Date, the Seller shall deliver to the Trust Collateral
Agent for deposit in the Collection Account, or to the extent received by the
Servicer or any Sub-Servicer, cause the Servicer to deliver or cause to be
delivered to the Trust Collateral Agent for deposit in the Collection Account,
all payments received on the Receivables on or after the Initial Cut-off Date
and on or before the second Business Day preceding the Closing Date. Within two
Business Days after a Subsequent Transfer Date, the Seller shall deliver to the
Trust Collateral Agent for deposit in the Collection Account, or to the extent
received by the Servicer or any Sub-Servicer, cause the Servicer to deliver or
cause to be delivered to the Trust Collateral Agent for deposit in the
Collection Account, all payments received on the Receivables on or after the
applicable Cut-off Date and on or before such Subsequent Transfer Date.
35
SECTION 2.5. The Trust Collateral Agent, based solely upon the
representations of the Custodian, acknowledges receipt by the Custodian as of
the Closing Date and each Subsequent Transfer Date, as the case may be, of a
Receivable File relating to each Receivable. It is understood and agreed that
OFSA makes no representation as to the contents of the Receivable File. If the
Servicer or any such Sub-Servicer subsequently finds any document or documents
constituting a part of a Receivable File to be missing or defective in any
material respect, the Servicer or such Sub-Servicer shall promptly so notify the
Trust Collateral Agent, the Insurer and the Seller in writing, and the Servicer
shall add such item to the exceptions list. The Seller shall use best efforts to
cure each such omission or defect on the exceptions list. If the Seller does not
correct or cure any such omission or defect within sixty (60) days from the date
the Trust Collateral Agent was notified of such omission or defect, then the
Seller shall promptly accept a retransfer of the related Receivable from the
Trust Collateral Agent. The Purchase Amount for the retransferred Receivable
shall be delivered by the Seller to the Trust Collateral Agent for deposit in
the Collection Account and upon receipt of the Purchase Amount by the Trust
Collateral Agent and its receipt of written notice thereof, the Trust Collateral
Agent shall cause the Custodian to release to the Seller the related Receivable
File and the Trust Collateral Agent shall execute and deliver such instruments
of transfer or assignment, in each case without recourse, as shall be reasonably
necessary to vest in the Seller or its designee any Receivable released pursuant
hereto. It is understood and agreed that the obligation of the Seller to accept
a retransfer of any Receivable as to which a material defect in or omission of a
constituent document exists shall constitute the sole remedy respecting such
defect or omission available to Noteholders or the Trust Collateral Agent on
behalf of Noteholders.
ARTICLE III
The Receivables
SECTION 3.1. Representations and Warranties of Seller. The Seller makes
the following representations and warranties as to the Receivables and the Other
Conveyed Property on which the Issuer is deemed to have relied in acquiring the
Receivables and upon which the Insurer shall be deemed to rely in issuing the
Note Policy. Such representations and warranties speak as of the execution and
delivery of this Agreement and as of the Closing Date in the case of the Initial
Receivables, and as of the related Subsequent Transfer Date in case of the
Subsequent Receivables (unless another date or time period is otherwise
specified or indicated in the particular representation or warranty), but shall
survive the sale, transfer and assignment of the Receivables to the Issuer and
the pledge thereof to the Trustee pursuant to the Indenture.
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(a) Schedule of Representations. The representations and warranties set
forth on the Schedule of Representations attached hereto as Schedule B are true
and correct.
(b) The representations and warranties set forth in this Section shall
survive assignment of the Receivables to the Trust Collateral Agent and shall
survive as long as any Note is outstanding or this Agreement has not been
terminated.
SECTION 3.2. Repurchase upon Breach.
(a) The Seller, the Servicer, any Sub-Servicer, the Insurer, any Trust
Officer of the Trust Collateral Agent or the Owner Trustee, as the case may be,
shall promptly inform each of the other parties and the Insurer, in writing,
upon the discovery of any breach of the Seller's representations and warranties
made pursuant to Section 3.1 which materially and adversely affects the
interests of the Noteholders or the Insurer in the related Receivable (any
Sub-Servicer being so obligated under the related Sub-Servicing Agreement);
provided, however, that the failure to give any such notice shall not derogate
from any obligations of the Seller under this Section 3.2. In addition, with
respect to any Receivables in respect of which the Title Documents were being
applied for on the Closing Date or the related Subsequent Transfer Date, as
applicable, if such Title Documents have not been received by the Servicer
within 180 days after the Closing Date or such Subsequent Transfer Date, as
applicable, the Servicer shall give the Trust Collateral Agent, the Insurer and
Seller written notice of such fact. If the Seller does not correct or cure such
breach (including delivery of such Title Documents, if applicable) by the
Reporting Date occurring during the second full calendar month following the
calendar month in which the Trust Collateral Agent was notified or the Seller,
any Sub-Servicer or the Servicer became aware, if earlier, of such breach
(including failure to deliver such Title Documents), then the Seller shall
promptly repurchase such Receivables from the Issuer. Any such repurchase by the
Seller shall be in exchange for the delivery by the Seller to the Issuer of the
Purchase Amount and shall be accomplished in the manner set forth in Section 5.6
and the Trust shall execute such assignments and other documents reasonably
requested by such Person in order to effect such repurchase. It is understood
and agreed that the obligation of the Seller to accept a repurchase of any
Receivable as to which such a breach has occurred and is continuing as described
above shall constitute the sole remedy respecting such breach available to the
Servicer, the Noteholders, the Insurer, the Issuer, the Trust Collateral Agent,
the Trustee and the Owner Trustee.
In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by the Seller or NAFI, the Seller shall
indemnify the Trust, the Trust Collateral Agent, the Insurer, and the
Noteholders and any of their respective officers, directors, employees or agents
against all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
37
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to a breach of the representation.
(b) Pursuant to Section 2.1 and 2.2 of this Agreement, the Seller conveyed
to the Trust all of the Seller's right, title and interest in its rights and
benefits, but none of its obligations or burdens, under the Purchase Agreement
including the Seller's rights under the Purchase Agreement and the delivery
requirements, representations and warranties and the cure or repurchase
obligations of NAFI thereunder. The Seller hereby represents and warrants to the
Trust that such assignment is valid, enforceable and effective to permit the
Trust to enforce such obligations of NAFI under the Purchase Agreement.
SECTION 3.3. Custody of Receivables Files. The Custodian shall maintain
custody and possession of the Receivable Files as custodian and bailee for, in
accordance with and pursuant to the Custodial Agreement.
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.1. Duties of the Servicer.
(a) The Servicer shall service and administer the Receivables on behalf of
the Trust and shall have full power and authority, acting alone and/or through
Sub-Servicers as provided in Section 4.2, to do any and all things which it may
deem necessary or desirable in connection with such servicing and administration
and which are consistent with this Agreement. Consistent with the terms of this
Agreement, the Servicer may waive, modify or vary any term of any Receivable or
consent to the postponement of strict compliance with any such term or in any
manner, grant indulgence to any Obligor if, in the Servicer's sole
determination, which shall be conclusive and binding, such waiver, modification,
postponement or indulgence is not materially adverse to the Noteholders or the
Insurer; provided however, that the Servicer may not permit any modification
with respect to any Receivable that would change its Annual Percentage Rate,
defer the payment of any principal or interest (except to the extent permitted
by Section 4.6(a)), reduce the outstanding principal balance (except for actual
payments of principal), or extend (except to the extent permitted by Section
4.6(a)) the final maturity date on such Receivable. Without limiting the
generality of the foregoing, the Servicer in its own name or in the name of the
Seller is hereby authorized and empowered by the Trust Collateral Agent when the
Servicer believes it appropriate in its best judgment to execute and deliver, on
behalf of the Trust, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge and all other comparable instruments,
with respect to the Receivables and with respect to the Financed Vehicles;
provided however,
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that notwithstanding the foregoing, the Servicer shall not, except pursuant to
an order from a Court of competent jurisdiction, release an Obligor from payment
of any unpaid amount under any Receivable or waive the right to collect the
unpaid balance of any Receivable from the Obligor, except that the Servicer may
forego collection efforts if the amount subject to collection is de minimis and
if it would forego collection in accordance with its customary procedures. If
any Receivable contains a "due-on-sale" provision allowing the holder thereof to
accelerate the Receivable upon sale of the Financed Vehicle financed thereunder,
the Servicer shall take reasonable steps under the circumstances to enforce such
due on sale provision if a Financed Vehicle is sold as soon as practicable after
determining that such Financed Vehicle has been sold; provided however, that the
Servicer shall not be obligated to take any legal action to enforce such
provision.
(b) The Servicer shall service and administer the Receivables by employing
procedures (including collection procedures) and a degree of care consistent
with prudent industry standards and as are customarily employed by servicers in
servicing and administering comparable motor vehicle retail installment sales
contracts and, to the extent more exacting, the degree of skill and attention
that the Servicer exercises from time to time with respect to all comparable
motor vehicle receivables that it services for itself or others. The Servicer
shall take all actions (other than those required to be taken by the Seller
pursuant to this Agreement) that are necessary or desirable to maintain
continuous perfection and first priority of security interests of NAFI in the
Financed Vehicles and to maintain continuous perfection of the security interest
created by each Receivable in the related Finance Vehicle on behalf of the Trust
Collateral Agent, including, but not limited to, using reasonable efforts to
obtain execution by the Obligors and the recording, registering, filing,
re-recording, re-registering and refiling of all Title Documents (it being
understood that Title Documents have not been and need not be endorsed or
delivered to the Trust Collateral Agent and do not and need not identify the
Trust Collateral Agent as the secured party or lienholder with respect to the
Receivables), security agreements, financing statements, continuation statements
or other instruments as are necessary to maintain the security interests granted
by the Obligors under the respective Receivables on behalf of the Trust
Collateral Agent; provided however, that the Servicer is not required to expend
any of its own funds to remove any security interest, lien or other encumbrance
on any Financed Vehicle. The Servicer shall not take any action to impair the
Trust's rights in any Receivable, except to the extent allowed pursuant to this
Agreement or required by law. The Financed Vehicle securing each Receivable
shall not be released in whole or in part from the security interest granted by
the Receivable, except upon payment in full of the Receivable or as otherwise
contemplated herein. The Servicer shall not extend or otherwise amend the terms
of any Receivable, except in accordance with Section 4.1(a). Upon discovery by
either the Servicer or any Sub-Servicer by a Trust Officer of the Trust
Collateral Agent of a default by the Servicer in the performance of its
obligations under this Section 4.1(b) which materially and adversely affects the
interests of the Noteholders or the
39
Insurer in the related Receivable, the party discovering such breach shall give
prompt written notice thereof to the other parties and the Insurer. If the
Servicer does not correct or cure such default by the Reporting Date occurring
during the second full calendar month following the calendar month in which the
Trust Collateral Agent was notified, or the Servicer, the Trust Collateral Agent
or the Sub-servicer became aware, if earlier, of such default, then the Servicer
shall promptly purchase such Receivable from the Trust. Any such purchase by the
Servicer shall be in exchange for the delivery by the Servicer to the Trust of
the Purchase Amount. Except as expressly provided in Section 9.2 and subject to
Section 10.1, it is understood and agreed that the obligation of the Servicer to
repurchase any Receivable as to which such a default has occurred and is
continuing as described above shall constitute the sole remedy respecting such
default available to the Seller, the Noteholders, the Insurer or the Indenture
Trustee on behalf of the Noteholders.
(c) Upon the occurrence of an Insurance Agreement Event of Default
pursuant to Section 5.01(b), (c), (d), (e) or (j), the Insurer may (so long as
an Insurer Default shall not have occurred and be continuing) instruct the Trust
Collateral Agent and the Servicer in writing to take or cause to be taken, or,
if an Insurer Default shall have occurred, upon the occurrence of a Servicer
Termination Event, the Trust Collateral Agent and the Servicer shall take or
cause to be taken such action as may, in the opinion of counsel to the
Controlling Party, be necessary to perfect or re-perfect the security interests
in the Financed Vehicles securing the Receivables in the name of the Trust by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Controlling Party, be
necessary or prudent. NAFI hereby agrees to pay all expenses related to such
perfection or reperfection and to take all action necessary therefor. In
addition, prior to the occurrence of an Insurance Agreement Event of Default,
the Controlling Party may instruct the Trust Collateral Agent and the Servicer
to take or cause to be taken such action as may, in the opinion of counsel to
the Controlling Party, be necessary to perfect or re-perfect the security
interest in the Financed Vehicles underlying the Receivables in the name of the
Trust, including by amending the title documents of such Financed Vehicles or by
such other reasonable means as may, in the opinion of counsel to the Controlling
Party, be necessary or prudent; provided, however, that if the Controlling Party
requests that the title documents be amended prior to the occurrence of an
Insurance Agreement Event of Default, the out-of-pocket expenses of the Servicer
in connection with such action shall be reimbursed to the Servicer by the
Controlling Party.
(d) The Servicer may perform any of its duties pursuant to this Agreement,
including those delegated to it by the Trust Collateral Agent pursuant to this
Agreement, through Persons appointed by the Servicer. Such Persons may include
affiliates of the Servicer and may include the Seller and its affiliates.
Notwithstanding any such delegation of a duty, the
40
Servicer shall remain obligated and liable for the performance of such duty as
if the Servicer were performing such duty.
(e) Upon the execution and delivery of this Agreement, the Servicer shall
deliver to the Trust Collateral Agent and the Insurer a list of officers and
employees of the Servicer, upon which the Trust Collateral Agent may
conclusively rely, involved in, or responsible for, the administration and
servicing of the Receivables, which list shall from time to time be updated by
the Servicer as additional officers and employees of the Servicer become
involved, or responsible for, the administration and servicing of the
Receivables or officers or employees of the Servicer previously identified on
any such list become disassociated with the administration and servicing of the
Receivables.
(f) The Servicer may take such actions as are necessary to discharge its
duties as Servicer in accordance with this Agreement, including the power to
execute and deliver on behalf of the Trust such instruments and documents as may
be customary, necessary or desirable in connection with the performance of the
Servicer's duties under this Agreement (including consents, waivers and
discharges relating to the Receivables and the Financed Vehicles and such
instruments or documents as may be necessary to effect foreclosure or other
conversion of the ownership of any Financed Vehicle). In furtherance thereof,
the Trust Collateral Agent hereby irrevocably appoints the Servicer as its
attorney-in-fact, such appointment being coupled with an interest, to execute on
its behalf such documents or instruments as are necessary to effect the
Repossession of Financed Vehicles, to deliver applicable Receivable Files,
Receivable Documents and Title Documents to the Seller upon the sale of a
Receivable to the Seller under this Agreement and to deliver applicable
Receivable Files, Receivable Documents and Title Documents upon liquidation or
final payment of a Receivable. The Trust Collateral Agent, upon receipt of a
certificate of a Servicing Official requesting the same be accepted by the Trust
Collateral Agent and certifying as to the reasons such documents are required,
shall furnish the Servicer with any other powers of attorney or other documents
reasonably necessary or appropriate which the Trust Collateral Agent may legally
execute to enable the Servicer to carry out its servicing and administrative
duties hereunder. Neither the Servicer nor any of its directors, officers,
employees or agents will be under any liability to the Trust, the Trust
Collateral Agent, the Insurer, any Noteholder, or the Seller for the
consequences of any delay resulting from having to obtain such documents from
the Trust Collateral Agent, provided that the Servicer furnished such
certificate to the Trust Collateral Agent reasonably promptly after determining
the necessity therefor in the particular instance.
(g) The Servicer warrants, represents and covenants to the Trust
Collateral Agent that recordation of the name of the Servicer as lienholder in
Title Documents respecting any Financed Vehicle is maintained by the Servicer as
agent for the Trust and that the Servicer has
41
no equitable ownership in the Receivables, except as it may have by virtue of
ownership of a Note or an equity interest in the Seller or any Noteholder. The
Servicer acknowledges that it is holding the Receivables coming into its
possession and any other property constituting a part of the Trust held by it,
in trust, for the benefit of the Noteholders and the Insurer.
SECTION 4.2. Sub-Servicing Agreements between Servicer and the
Sub-Servicers. The Servicer may enter into Sub-Servicing Agreements with one or
more Sub-Servicers for the servicing and administration of certain of the
Receivables; provided however, that the Servicer shall not enter into any such
Sub-Servicing Agreement with any Sub-Servicer other than OFSA, without the prior
written consent of the Insurer (so long as a Insurer Default shall not have
occurred and be continuing), which consent shall not be unreasonably withheld;
provided further that the Servicer shall not amend any Sub-Servicing Agreement
without (i) with respect to a material amendment, the consent of the Insurer and
(ii) with respect to all other amendments, upon five (5) days prior written
notice of such amendment. References in this Agreement to actions taken or to be
taken by the Servicer in servicing the Receivables include actions taken or to
be taken by a Sub-Servicer on behalf of the Servicer. Each Servicing Agreement
shall be upon such terms and conditions as are not inconsistent with this
Agreement and as the Servicer and the Sub-Servicer have agreed. Each
Sub-Servicing Agreement shall require that the related Sub-Servicer acknowledge
that it is holding the Receivables and the Receivable Documents for the related
Receivables coming into its possession and any other property constituting a
part of the Trust Property held by it, in trust, for the benefit of the
Noteholders and the Insurer. The Servicer and a Sub-Servicer may enter into
amendments thereto; provided however, that any such amendments or different
forms shall be consistent with and not violate the provisions of this Agreement.
The Servicer shall notify each Rating Agency, the Trust Collateral Agent and the
Insurer upon entering into any Sub-Servicing Agreement.
SECTION 4.3. Obligations of the Servicer. Notwithstanding any
Sub-Servicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer or a Sub-Servicer or reference
to actions taken through a Sub-Servicer or otherwise, the Servicer shall remain
obligated for the servicing and administering of the Receivables in accordance
with the provisions of Section 4.1 of this Agreement without diminution of such
obligation or liability by virtue of such Sub-Servicing Agreements or
arrangements or by virtue of indemnification from a Sub-Servicer and to the same
extent and under the same terms and conditions as if the Servicer alone were
servicing and administering the Receivables. The Servicer shall be entitled to
enter into any agreement with a Sub-Servicer for indemnification of the
Servicer, and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.
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SECTION 4.4. No Contractual Relationship between a Sub-Servicer and Trust
Collateral Agent or Noteholders. Any Sub-Servicing Agreement that may be entered
into and any other transactions or services relating to the Receivables
involving a Sub-Servicer in its capacity as such and not as an originator shall
be deemed to be between a Sub-Servicer and the Servicer alone, and the Trust
Collateral Agent, the Trust, the Insurer and Noteholders shall not be deemed
parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to a Sub-Servicer except as expressly set forth in
Section 4.5 or in the applicable Sub-Servicing Agreement; provided that, if the
Servicer is deemed terminated, the Sub-Servicer may be terminated. Servicer
shall promptly provide to the Trust Collateral Agent and the Insurer any notice
received from a Sub-Servicer.
SECTION 4.5. Assumption or Termination of Sub-Servicing Agreement by Trust
Collateral Agent. In the event the Servicer shall for any reason no longer be
the servicer of the Receivables (including by reason of a Servicer Termination
Event), the Trust Collateral Agent, its designee or any successor Servicer will
thereupon assume all of the rights and obligations of the Servicer under one or
more Sub-Servicing Agreements that may have been entered into by giving notice
of such assumption to the related Sub-Servicer or Sub-Servicers within ten (10)
Business Days of the termination of the Servicer as servicer of the Receivables.
Upon the giving of such notice, the Trust Collateral Agent, its designee or the
successor Servicer, shall be deemed to have assumed all of the Servicer's
interest therein and to have replaced the Servicer as a party to the
Sub-Servicing Agreement to the same extent as if the Sub-Servicing Agreement had
been assigned to the assuming party except that the Servicer and the
Sub-Servicer, if any, shall not thereby be relieved of any accrued liability or
obligations under the Sub-Servicing Agreement and the Sub-Servicer, if any,
shall not be relieved of any liability or obligation to the Servicer that
survives the assignment or termination of the Sub-Servicing Agreement. The Trust
Collateral Agent shall notify each Rating Agency and the Insurer if any
Sub-Servicing Agreement is assumed by the Trust Collateral Agent, its designee
or the successor Servicer.
The Servicer shall, upon request of the Trust Collateral Agent but at the
expense of the Servicer, deliver to the assuming party all documents and records
relating to the Sub-Servicing Agreement and the Receivables then being serviced
and an accounting of amounts collected and held by it and otherwise use its
reasonable efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreement to the assuming party.
SECTION 4.6. Collection of Receivable Payments.
(a) The Servicer shall proceed diligently to collect all payments called
for under the terms and provisions of the Receivables, and shall service the
Receivables in a manner consistent with the servicing standards and procedures
generally accepted in the financial
43
services industry for similar Receivables, and as otherwise expressly provided
by this Agreement. Consistent with the foregoing, the Servicer may in its
discretion (i) waive any late payment charge and (ii) extend the then current
maturity date of a Receivable by two months, once during each calendar year at
the request of the related Obligor on account of the Obligor's adverse financial
circumstances that affect the Obligor's ability to make payments under such
Receivable; provided however, that the Servicer may not so extend the then
current maturity date of Receivable more than twice during the life of such
Receivable; provided further, that the Average Extension Ratio for any calendar
month, commencing July 1997, shall not exceed 2.5% for each January, August,
September and December and 2.0% for any other calendar month. The Average
Extension Ratio for any calendar month shall equal the arithmetic average of the
Extension Ratios for such calendar month and the two preceding calendar months
(for example, the Average Extension Ratio for July 1997 will equal the
arithmetic average of the Extension Ratios for the months June 1997, July 1997
and August 1997 and will be included in the report delivered by the Servicer
pursuant to Section 4.11 on or before the August 1997 Reporting Date). The
Extension Ratio for any calendar month shall equal the percentage equivalent of
a fraction the numerator of which is the aggregate number of Receivables that
have been extended during such calendar month and the denominator of which is
the aggregate number of Receivables outstanding as of the first day of such
calendar month.
(b) The Servicer shall instruct (or shall cause the Sub-Servicer to
instruct) all Obligors to make all payments due in respect of the Receivables to
the Sub-Servicer Account. The Servicer shall, pursuant to the Sub-Servicing
Agreement, cause the Sub-Servicer to use any amounts other than collections in
respect of motor vehicle financing obligations serviced by the Sub-Servicer. The
Servicer shall cause the Sub-Servicer to use its best efforts to transfer to the
Collection Account all collected funds on deposit in the Sub-Servicer Account
that constitute part of the Trust Property within one Business Day, and in any
event within two Business Days of receipt thereof. If the Servicer, the Seller,
NAFI or any Sub-Servicer receives collections under or other payments in respect
of the Receivables, each such Person shall as soon as practicable, but no later
than two Business Days following receipt of such item by such Person, cause such
payment to be remitted to the Trust Collateral Agent for deposit to the
Collection Account. If the Servicer determines that any amount that is not a
part of the Trust Property has been deposited in any Trust Account, the Servicer
shall promptly instruct the Trust Collateral Agent by facsimile (with prompt
telephone confirmation) to segregate such amount, and shall therein direct the
Trust Collateral Agent to turn over such amounts to the Person entitled thereto
within two Business Days. A copy of any such direction shall be delivered by the
Servicer to the Insurer.
(c) The Servicer shall cause OFSA to maintain the Sub-Servicer Account or
a comparable account, and shall cause any other Sub-Servicer to maintain an
account comparable
44
to the Sub-Servicer Account, to which Obligors shall have been directed to remit
payments in respect of the Receivables. If the Sub-Servicer Account or any
comparable account maintained by a Sub-Servicer is terminated for any reason
prior to the establishment of, and notification to Obligors to remit payments
to, a replacement servicing account comparable to the Sub-Servicer Account, the
Servicer shall promptly, and in any event within 30 days of termination of such
Sub-Servicer Account or comparable account, establish a pursuant to a Lockbox
Agreement and notify all Obligors to remit payments in respect of the
Receivables to such Lockbox Account.
(d) Notwithstanding any Lockbox Agreement, or any of the provisions of
this Agreement relating to a Lockbox Agreement, a Lockbox Bank or a Lockbox
Account, the Servicer shall remain obligated and liable to the Trust Collateral
Agent and the Noteholders for servicing and administering the Receivables and
the rest of the Trust Property in accordance with the provisions of this
Agreement without diminution of such obligations or liability by virtue thereof.
SECTION 4.7. Maintenance of Insurance. The Servicer shall use its
reasonable efforts to cause each Obligor to maintain on the related Financed
Vehicle a comprehensive and collision policy providing coverage at least equal
to the lesser of (i) the actual cash value of such Financed Vehicle and (ii) the
unpaid balance owing on the related Receivable, less Unearned Finance Charges;
provided however, that the Servicer shall not be obligated to expend its own
funds to pay any insurance premiums or obtain or maintain any such policy.
Pursuant to Section 4.6 any amounts collected by the Servicer under any such
policies (other than amounts to be applied to the restoration or repair of the
related Financed Vehicles or amounts released to the Obligor in accordance with
the Servicer's normal servicing procedures) shall be deposited in the Collection
Account. All policies required by this paragraph shall be endorsed with clauses
providing for loss payable to the Servicer or the related Sub-Servicer and its
successors and assigns. Servicer shall maintain and keep in place a vendor's
single interest insurance policy.
SECTION 4.8. Realization upon Defaulted Receivables. In the event that a
Receivable becomes and continues to be a Defaulted Receivable, the Servicer
shall take all reasonable and lawful steps necessary for Repossession; provided
however, that the Servicer shall not be obligated to institute any action for
Repossession through judicial proceedings unless it determines in its good faith
judgment, which determination will be conclusive and binding, that Insurance
Proceeds or Liquidation Proceeds that would be realized in connection therewith
or amounts payable pursuant to the last sentence of this Section 4.8 would be
sufficient for the reimbursement in full of its out-of-pocket expenses pursuant
to this Agreement. In connection with such Repossession, the Servicer shall
follow such practices and procedures required by Section 4.1 and make advances
of its own funds for any out-of-pocket expenses incurred. The
45
Servicer shall be reimbursed for Liquidation Expenses (including advances) by
retention of the required reimbursement from the first Liquidation Proceeds or
Insurance Proceeds received with respect to such Defaulted Receivable. The
Servicer shall be entitled to receive the following amounts with respect to any
Receivable the Obligor of which has filed bankruptcy or against whom a petition
for involuntary bankruptcy has been filed: a one time fee of $200 in respect of
those Receivables not referred to outside legal counsel, or, in the case of
those Receivables that are so referred, reimbursement of the reasonable fees and
expenses of outside legal counsel, if their retention was necessary in the
reasonable judgment of the Servicer.
SECTION 4.9. Total Servicing Fee; Payment of Certain Expenses by Servicer.
On each Distribution Date, the Servicer shall be entitled to receive out of the
Collection Account the Base Servicing Fee and any Supplemental Servicing Fee for
the related Due Period pursuant to Section 5.7. The Servicer shall be required
to pay all expenses incurred by it in connection with its activities under this
Agreement (including taxes imposed on the Servicer, fees and expenses of any
Sub-Servicer, expenses incurred in connection with distributions and reports
made by the Servicer to Noteholders or the Insurer and all other fees and
expenses of the Owner Trustee, the Trust Collateral Agent or the Trustee, except
taxes levied or assessed against the Trust, and claims against the Trust in
respect of indemnification, which taxes and claims in respect of indemnification
against the Trust are expressly stated to be for the account of NAFI) and shall
not be entitled to reimbursement therefor except as specifically provided
herein. The Servicer shall be liable for the fees, charges and expenses of the
Owner Trustee, the Trust Collateral Agent, the Trustee, the Custodian, the
Collateral Agent, the Lockbox Bank, any Sub-Servicer and their respective agents
(and any fees under the Lockbox Agreement).
SECTION 4.10. [Reserved]
SECTION 4.11. Reports.
(a) Not later than the Reporting Date, the Servicer shall forward to the
Trust Collateral Agent, the Indenture Trustee, each Rating Agency, the Insurer
and the Seller a statement substantially in the form attached hereto as Exhibit
4.11 (as such form may be modified from time to time by agreement between the
Trust Collateral Agent and the Servicer with the prior written consent of the
Insurer), certified by an officer of the Servicer. In addition to the
information required by Exhibit 4.11, the Servicer shall include in the copy of
such statement delivered to the Insurer (i) the Delinquency Ratio, Average
Delinquency Ratio, Default Rate, Average Default Rate, Net Loss Rate, Average
Net Loss Rate, Average Extension Ratio and Extension Ratio for such Reporting
Date, (ii) whether any Trigger Event has occurred as of such Reporting Date,
(iii) whether any Trigger Event that may have occurred as of a prior Reporting
Date is deemed cured as of such Reporting Date, and
46
(iv) whether to the knowledge of the Servicer an Insurance Agreement Event of
Default has occurred.
(b) On the first Business Day after each Determination Date, the Trust
Collateral Agent shall forward by telecopier to the Servicer, the Insurer and
the Seller a statement (and shall also mail a copy to the Servicer, the Insurer
and the Seller) setting forth the amount, if any, on deposit in the Collection
Account, the Distribution Account, the Pre-Funding Account, the Note
Distribution Account and the Pre-Funding Period Reserve Account as of such
Determination Date. Not later than the close of business on the fourth Business
Day prior to each Distribution Date, the Trust Collateral Agent shall forward by
telecopier to the Collateral Agent and the Insurer a copy of the statement
required to be delivered to Noteholders on such Distribution Date pursuant to
Section 5.10 prepared assuming that the Insurer will not exercise its right
under Section 5.11. Not later than five days after each Determination Date, the
Trust Collateral Agent shall forward to the Servicer, the Insurer and the Seller
a statement showing, for the previous Distribution Date, the aggregate of
withdrawals from the Distribution Account and the withdrawals and deposits to
the Spread Account.
SECTION 4.12. Annual Statement as to Compliance, Notice of Servicer
Termination Event.
(a) The Servicer shall deliver or cause to be delivered to each Rating
Agency, the Trustee, the Owner Trustee, the Trust Collateral Agent and the
Insurer on or before April 30 (or 120 days after the end of the Servicer's
fiscal year, if other than December 31) of each year, beginning on April 30,
1998, an Officer's Certificate signed by any responsible officer of the
Servicer, or such Eligible Sub-Servicer who is performing the servicing duties
of the Servicer, dated as of December 31 (or other applicable date) of the
immediately preceding year, stating that (i) a review of the activities of the
Servicer during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision, (ii) to the best of
such officer's knowledge, based on such review, the Servicer has fulfilled all
its obligations under this Agreement throughout such year, 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 (iii) to the
best of such officer's knowledge, each Sub-Servicer has fulfilled its
obligations under its Sub-Servicing 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 employee and the nature and status
thereof.
(b) The Servicer shall deliver to the Trust Collateral Agent, the Insurer,
the Noteholders and each Rating Agency, promptly after having obtained knowledge
thereof, but in no event later than two Business Days thereafter, written notice
in an Officer's Certificate of
47
any event which with the giving of notice or lapse of time, or both, would
become a Servicer Termination Event under Section 10.1.
SECTION 4.13. Annual Independent Accountants' Report.
(a) The Servicer shall, at its expense, cause a firm of nationally
recognized independent certified public accountants (the "Independent
Accountants"), who may also render other services to the Servicer or to the
Seller, to deliver to the Trustee, the Owner Trustee, the Trust Collateral
Agent, the Insurer, on or before March 30 (or 90 days after the end of the
Servicer's fiscal year, if other than December 31) of each year, beginning on
March 30, 1998, with respect to the twelve months ended the immediately
preceding December 31 (or other applicable date) (or such other period as shall
have elapsed from the Closing Date to the date of such certificate), a statement
(the "Accountants' Report") addressed to the Board of Directors of the Servicer,
to the Trustee, the Owner Trustee, the Trust Collateral Agent and to the
Insurer, to the effect that such firm has audited the books and records of the
Servicer and that such audit (1) was made in accordance with generally accepted
auditing standards, and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered necessary in
the circumstances; (2) included an examination of documents and records relating
to the servicing of automobile installment sales contracts under pooling and
servicing agreements substantially similar one to another (such statement to
have attached thereto a schedule setting forth the servicing agreements covered
thereby, including this Agreement); (3) included an examination of the
delinquency and loss statistics relating to the Servicer's portfolio of
automobile installment sales contracts; and (4) except as described in the
statement, disclosed no exceptions or errors in the records relating to
automobile and light truck loans serviced for others that, in the firm's
opinion, generally accepted auditing standards requires such firm to report. The
Accountants' Report shall further state that (1) a review in accordance with
agreed upon procedures was made of three randomly selected Servicer's
Certificates for the Trust; (2) except as disclosed in the Report, no exceptions
or errors in the Servicer's Certificates so examined were found; and (3) the
delinquency and loss information relating to the Receivables contained in the
Servicer Certificates were found to be accurate.
(b) The Accountants' Report shall also indicate that the firm is
independent of the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
(c) A copy of the Accountant's Report may be obtained by any Noteholder by
a request in writing to the Trust Collateral Agent addressed to its Corporate
Trust Office.
SECTION 4.14. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Trust
Collateral Agent and the
48
Insurer reasonable access to the documentation regarding the Receivables. Each
of the Seller and Servicer will permit any authorized representative or agent
designated by the Insurer to visit and inspect any of the properties of the
Seller or Servicer, as the case may be, to examine the corporate books and
financial records of the Seller or Servicer, as the case may be, its records
relating to the Receivables, and make copies thereof or extracts therefrom and
to discuss the affairs, finances, and accounts of the Seller or Servicer, as the
case may be, with its principal officers, as applicable, and its independent
accountants. Any expense incident to the exercise by the Insurer of any right
under this Section 4.14 shall be borne by NAFI, so long as NAFI is the Servicer.
In each case, such access shall be afforded without charge but only upon
reasonable request and during normal business hours.
SECTION 4.15. Monthly Tape. On or before the fourth Business Day, but in
no event later than the fifth calendar day, of each month, the Servicer will
deliver or cause to be delivered to the Trust Collateral Agent and the Insurer a
computer tape and a diskette (or any other electronic transmission acceptable to
the Trust Collateral Agent and the Insurer in a format acceptable to the Trust
Collateral Agent and the Insurer, containing the information with respect to the
Receivables as of the preceding Determination Date necessary for preparation of
the Servicer's Certificate relating to the immediately succeeding Determination
Date and necessary to determine the application of collections as provided in
Section 5.4.
SECTION 4.16. Retention and Termination of Servicer. The Servicer hereby
covenants and agrees to act as such under the Agreement for an initial term,
commencing on the Closing Date and ending on September 30, 1997, which term
shall be extendible by the Insurer for successive quarterly terms ending on each
successive March 31, June 30, September 30 and December 31 (or, pursuant to
revocable written standing instructions from time to time to the Servicer and
the Trust Collateral Agent, for any specified number of terms greater than one),
until the termination of the Trust. Each such notice (including each notice
pursuant to standing instructions, which shall be deemed delivered at the end of
successive quarterly terms for so long as such instructions are in effect) (a
"Servicer Extension Notice") shall be delivered by the Insurer to the Trust
Collateral Agent and the Servicer. The Servicer hereby agrees that, as of the
date hereof and upon its receipt of any such Servicer Extension Notice, the
Servicer shall become bound, for the initial term beinning on the date hereof
and for the duration of the term covered by such Notice, to continue as the
Servicer subject to and in accordance with the other provisions of this
Agreement. Until such time as an Insurer Default shall have occurred and be
continuing, the Trust Collateral Agent agrees that, as of the fifteenth day
prior to the last day of any term of the Servicer, if in which the Trust
Collateral Agent shall not have received any Servicer Extension Notice from the
Insurer, the Trust Collateral Agent will, within five days thereafter, give
written notice of such non-receipt to the Insurer, and the Servicer and the
Servicer's term shall not be extended unless a Servicer Extension Notice is
received on or before the last day of such term.
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SECTION 4.17. Custodial Arrangement. The Custodian shall maintain custody
and possession of the Receivable Files as custodian and bailee in accordance
with and pursuant to the Custodial Agreement. The Servicer hereby assigns all of
its right, title and interest in, but none of its obligators thereunder, and to
such Custodial Agreement to the Trust Collateral Agent. To the extent the
Servicer receives any notices with respect to the Custodial Agreement, the
Servicer will forward a copy of such notice to the Trust Collateral Agent and
the Insurer.
ARTICLE V
Trust Accounts; Distributions;
Statements to Noteholders
SECTION 5.1. Establishment of Trust Accounts.
(a) (i) The Trust Collateral Agent, on behalf of the Noteholders,
the Certificateholders and the Insurer, shall establish and maintain in
its own name an Eligible Deposit Account (the "Collection Account"),
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Trust Collateral Agent on behalf of the
Noteholders, the Certificateholders and the Insurer. The Collection
Account shall initially be established with the Trust Collateral Agent.
(ii) The Trust Collateral Agent, on behalf of the Noteholders, shall
establish and maintain in its own name an Eligible Deposit Account (the
"Note Distribution Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Trust
Collateral Agent on behalf of the Noteholders and the Insurer. The Note
Distribution Account shall initially be established with the Trust
Collateral Agent.
(iii) The Trust Collateral Agent, on behalf of the Noteholders and
the Insurer, shall establish and maintain in its own name an Eligible
Deposit Account (the "Pre-Funding Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of
the Trust Collateral Agent on behalf of the Noteholders and the Insurer.
The Pre-Funding Account shall initially be established with the Trust
Collateral Agent.
(iv) The Trust Collateral Agent, on behalf of the Noteholders, the
Certificateholders and the Insurer, shall establish and maintain in its
own name an Eligible Deposit Account (the "Distribution Account"), bearing
a designation clearly indicating that the funds deposited therein are held
for the benefit of the Trust
50
Collateral Agent on behalf of the Noteholders, the Certificateholders and
Insurer. The Distribution Account shall initially be established with the
Trust Collateral Agent.
(b) The Trust Collateral Agent shall deposit the following amounts into
the Collection Account upon receipt: (i) all amounts withdrawn by a Sub-Servicer
from the Sub-Servicer Account and all amounts received by the Servicer, the
Seller, NAFI or any Sub-Servicer and transferred to the Trustee pursuant to
Section 4.6(b); (ii) the Purchase Amount received in respect of any Purchased
Receivables pursuant to Sections 2.4, 3.2 and 4.1 hereof; (iii) all income and
gain from investments of funds in the Collection Account; and (iv) all
Liquidation Proceeds (net of Liquidation Expenses retained by the Servicer or
Sub-Servicer) and other amounts with respect to the Trust Property, if any,
received from the Seller, the Servicer or any Sub-Servicer.
(c) On each Distribution Date, the Trust Collateral Agent shall, at the
written direction of the Servicer, withdraw from the Collection Account and
deposit in the Distribution Account the amount on deposit in the Collection
Account as of the close of business on the related Determination Date (other
than any pay-ahead amounts, as provided in Section 5.4) and any amount deposited
to the Collection Account in respect of Purchased Receivables on or prior to the
related Reporting Date and subsequent to the preceding Reporting Date, less the
sum of (i) the Supplemental Servicing Fee collected with respect to the
Receivables on deposit in the Collection Account as of such Determination Date,
(ii) any income and gain on investments of deposits in the Collection Account as
of such Determination Date, (iii) any collection or other amounts deposited to
the Collection Account in respect of Purchased Receivables other than the
Purchase Amounts. In addition, on each Distribution Date, the Trust Collateral
Agent shall, in accordance with the written direction of the Servicer, withdraw
from the Collection Account and shall pay (i) to the Seller any income and gain
on investments then on deposit in the Collection Account and all late payment
fees then on deposit in the Collection Account and (ii) to pay to the Seller
with respect to each Receivable or property acquired in respect thereof that has
been retransferred to the Seller pursuant to Sections 2.4, 3.2, 4.1 or 11.1, all
amounts received thereon and not distributed as of, or received after, the date
on which the related Principal Balance or Purchase Amount (or, in the case of a
retransfer pursuant to Section 11.1, the purchase amount required therein) is
determined. In the event the Servicer, any Sub-Servicer or the Trust Collateral
Agent shall deposit in the Collection Account any amount in error and such
amount is not required to be deposited therein, the Trust Collateral Agent may
withdraw at any time, on its own behalf if the erroneous deposit was made by the
Trust Collateral Agent and on behalf of the Servicer or Sub-Servicer if the
erroneous deposit was made by the Servicer or Sub-Servicer promptly after
receipt of an Officer's Certificate setting forth the reason for such withdrawal
of such amount from the Collection Account, any provision herein to the contrary
notwithstanding.
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(d) Funds on deposit in the Collection Account, the Pre-Funding Account,
the Note Distribution Account and the Pre-Funding Period Reserve Account
(collectively, the "Trust Accounts") shall be invested by the Trust Collateral
Agent (or any custodian with respect to funds on deposit in any such account) in
Eligible Investments selected in writing by the Servicer (pursuant to standing
instructions or otherwise) which, absent any instruction shall be the
investments specified in clause (d) of the definition of Eligible Investments
set forth herein. Other than as permitted by the Rating Agencies and the
Insurer, funds on deposit in any Trust Account other than the Pre-Funding Period
Reserve Account shall be invested in Eligible Investments that will mature so
that such funds will be available at the close of business on the Business Day
immediately preceding the following Distribution Date. Funds deposited in the
Pre-Funding Account shall be invested by the Trust Collateral Agent pursuant to
written instructions from the Seller in Eligible Investments that mature no
later than the Business Day next preceding the earlier of the date on which such
funds are expected to be needed and the Distribution Date next succeeding the
date of such investment (or on such date or such Distribution Date, as the case
may be, if such Eligible Investment is an obligation of the institution
maintaining the Pre-Funding Account), and no such investment shall be sold prior
to its maturity. Funds deposited in a Trust Account on the day immediately
preceding a Distribution Date upon the maturity of any Eligible Investments are
not required to be invested overnight. All Eligible Investments will be held to
maturity.
(e) All investment earnings of moneys deposited in the Trust Accounts
shall be deposited (or caused to be deposited) by the Trust Collateral Agent in
the Collection Account no later than the close of business on the Business Day
immediately preceding the related Distribution Date, and any loss resulting from
such investments shall be charged to the Collection Account. The Servicer shall
not direct the Trust Collateral Agent to make any investment of any funds held
in any of the Trust Accounts unless the security interest granted and perfected
in such account will continue to be perfected in such investment, in either case
without any further action by any Person, and, in connection with any direction
to the Trust Collateral Agent to make any such investment, if necessary, the
Servicer shall deliver to the Trust Collateral Agent an Opinion of Counsel to
such effect upon which the Trust Collateral Agent may conclusively rely.
(f) The Trust Collateral Agent shall not in any way be held liable by
reason of any insufficiency in any of the Trust Accounts resulting from any loss
on any Eligible Investment included therein except for losses attributable to
the Trust Collateral Agent's negligence or bad faith or its failure to make
payments on such Eligible Investments issued by the Trust Collateral Agent, in
its commercial capacity as principal obligor and not as trustee, in accordance
with their terms.
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(g) If (i) the Servicer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Trust Collateral Agent by
2:00 p.m. Eastern Time (or such other time as may be agreed by the Issuer and
Trust Collateral Agent) on any Business Day; or (ii) a Default or Event of
Default shall have occurred and be continuing with respect to the Notes but the
Notes shall not have been declared due and payable, or, if such Notes shall have
been declared due and payable following an Event of Default, amounts collected
or receivable from the Trust Property are being applied as if there had not been
such a declaration; then the Trust Collateral Agent shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Eligible Investments pursuant to paragraph (b) above.
(h) (i) The Trust Collateral Agent shall possess all right, title
and interest in all funds on deposit from time to time in the Trust
Accounts and in all proceeds thereof (excluding all Investment Earnings on
the Collection Account) and all such funds, investments, proceeds and
income shall be part of the Owner Trust Estate. Except as otherwise
provided herein, the Trust Accounts shall be under the sole dominion and
control of the Trust Collateral Agent for the benefit of the Noteholders
and the Insurer. If, at any time, any of the Trust Accounts ceases to be
an Eligible Deposit Account, the Trust Collateral Agent (or the Servicer
on its behalf) shall within five Business Days (or such longer period as
to which each Rating Agency and the Insurer may consent) establish a new
Trust Account as an Eligible Deposit Account and shall transfer any cash
and/or any investments to such new Trust Account. In connection with the
foregoing, the Servicer agrees that, in the event that any of the Trust
Accounts are not accounts with the Trust Collateral Agent, the Servicer
shall notify the Trust Collateral Agent in writing promptly upon any of
such Trust Accounts ceasing to be an Eligible Deposit Account.
(ii) With respect to the Trust Account Property:
(A) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Deposit Accounts; and,
except as otherwise provided herein, each such Eligible Deposit
Account shall be subject to the exclusive custody and control of the
Trust Collateral Agent, and the Trust Collateral Agent shall have
sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Trust Collateral Agent in
accordance with paragraph (a) of the definition of "Delivery" and
shall be held, pending maturity or disposition, solely by the Trust
Collateral Agent or a financial intermediary (as
53
such term is defined in Section 8-313(4) of the UCC) acting solely
for the Trust collateral Agent;
(C) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to Federal
book-entry regulations shall be delivered in accordance with
paragraph (b) of the definition of "Delivery" and shall be
maintained by the Trust Collateral Agent, pending maturity or
disposition, through continued book-entry registration of such Trust
Account Property as described in such paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by
clause (C) above shall be delivered to the Trust Collateral Agent in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Trust Collateral Agent, pending maturity
or disposition, through continued registration of the Trust
Collateral Agent's (or its nominee's) ownership of such security.
SECTION 5.2. Pre-Funding Period Reserve Account.
(a) The Servicer shall cause the Trust Collateral Agent to establish and
maintain an Eligible Deposit Account (the "Pre-Funding Period Reserve Account")
with the Trust Collateral Agent, bearing a designation clearly indicating that
the funds deposited therein are held in trust for the benefit of the Noteholders
and the Insurer.
On or prior to the Closing Date, the Seller shall deposit an amount equal
to the Pre-Funding Period Reserve Account Initial Deposit into the Pre-Funding
Period Reserve Account.
(b) (i) On the Distribution Dates occurring on or prior to the
Distribution Date next succeeding termination of the Pre-Funding Period,
the Trust Collateral Agent shall, in accordance with the Servicer's
Certificate, withdraw from the Pre-Funding Period Reserve Account the
Monthly Pre-Funding Period Reserve Amount for such Distribution Date and
deposit such amount in the Collection Account as further provided in
Section 5.7.
(ii) On the Distribution Dates occurring on or prior to the
Distribution Date next succeeding termination of the Pre-Funding Period,
Servicer shall instruct the Trust Collateral Agent in writing to withdraw
from the Pre-Funding Period Reserve Account and pay to the Seller on such
Distribution Date an amount equal to the amount of funds on deposit in the
Pre-Funding Period Reserve Account (after giving effect to any required
transfer pursuant to the preceding clause (i) on such Distribution Date)
in
54
excess of the Required Reserve Amount for such Distribution Date. Any
amounts remaining in the Pre-Funding Period Reserve Account on the
Distribution Date which immediately follows the end of the Pre-Funding
Period after taking into account the transfer pursuant to Section
5.7(a)(i) shall be remitted by the Trust Collateral Agent to the Seller.
Upon any such distributions to the Seller, the Noteholders and the Insurer
will have no further rights in, or claims to, such amounts.
SECTION 5.3. Certain Reimbursements to the Servicer. The Servicer will be
entitled to be reimbursed from amounts on deposit in the Collection Account with
respect to a Due Period for amounts previously deposited in the Collection
Account but later determined by the Servicer to have resulted from mistaken or
postings or checks returned for insufficient funds. The amount to be reimbursed
hereunder shall be paid to the Servicer on the related Distribution Date
pursuant to Section 5.7(b)(i) upon certification by the Servicer of such amounts
and the provision of such information to the Trust Collateral Agent and the
Insurer as may be necessary in the opinion of the Insurer to verify the accuracy
of such certification. In the event that the Insurer has not received evidence
satisfactory to it of the Servicer's entitlement to reimbursement pursuant to
this Section, the Insurer shall (unless an Insurer Default shall have occurred
and be continuing) give the Trust Collateral Agent written notice to such
effect, following receipt of which the Trust Collateral Agent shall not make a
distribution to the Servicer in respect of such amount pursuant to Section 5.7,
or if the Servicer prior thereto has been reimbursed pursuant to Section 5.7,
the Trust Collateral Agent shall withhold such amounts from amounts otherwise
distributable to the Servicer on the next succeeding Distribution Date.
SECTION 5.4. Application of Collections. For all purposes of this
Agreement the allocation of a payment on a Receivable between principal and
interest shall be made based upon the amortization method provided in the
related Contract. For purposes of allocating a pay-ahead payment on a Receivable
between principal and interest, the pay-ahead shall be deemed to have been
received on the date it was actually due. For all purposes of this Agreement, no
amount shall be treated as collected under a Receivable until such amount has
been deposited into the Collection Account.
SECTION 5.5. Withdrawals from Series 1997-1 Spread Account.
(a) In the event that the Servicer's Certificate with respect to any
Determination Date shall state that the Available Amount with respect to such
Distribution Date is less than the sum of the amounts payable on the related
Distribution Date pursuant to clauses (i) through (iv) (other than any Note
Prepayment Amount) of Section 5.7(b) (such deficiency being a "Deficiency Claim
Amount"), which notice shall also state if there are not sufficient amounts in
the Spread Account to cover such deficiency, then on the Business Day
immediately
55
preceding the related Draw Date, the Trust Collateral Agent shall deliver to the
Collateral Agent, the Owner Trustee, the Insurer and the Servicer, by hand
delivery, telex or facsimile transmission, a written notice (a "Deficiency
Notice") specifying the Deficiency Claim Amount for such Distribution Date and
the Note Policy Claim Amount, if any. Such Deficiency Notice shall direct the
Collateral Agent to remit such Deficiency Claim Amount (to the extent of the
funds available to be distributed pursuant to the Spread Account Agreement) to
the Trust Collateral Agent for deposit in the Collection Account on the related
Distribution Date.
(b) Any Deficiency Notice shall be delivered by 10:00 am., New York City
time, on the Business Day immediately preceding the Draw Date immediately
preceding the related Distribution Date. The amounts distributed by the
Collateral Agent to the Trust Collateral Agent pursuant to a Deficiency Notice
shall be deposited by the Trust Collateral Agent into the Collection Account
pursuant to Section 5.6.
SECTION 5.6. Additional Deposits.
(a) NAFI and the Seller, as applicable, shall deposit or cause to be
deposited in the Collection Account on the Reporting Date following the date on
which such obligations are due the aggregate Purchase Amount with respect to
Purchased Receivables. On or before each Draw Date, the Trust Collateral Agent
shall remit to the Collection Account any amounts delivered to the Trust
Collateral Agent by the Collateral Agent.
(b) The proceeds of any purchase or sale of the assets of the Trust
described in Section 11.1 hereof shall be deposited in the Collection Account.
SECTION 5.7. Distributions.
(a) On each Distribution Date, the Trust Collateral Agent shall (based
solely on the information contained in the Servicer's report delivered pursuant
to Section 4.11 on the related Reporting Date unless the Insurer shall have
notified the Trust Collateral Agent of any errors or deficiencies with respect
thereto) cause to be made the following transfers and distributions in the
amounts set forth in such report for such Distribution Date:
(i) During the Pre-Funding Period, from the Pre-Funding Period
Reserve Account to the Note Distribution Account, in immediately available
funds, the Monthly Pre-Funding Period Reserve Amount for such Distribution
Date; and
(ii) If such Distribution Date is the Mandatory Redemption Date,
from the Pre-Funding Account to the Note Distribution Account, in
immediately available funds,
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the Pre-Funded Amount after giving effect to the purchase of Subsequent
Receivables, if any, on the Mandatory Redemption Date.
(b) On each Distribution Date, the Trust Collateral Agent shall, to the
extent of the Available Amount together with (i) funds withdrawn from the Spread
Account, if any, (ii) the Policy Claim Amount, if any, and (iii) any amount
deposited to the Distribution Account pursuant to Section 5.11 (such amounts so
deposited to be applied only as directed by the Insurer) make the following
payments (in case of the withdrawals from the Spread Account, for payments of
the Servicing Fee, the Noteholders' Distributable Amount and any amounts owing
to the Insurer pursuant to clause (iv) below, and in the case of the Policy
Claim Amount, for Scheduled Payments (as defined in the Policy) only) from the
Distribution Account in the following order of priority:
(i) to the Servicer, the Servicing Fee for the related Due Period,
Period, and any unpaid Servicing Fees from prior Due Periods to the extent
not previously paid;
(ii) to each of the Trust Collateral Agent, the Indenture Trustee,
the Owner Trustee, the Collateral Agent and the Custodian, their
respective accrued and unpaid fees to the extent not paid by the Servicer;
(iii) to the Note Distribution Account, the Noteholders'
Distributable Amount;
(iv) to the Insurer (or any designee thereof), to the extent of any
amounts owing to the Insurer under the Insurance Agreement, the Indenture
or this Agreement and not paid;
(v) to the Collateral Agent for deposit to the Spread Account, an
amount, if necessary, required to increase the amount therein to the
Requisite Amount (after taking into account all withdrawals from the
Spread Account on such Distribution Date);
(vi) to the Pre-Funding Period Reserve Account, the amount by which
the Required Reserve Amount exceeds the amount of funds on deposit therein
after giving effect to any withdrawals from the Pre-Funding Period Reserve
Account on such Distribution Date;
(vii) to the Indenture Trustee and the Owner Trustee for any
unreimbursed expenses and to pay any indemnities owed by the Seller to the
Indenture Trustee under the Indenture or to the Owner Trustee under the
Trust Agreement;
57
(viii) to reimburse the Servicer for any expense of an Opinion of
Counsel incurred in connection with an amendment to the Indenture, and any
expenses incurred by the Servicer in connection with a realization upon a
Defaulted Receivable;
(ix) to reimburse the Backup Servicer for expenses incurred by the
Backup Servicer and to reimburse the Servicer for expenses incurred by and
reimbursable, or any indemnities payable by the Seller, to the Servicer
pursuant to this Agreement;
(x) to reimburse the Seller for expenses incurred by and
reimbursable to the Seller pursuant to the Indenture and this Agreement;
and
(xi) to the holder(s) of the Trust Certificates, the balance of any
funds remaining in the Distribution Account after application pursuant to
the preceding clauses (i) through (x).
provided, however, that, (A) following an acceleration of the Notes or, (B) if
an Insurer Default shall have occurred and be continuing and an Event of Default
pursuant to Section 5.1(i), 5.1(ii), 5.1(iv), 5.1(v) or 5.1(vi) of the Indenture
shall have occurred and be continuing, in each case, to the extent actually
known by a Trust Officer of the Trust Collateral Agent, or (C) the receipt of
Insolvency Proceeds pursuant to Section 11.1(b), amounts deposited in the Note
Distribution Account (including any such Insolvency Proceeds) and the
Distribution Account shall be paid to the Noteholders and the Certificateholders
pursuant to Section 5.6 of the Indenture.
(c) Each Certificateholder, by its acceptance of its Certificate, will be
deemed to have consented to the provisions of paragraph (b) above relating to
the priority of distributions and will be further deemed to have acknowledged
that no property rights in any amount of or the proceeds of any such amount
shall vest in such Certificateholder until such amount have been distributed to
such Certificateholder pursuant to such provisions; provided, that the foregoing
shall not restrict the right of any Certificateholder, upon compliance with the
provisions hereof, from seeking to compel the performance of the provisions
hereof by the parties hereto.
(d) In furtherance of and not in limitation of the foregoing, each
Certificateholder, by acceptance of its Certificate, specifically acknowledges
that no amounts shall be received by it, nor shall it have any right to receive
any amounts, unless and until such amounts have been distributed pursuant to
clause (xi) above to such Certificateholder. Each Certificateholder, by
acceptance of its Certificate, further specifically acknowledges that it has no
right to or interest in any monies at any time held pursuant to the Spread
Account Agreement or pursuant hereto prior to the release fo such monies as
aforesaid, such monies being held in trust for the benefit
58
of the Noteholders and the Insurer. Notwithstanding the foregoing, in the event
that it is ever determined that the monies held in the Spread Account constitute
a pledge of collateral, then the provisions of this Agreement and the Spread
Account Agreement shall be considered to constitute a security agreement and the
Seller and the Certificateholders hereby grant to the Collateral Agent for the
benefit of the Trustee and the Insurer a first priority perfected security
interest in such amounts, to be applied as set forth in Section 3.03 of the
Spread Account Agreement. In addition, each Certificateholder, by acceptance of
its Certificate, hereby appoints the Seller as its agent to pledge a first
priority perfected security interest in the Spread Account, and any amounts held
therein from time to time to the Collateral Agent for the benefit of the Trustee
and the Insurer pursuant to the Spread Account Agreement and agrees to execute
and deliver such instruments of conveyance, assignment, grant, confirmation,
etc., as well as any financing statements, in each case as the Insurer shall
consider reasonably necessary in order to perfect the Collateral Agent's
Security Interest in the Collateral (as such terms are defined in the Spread
Account Agreement).
(e) In the event that the Collection Account is maintained with an
institution other than the Trust Collateral Agent, the Servicer shall instruct
and cause such institution to make all deposits and distributions pursuant to
Section 5.7(b) on the related Distribution Date.
SECTION 5.8. Note Distribution Account.
(a) On each Distribution Date, the Trust Collateral Agent shall distribute
all amounts on deposit in the Note Distribution Account, as such amounts on
deposit in the Note Distribution Account are specified on the Monthly Servicer's
Certificate, to Noteholders in respect of the Notes to the extent of amounts due
and unpaid on the Notes for principal and interest in the following amounts and
in the following order of priority:
(i) accrued and unpaid interest on the Notes; provided that if there
are not sufficient funds in the Note Distribution Account to pay the
entire amount of accrued and unpaid interest then due on the Notes, the
amount in the Note Distribution Account shall be applied to the payment of
such interest on the Notes pro rata on the basis of the amount of accrued
and unpaid interest due on the Notes; and
(ii) to the Holders of the Notes, the Noteholders' Principal
Distributable Amount until the outstanding principal balance of the Notes
is reduced to zero.
(b) On each Distribution Date, the Trust Collateral Agent shall send to
each Noteholder the statement provided to the Trust Collateral Agent by the
Servicer pursuant to Section 5.10 hereof on such Distribution Date.
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(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Noteholder, such tax shall reduce the
amount otherwise distributable to the Noteholder in accordance with this
Section. The parties hereto hereby agree to provide to the Trust Collateral
Agent the information any such party may have, if any, with respect to any such
withholding tax. The Trust Collateral Agent is hereby authorized and directed to
retain from amounts otherwise distributable to the Noteholders sufficient funds
for the payment of any tax that is legally owed by the Trust (but such
authorization shall not prevent the Trust Collateral Agent from contesting any
such tax in appropriate proceedings, and withholding payment of such tax, if
permitted by law, pending the outcome of such proceedings). The amount of any
withholding tax imposed with respect to a Noteholder shall be treated as cash
distributed to such Noteholder at the time it is withheld by the Trust and
remitted to the appropriate taxing authority. If there is a possibility that
withholding tax is payable with respect to a distribution (such as a
distribution to a non-U.S. Noteholder), the Trust Collateral Agent may in its
sole discretion withhold such amounts in accordance with this clause (c). In the
event that a Noteholder wishes to apply for a refund of any such withholding
tax, the Trust Collateral Agent shall reasonably cooperate with such Noteholder
in making such claim so long as such Noteholder agrees to reimburse the Trust
Collateral Agent for any out-of-pocket expenses incurred.
(d) Distributions required to be made to Noteholders on any Distribution
Date shall be made to each Noteholder of record on the preceding Record Date
either by wire transfer, in immediately available funds, to the account of such
Holder at a bank or other entity having appropriate facilities therefor, if such
Noteholder shall have provided to the Note Registrar appropriate written
instructions at least five Business Days prior to such Distribution Date and
such Holder's Notes in the aggregate evidence a denomination of not less than
$1,000,000 or, if not, by check mailed to such Noteholder at the address of such
holder appearing in the Note Register; provided, however, that, unless
Definitive Notes have been issued pursuant to Section 3.13 of the Trust
Agreement, with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
distributions will be made by wire transfer in immediately available funds to
the account designated by such nominee. Notwithstanding the foregoing, the final
distribution in respect of any Note (whether on the Final Scheduled Distribution
Date or otherwise) will be payable only upon presentation and surrender of such
Note at the office or agency maintained for that purpose by the Note Registrar
pursuant to Section 2.4 of the Indenture.
SECTION 5.9. Pre-Funding Account.
(a) On the Closing Date, the Trust Collateral Agent will deposit, on
behalf of the Seller, in the Pre-Funding Account $6,689,091.18 from the proceeds
of the sale of the Notes. On each Subsequent Transfer Date, the Servicer shall
instruct the Trust Collateral Agent to
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withdraw from the Pre-Funding Account an amount equal to 91% of the Principal
Balance of the Subsequent Receivables transferred to the Issuer on such
Subsequent Transfer Date and to distribute such amount to or upon the order of
the Seller upon satisfaction of the conditions set forth in this Agreement with
respect to such transfer. The Trust Collateral Agent shall also deposit into the
Pre-Funding Account any income or gain earned from the investment of amounts on
deposit in the Pre-Funding Account as received. On each Distribution Date, any
income and gain earned from the investment of amounts on deposit in the
Pre-Funding Account since the previous Distribution Date (or the Closing Date,
in the case of the first Distribution Date) shall be deposited into the Note
Distribution Account.
(b) If the Pre-Funded Amount has not been reduced to zero on the date on
which the Pre-Funding Period ends after giving effect to any reductions in the
Pre-Funded Amount on such date, the Servicer shall instruct the Trust Collateral
Agent to withdraw from the Pre-Funding Account on the Mandatory Redemption Date
the Pre-Funded Amount (exclusive of any Pre-Funding Earnings) and deposit an
amount equal to the Note Prepayment Amount in the Note Distribution Account in
accordance with the priority of payments under Section 5.7(b).
SECTION 5.10. Statements to Noteholders. Concurrently with each
distribution charged to the Note Distribution Account, the Trust Collateral
Agent shall forward by mail to each Noteholder, the Seller, the Servicer, the
Insurer and each Rating Agency, a written statement prepared by the Servicer
substantially in the form attached hereto as Exhibit 5.10.
SECTION 5.11. Optional Deposits by the Insurer. The Insurer shall at any
time, and from time to time, with respect to a Distribution Date, have the
option (but shall not be required, except in accordance with the terms of a
Policy) to deliver amounts to the Trust Collateral Agent for deposit into the
Collection Account for any of the following purposes: (i) to provide funds in
respect of the payment of fees or expenses of any provider of services to the
Trust with respect to such Distribution Date, or (ii) to include such amount to
the extent that without such amount a draw would be required to be made on the
Note Policy.
ARTICLE VI
The Note Policy
SECTION 6.1. Claims Under Note Policy.
(a) In the event that the Trust Collateral Agent has delivered a
Deficiency Notice with respect to any Determination Date pursuant to Section 5.5
hereof, the Trust Collateral Agent shall on the related Draw Date determine the
Note Policy Claim Amount for the related Distribution Date. If the Note Policy
Claim Amount specified on the Deficiency Notice for
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such Distribution Date is greater than zero, the Trust Collateral Agent shall
furnish to the Insurer no later than 12:00 noon New York City time on the
related Draw Date, a completed Notice of Claim (as defined in (b) below) in the
amount of the Note Policy Claim Amount. Amounts paid by the Insurer pursuant to
a claim submitted under this Section 6.1 shall be deposited by the Trust
Collateral Agent into the Note Distribution Account for payment pursuant to
paragraph (b) below to Noteholders on the related Distribution Date.
(b) Any notice delivered by the Trust Collateral Agent to the Insurer
pursuant to subSection 6.1(a) shall specify the Note Policy Claim Amount claimed
under the Note Policy and shall constitute a "Notice of Claim" under the Note
Policy. In accordance with the provisions of the Note Policy, the Insurer is
required to pay to the Trust Collateral Agent the Note Policy Claim Amount
properly claimed thereunder by 12:00 noon, New York City time, on the later of
(i) the third Business Day (as defined in the Note Policy) following receipt on
a Business Day (as defined in the Note Policy) of the Notice of Claim, and (ii)
the applicable Distribution Date. Any payment made by the Insurer under the Note
Policy shall be applied solely to the payment of the Notes, and for no other
purpose.
(c) The Trust Collateral Agent shall (i) receive as attorney-in-fact of
each Noteholder any Note Policy Claim Amount from the Insurer and (ii) deposit
the same in the Note Distribution Account for distribution to Noteholders. Any
and all Note Policy Claim Amounts disbursed by the Trust Collateral Agent from
claims made under the Note Policy shall not be considered payment by the Trust
or from the Spread Account with respect to such Notes, and shall not discharge
the obligations of the Trust with respect thereto. The Insurer shall, to the
extent it makes any payment with respect to the Notes, become subrogated to the
rights of the recipients of such payment, to the extent of such payments.
Subject to and conditioned upon any payment with respect to the Notes by or on
behalf of the Insurer, the Trust Collateral Agent shall assign to the Insurer
all rights to the payment of interest or principal with respect to the Notes
which are then due for payment to the extent of all payments made by the
Insurer, and the Insurer may exercise any option, vote, right, power or the like
with respect to the Notes to the extent that it has made payment pursuant to the
Note Policy. To evidence such subrogation, the Note Registrar (as defined in the
Indenture) shall note the Insurer's rights as subrogee upon the Note Register
upon receipt from the Insurer of proof of payment by the Insurer of any
Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount. The foregoing subrogation shall in all cases be subject to
the rights of the Noteholders to receive all Scheduled Payments (as defined in
the Note Policy) in respect of the Notes.
(d) The Trust Collateral Agent shall keep a complete and accurate record
of all funds deposited by the Insurer into the Note Distribution Account and the
allocation of such funds to payment of interest on and principal paid in respect
of any Note. The Insurer shall
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have the right to inspect such records at reasonable times upon one Business
Day's prior notice to the Trust Collateral Agent.
(e) The Trust Collateral Agent shall be entitled to enforce on behalf of
the Noteholders the obligations of the Insurer under the Note Policy.
Notwithstanding any other provision of this Agreement or any Transaction
Document, the Noteholders are not entitled to make any claims under the Note
Policy or institute proceedings directly against the Insurer.
SECTION 6.2. Preference Claims.
(a) In the event that the Trust Collateral Agent has received a certified
copy of an order of the appropriate court that any Scheduled Payment (as defined
in the Note Policy) has been avoided in whole or in part as a preference payment
under applicable bankruptcy law, the Trust Collateral Agent shall so notify the
Insurer, shall comply with the provisions of the Note Policy to obtain payment
by the Insurer of such avoided payment, and shall, at the time it provides
notice to the Insurer, notify Holders of the Notes by mail that, in the event
that any Noteholder's payment is so recoverable, such Noteholder will be
entitled to payment pursuant to the terms of the Note Policy. The Trust
Collateral Agent shall furnish to the Insurer its records evidencing the
payments of principal of and interest on Notes, if any, which have been made by
the Trust Collateral Agent and subsequently recovered from Noteholders, and the
dates on which such payments were made. Pursuant to the terms of the Note
Policy, the Insurer will make such payment on behalf of the Noteholder to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order (as defined in the Note Policy) and not to the Trust Collateral Agent
or any Noteholder directly (unless a Noteholder has previously paid such payment
to the receiver, conservator, debtor-in-possession or trustee in bankruptcy, in
which case the Insurer will make such payment to the Trust Collateral Agent for
distribution to such Noteholder upon proof of such payment reasonably
satisfactory to the Insurer).
(b) The Trust Collateral Agent shall promptly notify the Insurer of any
proceeding or the institution of any action (of which the Trust Collateral Agent
has actual knowledge) seeking the avoidance as a preferential transfer under
applicable bankruptcy, insolvency, receivership, rehabilitation or similar law
(a "Preference Claim") of any distribution made with respect to the Notes. Each
Holder, by its purchase of Notes, and the Trust Collateral Agent hereby agree
that so long as an Insurer Default shall not have occurred and be continuing,
the Insurer may at any time during the continuation of any proceeding relating
to a Preference Claim direct all matters relating to such Preference Claim
including, without limitation, (i) the direction of any appeal of any order
relating to any Preference Claim and (ii) the posting of any surety, supersedeas
or performance bond pending any such appeal at the expense of the Insurer, but
subject to reimbursement as provided in the Insurance
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Agreement. In addition, and without limitation of the foregoing, as set forth in
Section 6.1(c), the Insurer shall be subrogated to, and each Noteholder and the
Trust Collateral Agent hereby delegate and assign, to the fullest extent
permitted by law, the rights of the Trust Collateral Agent and each Noteholder
in the conduct of any proceeding with respect to a Preference Claim, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Preference
Claim.
SECTION 6.3. Surrender of Note Policy. The Trust Collateral Agent shall
surrender the Note Policy to the Insurer for cancellation upon the expiration of
such policy in accordance with the terms thereof.
SECTION 6.4. Spread Account. The Seller agrees, simultaneously with the
execution and delivery of this Agreement, to execute and deliver the Spread
Account Agreement, and pursuant to the terms thereof, to deposit the Initial
Spread Account Deposit in the Spread Account.
ARTICLE VII
RESERVED
ARTICLE VIII
The Seller
SECTION 8.1. Representations, Warranties and Covenants of the Seller. The
Seller hereby represents, warrants and covenants to the Trust Collateral Agent,
the Insurer and the Servicer, which representations, warranties and covenants
shall survive as long as any Note shall be outstanding or this Agreement has not
been terminated, that as of the Closing Date and each Subsequent Transfer Date:
(a) the Seller is a Delaware business trust duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has
all licenses and approvals necessary to carry on its business as now being
conducted and shall appoint and employ agents or attorneys in each jurisdiction
where it shall be necessary to take action under this Agreement and the other
Transaction Documents; the Seller has the full power and authority to own its
property, to carry on its business as presently conducted, and to execute,
deliver and perform this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) and the other Transaction Documents by the
Seller and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized; this
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Agreement evidences the valid, binding and enforceable obligations of the Seller
(subject to applicable bankruptcy and insolvency laws and other similar laws
affecting the enforcement of creditors' rights generally whether enforcement is
sought in a proceeding in equity or at law); and all requisite action has been
taken by the Seller to make this Agreement and the other Transaction Documents
valid and binding upon the Seller (subject as aforesaid in the preceding
clause);
(b) the Seller is not required to obtain the consent of any other party or
obtain the consent, license, approval or authorization of, or make any
registration or declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any other Transaction Documents;
(c) the consummation of the transactions contemplated by this Agreement
and the other Transaction Documents will not result in the breach of any term or
provision of the trust agreement of the Seller or result in the breach of any
term or provision of, or conflict with or constitute a default (with or without
notice, lapse of time or both) under or result in the acceleration of any
obligation under, any agreement, indenture or loan or credit agreement or other
instrument to which the Seller or its property is subject or result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such agreement, indenture or loan or credit agreement or other
instruments (aside from the lien created pursuant to this Agreement), or result
in the violation of any law (including, without limitation, any bulk transfer or
similar law), rule, regulation, order, judgment or decree to which the Seller or
its property or the Receivables are subject;
(d) no statement, report or other document furnished or to be furnished
pursuant to this Agreement or in connection with the transaction contemplated
hereby contains or will, when furnished, contain any untrue statement of a
material fact or omits or will, when furnished, omit to state a material fact
necessary to make the statements contained therein not misleading, in light of
the circumstances under which they were made;
(e) neither the Seller nor any of its subsidiaries or affiliates is a
party to, bound by or in breach or violation of any indenture or other agreement
or instrument, or subject to or in violation of any statute, order or regulation
of any court, regulatory body, administrative agency or governmental body having
jurisdiction over it, which materially and adversely affects, or may in the
future materially and adversely affect, the ability of the Seller to perform its
obligations under this Agreement or any other Transaction Document;
(f) this Agreement and each Basic Agreement, when duly executed and
delivered, shall effect a valid sale, transfer and assignment of the Receivables
and the remaining Trust Property, enforceable against the Seller and creditors
of and purchasers from the Seller;
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(g) there are no proceedings or investigations pending or, to the Seller's
knowledge, threatened against the Seller or NAFI, before any court, regulatory
body, administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Seller or its properties (i) asserting the
invalidity of this Agreement or any of the Transaction Documents, (ii) seeking
to prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the Transaction Documents,
(iii) seeking any determination or ruling that might materially and adversely
affect the performance by the Seller of its obligations under, or the validity
or enforceability of, this Agreement or any of the Transaction Documents, (iv)
involving the Seller and which might adversely affect the federal income tax or
other federal, state or local tax attributes of the Notes, or (e) that could
have a material adverse effect on the Receivables.
(h) the Seller has obtained or made all necessary consents, approvals,
waivers and notifications of creditors, lessors and other non-governmental
persons, in each case, in connection with the execution and delivery of this
Agreement and the other Transaction Documents, and the consummation of all the
transactions herein and therein contemplated;
(i) the Seller shall not take any action to impair the Trust Collateral
Agent's rights on behalf of the Noteholder and the Insurer in any Contract;
(j) the Seller has filed all federal, state, county, local and foreign
income, franchise and other tax returns required to be filed by it through the
date hereof, and has paid all taxes reflected as due thereon;
(k) since the date of its organization, the Seller has maintained its
chief executive office in the State of Florida or the State of Delaware, and
there have been no other locations of the Seller's principal office during the
four (4) months preceding the Closing Date;
(l) Seller is solvent and will not become insolvent after giving effect to
the transactions contemplated hereunder; Seller is paying its debts as they
become due; Seller, after giving effect to the contemplated transactions, will
have adequate capital to conduct its business;
(m) since February 1995, "National Financial Auto Funding Trust" is the
only trade name under which the Seller has operated its business and, prior to
such date, NAFCO Funding Trust was the only trade name under which the Seller
operated its business;
(n) the Seller shall not engage in any business or activity other than in
connection with or relating to the purchase of auto loan receivables and the
issuance of securities secured by, or evidencing beneficial interests in, such
auto loan receivables;
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(o) the Seller is not and shall not be involved in the day-to-day or other
management of its parent or any of its affiliates;
(p) the Seller's financial statements shall reflect its separate legal
existence from any of its affiliates;
(q) the Seller shall maintain records and books of account of the Seller
and shall not commingle such records and books of account with the records and
books of account of any Person;
(r) the Seller shall act solely in its own name and through the duly
authorized trustees or agents in the conduct of its business, and shall conduct
its business so as not to mislead others as to the identity of the entity with
which they are concerned;
(s) at all times, except in the case of a temporary vacancy, which shall
promptly be filled, the Seller shall have at least one trust collateral agent
who qualifies as an "Independent Trust Collateral Agent" as such term is defined
in the Trust Agreement as in effect on the date hereof.
The Seller shall indemnify the Trust Collateral Agent, the Insurer, the
Servicer, their respective officers, directors, agents and employees and each
Noteholder, and hold each of them harmless against any and all damages
(including all expenses and legal fees) resulting from a breach of the
representations and warranties set forth in this Section 8.1.
The Insurer shall be deemed to have relied on the foregoing
representations, warranties and covenants in executing and delivering the Note
Policy.
SECTION 8.2. Corporate Existence.
(a) During the term of this Agreement, the Seller will keep in full force
and effect its existence, rights and franchises as a business trust under the
laws of Delaware and will obtain and preserve its qualification to do business
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, any Subsequent
Transfer Agreement, the Transaction Documents and each other instrument or
agreement necessary or appropriate to the proper administration of this
Agreement and such other agreements and the transactions contemplated hereby and
thereby and the performance of its obligations hereunder and thereunder.
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(b) During the term of this Agreement, the Seller shall observe the
applicable legal requirements for the recognition of the Seller as a legal
entity separate and apart from its Affiliates, including as follows:
(i) the Seller shall maintain business records and books of account
separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the Seller
shall not commingle its assets and funds with those of its Affiliates;
(iii) the Seller shall at all times hold itself out to the public
under the Seller's own name as a legal entity separate and distinct from
its Affiliates; and
(iv) all transactions and dealings between the Seller and its
Affiliates will be conducted on an arm's-length basis.
SECTION 8.3. Liability of Seller; Indemnities. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken under this Agreement by the Seller and the representations made by
the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Trust, the Insurer, the Trustee, the Trust Collateral Agent
and their respective officers, directors, agents and employees from and against
any taxes that may at any time be asserted against any such Person with respect
to the transactions contemplated in this Agreement and any of the Transaction
Documents (except any income taxes arising out of fees paid to the Owner
Trustee, the Trust Collateral Agent, the Trustee and the Insurer and except any
taxes to which the Owner Trustee, the Trust Collateral Agent or the Trustee may
otherwise be subject to), including any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes (but, in the
case of the Issuer, not including any taxes asserted with respect to, federal or
other income taxes arising out of distributions on the Notes) and costs and
expenses in defending against the same.
(b) The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Trustee, the Trust Collateral Agent, the Insurer, their
respective officers, directors, agents and employees and the Noteholders from
and against any loss, liability or expense incurred by reason of (i) the
Seller's willful misfeasance, bad faith or negligence in the performance of its
duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement and (ii) the Seller's or the
Issuer's violation of Federal or state securities laws in connection with the
offering and sale of the Notes.
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(c) The Seller shall indemnify, defend and hold harmless the Owner
Trustee, Trustee and the Trust Collateral Agent and their respective officers,
directors, employees and agents from and against any and all costs, expenses,
losses, claims, damages and liabilities arising out of, or incurred in
connection with the acceptance or performance of the trusts and duties set forth
herein and in the Transaction Documents except to the extent that such cost,
expense, loss, claim, damage or liability shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of the
Owner Trustee.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee, the Trustee or the Trust Collateral Agent and the
termination of this Agreement or the Indenture or the Trust Agreement or the
Custodian Agreement, as applicable, and shall include reasonable fees and
expenses of counsel and other expenses of litigation. If the Seller shall have
made any indemnity payments pursuant to this Section and the Person to or on
behalf of whom such payments are made thereafter shall collect any of such
amounts from others, such Person shall promptly repay such amounts to the
Seller, without interest.
SECTION 8.4. Merger or Consolidation of, or Assumption of the Obligations
of, Seller. The Seller may not be merged or consolidated with or into any person
or transfer substantially all of its assets to any Person.
SECTION 8.5. Limitation on Liability of Seller and Others. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the written advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising under any Transaction Document. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under this Agreement, and that in its opinion may
involve it in any expense or liability.
SECTION 8.6. Seller May Own Notes. The Seller and any Affiliate thereof
may in its individual or any other capacity become the owner or pledgee of Notes
with the same rights as it would have if it were not the Seller or an Affiliate
thereof, except as expressly provided herein or in any Transaction Document.
Notes so owned by the Seller or such Affiliate shall have an equal and
proportionate benefit under the provisions of the Transaction Documents, without
preference, priority, or distinction as among all of the Notes; provided,
however, that any Notes owned by the Seller or any Affiliate thereof, during the
time such Notes are owned by them, shall be without voting rights for any
purpose set forth in the Documents and will not be entitled to the benefits of
the Note Policy. The Seller shall notify the Owner Trustee, the Trustee, the
Trust Collateral Agent and the Insurer promptly after it or any of its
Affiliates become the owner or pledgee of a Note.
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ARTICLE IX
The Servicer
SECTION 9.1. Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents, warrants and covenants to the Trust Collateral
Agent and the Insurer that as of the Closing Date and each Subsequent Transfer
Date:
(a) the Servicer is duly organized, validly existing and in good standing
under the laws of the state of its organization and is qualified to transact
business in and is in good standing under the laws of each state in which it is
necessary for it to be so qualified in order to carry on its business as now
being conducted and has all licenses necessary to carry on its business as now
being conducted; the Servicer has the full power and authority to own its
property, to carry on its business as presently conducted, and to execute,
deliver and perform each of the Transaction Documents to which it is a party;
the execution, delivery and performance of each of the Transaction Documents to
which it is a party (including all instruments of transfer to be delivered
pursuant to any such Transaction Documents to which it is a party) by the
Servicer and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized; each of the Transaction Documents
to which it is a party evidences the valid, binding and enforceable obligation
of the Servicer (subject to applicable bankruptcy and insolvency laws and other
similar laws affecting the enforcement of creditors' rights generally and to
general principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law) and all requisite partnership action has been
taken by the Servicer to make each of the Transaction Documents to which it is a
party valid and binding upon the Servicer (subject as aforesaid in the preceding
clause);
(b) the Servicer is not required to obtain the consent of any other party
or obtain the consent, license, approval or authorization of, or make any
registration or declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of each of the Transaction Documents to which it is a party;
(c) the consummation of the transactions contemplated by the Basic
Documents will not result in the breach of any term or provision of the
certificate of incorporation or by-laws of the Servicer or result in the breach
of any term or provision of, or conflict with or constitute a default (with or
without notice, lapse of time or both) under or result in the acceleration of
any obligation under, any agreement, indenture or loan or credit agreement or
other instrument to which the Servicer or its property is subject, or result in
the creation or imposition of any Lien upon any of the properties pursuant to
the terms of any such agreement indenture or loan or credit agreement or other
instrument (aside from the lien created pursuant
70
to this Agreement) or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Servicer or its property or the
Receivables are subject;
(d) the Servicer is not a party to, bound by or in breach or violation of
any indenture or other agreement or instrument, or subject to or in violation of
any statute, order or regulation of any court, regulatory body, administrative
agency or governmental body having jurisdiction over it, which materially and
adversely affects, or may in the future materially and adversely affect, the
ability of the Servicer to perform its obligations under this Agreement or the
interest of the Noteholders, the Trust or the Insurer in any material respect;
(e) there are no actions, suits, proceedings or investigations pending or,
to the Servicer's knowledge, threatened against the Servicer, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement or any of the
Transaction Documents, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by the Transaction
Documents, (iii) seeking any determination or ruling that might materially and
adversely affect the performance by the Servicer of its obligations under, or
the validity or enforceability of, this Agreement or any of the Transaction
Documents, (iv) involving the Servicer and which might adversely affect the
federal income tax or other federal, state or local tax attributes of the Notes,
or (v) that could have a material adverse effect on the Receivables. To the
Servicer's knowledge, there are no proceedings or investigations pending or
threatened against the Servicer, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality having
jurisdiction over the Servicer or its properties relating to the Servicer which
might adversely affect the federal income tax or other federal, state or local
tax attributes of the Notes;
(f) the principal office of the Servicer is located at One Park Place, ▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇; and
(g) the Sub-Servicing Agreement is enforceable against the Servicer and
has been duly authorized by all necessary corporate action of the Servicer and
has been duly executed and delivered by the Servicer.
It is understood and agreed that the representations and warranties set
forth in this Section 9.1 shall survive delivery of the respective Receivable
Files to the Custodian and the Sub-Servicers, if any, on behalf of the Trust
Collateral Agent and shall survive as long as any Note shall be outstanding or
this Agreement has not been terminated. Upon discovery by the Seller, the
Servicer or a Responsible Officer of the Trust Collateral Agent of a breach of
any of the representations and warranties set forth in this Section 9.1 which
materially and adversely affects the interests of the Noteholders or the Insurer
in any Receivable, the party
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discovering such breach shall give prompt written notice thereof to the other
parties and to the Insurer. In addition to the foregoing, the Servicer shall
indemnify the Seller, the Trust Collateral Agent, the Insurer, the Trust and the
Noteholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to a breach of the covenants or
representations and warranties set forth in Section 9.1.
The Insurer shall be deemed to have relied on the foregoing
representations, warranties and covenants in executing and delivering the Note
Policy.
SECTION 9.2. Liability of Servicer; Indemnities.
(a) The Servicer (in its capacity as such) shall be liable hereunder only
to the extent of the obligations in this Agreement specifically undertaken by
the Servicer and the representations made by the Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the Trust, the
Trustee, the Trust Collateral Agent, the Owner Trustee, the Insurer, their
respective officers, directors, agents and employees, and the Noteholders 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 any Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold harmless the Trustee,
the Trust Collateral Agent and the Owner Trustee and their respective officers,
directors, agents and employees from and against any taxes that may at any time
be asserted against any of such parties with respect to the transactions
contemplated in this Agreement except to the extent that such costs, expenses,
losses, damages, claims and liabilities arise out of the negligence or willfully
misconduct of such parties.
(d) The Servicer (when the Servicer is NAFI) shall indemnify, defend and
hold harmless the Trust, the Trustee, the Trust Collateral Agent, the Owner
Trustee, the Insurer, their respective officers, directors, agents and employees
and the Noteholders from and against any taxes that may at any time be asserted
against any of such parties with respect to the transactions contemplated in
this Agreement, including, without limitation, any sales, gross receipts,
tangible or intangible personal property, privilege or license taxes (but not
including any federal or other income taxes, including franchise taxes asserted
with respect to, and as of the date of, the sale of the Receivables and the
Other Conveyed Property to the Trust or the
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issuance and original sale of the Securities) and costs and expenses in
defending against the same.
(e) The Servicer (when the Servicer is not NAFI) shall indemnify, defend
and hold harmless the Trust, the Trustee, the Trust Collateral Agent, the Owner
Trustee, the Insurer, their respective officers, directors, agents and employees
and the Noteholders from and against any taxes with respect to the sale of
Receivables in connection with servicing hereunder that may at any time be
asserted against any of such parties with respect to the transactions
contemplated in this Agreement, including, without limitation, any sales, gross
receipts, tangible or intangible personal property, privilege or license taxes
(but not including any federal or other income taxes, including franchise taxes
asserted with respect to, and as of the date of, the sale of the Receivables and
the Other Conveyed Property to the Trust or the issuance and original sale of
the Securities) and costs and expenses in defending against the same.
(f) The Servicer shall indemnify, defend and hold harmless the Trust, the
Trustee, the Trust Collateral Agent, the Owner Trustee, the Insurer, their
respective officers, directors, agents and employees and the Noteholders 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 the Trust, the Trustee, the Trust
Collateral Agent, the Insurer or the Noteholders by reason of the breach of this
Agreement by the Servicer, the negligence, misfeasance, or bad faith of the
Servicer in the performance of its duties under this Agreement or by reason of
reckless disregard of its obligations and duties under this Agreement or
otherwise incurred in connection with the transactions contemplated hereby.
(g) NAFI shall indemnify, defend and hold harmless the Trust, the Trustee,
the Trust Collateral Agent, the Owner Trustee, the Insurer, their respective
officers, directors, agents and employees and the Noteholders from and against
any loss, liability or expense incurred by reason of the violation by Servicer
or Seller of federal or state securities laws in connection with the
registration or the sale of the Securities.
(h) Indemnification under this Article shall survive the termination of
this Agreement and will survive the early resignation or removal of any of the
parties hereto and shall include, without limitation, reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer has made any
indemnity payments pursuant to this Article and the recipient thereafter
collects any of such amounts from others, the recipient shall promptly repay
such amounts collected to the Servicer, without interest. Notwithstanding any
other provision of this Agreement, the obligations of the Servicer shall not
terminate or be deemed
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released upon the resignation or termination of NAFI as the Servicer and shall
survive any termination of this Agreement.
SECTION 9.3. Merger or Consolidation of, or Assumption of the Obligations
of the Servicer or the Trust Collateral Agent.
(a) During the term of this Agreement, the Servicer will keep in full
force and effect its existence, rights and franchises as a business trust under
the laws of Delaware and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, any
Subsequent Transfer Agreement, the Transaction Documents and each other
instrument or agreement necessary or appropriate to the proper administration of
this Agreement and the transactions contemplated hereby and thereby and the
performance of its obligations hereunder and thereunder.
(b) The Servicer may be merged or consolidated with or into any Person, or
transfer substantially all of its assets to any Person, in which case any Person
resulting from any merger or consolidation to which the Servicer shall be a
party, or any Person succeeding to the business of the Servicer, shall be the
successor of the Servicer hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided however, that the successor or
surviving person to the Servicer shall be an Eligible Servicer and each
successor to the Servicer by virtue of its acquisition of substantially all of
the Servicer's assets shall be deemed to have made the representations and
warranties set forth in Section 9.01 hereof and shall agree in writing to be
bound by each of the Servicer's obligations hereunder; provided further, that,
(i) no representation or warranty of the Servicer is breached at the time of
merger, (ii) no event has occurred that, after notice or lapse of time or both,
would be an Insurance Agreement Event of Default and (iii) an opinion of counsel
to the effect that all conditions precedent to merger have been satisfied and a
security interest opinion have been provided. The Servicer shall provide notice
of any such merger, consolidation or transfer of substantially all of its assets
to the Insurer, the Trust Collateral Agent and the Rating Agencies.
(c) Any Person (i) into which the Trust Collateral Agent may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the Trust
Collateral Agent shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Trust Collateral Agent, or (iv)
succeeding to the business of the Trust Collateral Agent, in any of the
foregoing cases shall execute an agreement of assumption to perform every
obligation of the Trust Collateral Agent under this Agreement and, whether or
not such assumption agreement is executed, shall be the successor to the Trust
Collateral Agent under this Agreement without the execution or filing of any
paper or any further act on the
74
part of any of the parties to this Agreement, anything in this Agreement to the
contrary notwithstanding. The Trust Collateral Agent or its successor hereunder
shall provide the Servicer and the Insurer with prompt notice of any such
transaction. In the event that the resulting entity does not meet the
eligibility requirements set forth in Section 6.11 of the Indenture, the Trust
Collateral Agent, upon the written request of the Insurer, shall resign. Nothing
contained herein shall be deemed to release the Trust Collateral Agent from any
obligation.
SECTION 9.4. Limitation on Liability of Servicer, Trust Collateral Agent
and Others.
(a) The Servicer will defend and indemnify the Trust Collateral Agent, the
Insurer and their respective officers, directors, employees and agents and the
Noteholders 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 or operation of any
Financed Vehicle by the Servicer or any Sub-Servicer. In addition, the Servicer
will defend and indemnify the Trust Collateral Agent, the Insurer and their
respective officers, directors, employees and agents and the Noteholders against
any and all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of litigation, arising from
a breach of its obligations to service the Receivables in accordance with this
Agreement; provided however, that the Servicer shall not be liable for any such
costs, expenses, losses, damages, claims or liabilities to the extent that any
thereof resulted from the negligence or willful misconduct of the Trust
Collateral Agent, its officers, directors, employees and agents; and provided
further that the Servicer will not be liable for any such amount that resulted
from any act or omission to act by it done in conformity with the written
instruction of the Trust Collateral Agent. If the Servicer or Seller has made
any indemnity payments to the Noteholders or the Trust Collateral Agent, the
Insurer or their respective officers, directors, employees or agents pursuant to
this paragraph, and the Trust Collateral Agent, the Insurer or their respective
officers, directors, employees or agents thereafter collects any of the amounts
which gave rise to such indemnity payments from others or any such amounts are
received by the Trust Collateral Agent or its officers, directors, employees or
agents, the Trust Collateral Agent or its officers, directors, employees or
agents shall repay such amounts collected to the Servicer or Seller who made
such indemnity payment. These indemnities of the Servicer and the Seller will
survive any transfer of the respective rights, duties and obligations of the
Servicer or the Seller hereunder to another Person, the termination of this
Agreement, any Servicer Termination Event, the termination of the Trust Property
or the resignation or replacement of the Trust Collateral Agent for acts
accruing prior to the transfer, termination of the Trust Property or the
resignation or replacement of the Trust Collateral Agent, but will not cover
actions or omissions of any successor Servicer after a Servicer Termination
Event. Neither the Servicer nor any of its directors, officers, employees or
agents shall be under any liability to the Trust Property, the
75
Trust Collateral Agent, any Noteholder, the Insurer or the Seller for any action
taken by the Servicer in its capacity as such (and not in any other capacity) in
good faith or for errors in judgment except for any action taken or errors
committed which caused a breach of a representation or warranty of the Servicer
under Section 9.1. The Seller, the Servicer and any director, officer, employee
or agent of any Seller or the Servicer may rely in good faith on any document of
any kind prima facie properly executed and submitted by any Person respecting
any matters arising hereunder.
(b) The Seller, the Servicer and any director, officer, employee or agent
of the Seller or the Servicer shall be indemnified by the Trust Property and
held harmless against any loss, liability or expense incurred in connection with
any legal action relating to this Agreement or the Notes, other than any loss,
liability or expense for which the Seller or Servicer provides an indemnity as
provided in the preceding paragraph (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to this Agreement). Neither the
Seller nor the Servicer shall be under any obligation to appear in, prosecute or
defend any legal action which is not in its reasonable judgment incidental to
its respective duties under this Agreement and which in its reasonable judgment
may subject it to any expense or liability; provided however, that the Servicer
may in its discretion undertake any such action which it may deem necessary or
desirable in respect to this Agreement and the rights and duties of the parties
hereto and the interest of the Noteholders hereunder. In such event, the legal
expenses and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Trust Property, and the Servicer shall be
entitled to be reimbursed therefor as provided herein. The rights of the
Servicer to indemnity, reimbursement or limitation on its liability pursuant to
this Section 9.4 shall survive the transfer of the rights, duties and
obligations of the Servicer to another Person or any Servicer Default.
(c) The Servicer shall defend, indemnify and hold harmless the Trust, the
Trust Collateral Agent, the Insurer, their respective officers, directors,
agents and employees, and the Noteholders from and against any taxes that may at
any time be asserted against the Trust, the Trust Collateral Agent or the
Noteholders with respect to the transactions contemplated in this Agreement,
including, without limitation, any sales, gross receipts, general corporation,
tangible personal property, privilege or license taxes (but not including any
taxes asserted with respect to, and as of the date of, the sale of the
Receivables and the other Trust Property to the Trust Collateral Agent or the
issuance and original sale of the Notes, or asserted with respect to ownership
of the Receivables, or federal or other income taxes arising out of
distributions on the Notes) and costs and expenses in defending against the
same.
(d) The Servicer shall indemnify, defend and hold harmless the Trust, the
Trust Collateral Agent, the Insurer, their respective officers, directors,
agents and employees and the Noteholders from and against any and all costs,
expenses, losses, claims, damages, and
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liabilities to the extent that such cost, expense, loss, claim, damage, or
liability arose out of, or was imposed upon the Trust Collateral Agent, the
Trust, the Insurer or the Noteholders through the breach of this Agreement, the
negligence, willful misfeasance, or bad faith of the Servicer in the performance
of its duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement.
(e) Notwithstanding anything herein to the contrary, the Trust Collateral
Agent shall not be liable for any obligation of the Servicer contained in this
Agreement, and the Trust Collateral Agent, the Seller, the Insurer and the
Noteholders shall look only to the Servicer to perform such obligations.
(f) The parties expressly acknowledge and consent to ▇▇▇▇▇▇ Trust and
Savings Bank acting in the possible dual capacity of successor Servicer and in
the capacity as Trust Collateral Agent. ▇▇▇▇▇▇ Trust and Savings Bank may, in
such dual or other capacity, discharge its separate functions fully, without
hindrance or regard to conflict of interest principles, duty of loyalty
principles or other breach of fiduciary duties to the extent that any such
conflict or breach arises from the performance by ▇▇▇▇▇▇ Trust and Savings Bank
of express duties set forth in the this Agreement in any of such capacities, all
of which defenses, claims or assertions are hereby expressly waived by the other
parties hereto and the Noteholders except in the case of gross negligence and
willful misconduct by ▇▇▇▇▇▇ Trust and Savings Bank.
SECTION 9.5. Delegation of Duties. The Servicer may delegate duties under
this Agreement to an Affiliate of NAFI, or, pursuant to Section 4.2, to a
Sub-Servicer with the prior written consent of the Insurer (unless an Insurer
Default shall have occurred and be continuing) and the Trust Collateral Agent;
provided, however, that such consent shall not be required for the initial
delegation to OFSA. The Servicer also may at any time perform through
sub-contractors the specific duties of (i) repossession of Financed Vehicles,
(ii) tracking Financed Vehicles' insurance and (iii) pursuing the collection of
deficiency balances on certain Liquidated Receivables, in each case, without the
written consent of the Insurer and may perform other specific duties through
such sub-contractors in accordance with Servicer's customary servicing policies
and procedures, with the prior consent of the Insurer; provided, however, that
no such delegation or sub-contracting duties by the Servicer shall relieve the
Servicer of its responsibility with respect to such duties. So long as no
Insurer Default shall have occurred and be continuing neither NAFI or any party
acting as Servicer hereunder shall appoint any Sub-Servicer hereunder without
the prior written consent of the Insurer and the Trust Collateral Agent.
SECTION 9.6. Servicer Not to Resign. Subject to the provisions of Section
9.3, the Servicer shall not resign from the obligations and duties imposed on it
by this Agreement as
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Servicer except upon a determination that by reason of a change in legal
requirements the performance of its duties under this 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, and the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or a Note Majority (if an
Insurer Default shall have occurred and be continuing) does not elect to waive
the obligations of the Servicer 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 shall be evidenced by
an Opinion of Counsel to such effect delivered and acceptable to the Trust
Collateral Agent, the Owner Trustee and the Insurer (unless an Insurer Default
shall have occurred and be continuing). No resignation of the Servicer shall
become effective until, so long as no Insurer Default shall have occurred and be
continuing, the Backup Servicer or an entity acceptable to the Insurer shall
have assumed the responsibilities and obligations of the Servicer or, if an
Insurer Default shall have occurred and be continuing, a successor Servicer that
is an Eligible Servicer shall have assumed the responsibilities and obligations
of the Servicer. Upon the resignation of the Servicer, the Servicer shall give
prompt written notice thereof to the Rating Agencies.
ARTICLE X
Default
SECTION 10.1. Servicer Termination Event. For purposes of this Agreement,
each of the following shall constitute a "Servicer Termination Event" (whatever
the reason for such Servicer Termination Event and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) Any failure by the Servicer to deliver, or cause to be delivered by
any Sub-Servicer, to the Trust Collateral Agent for distribution to Noteholders
or deposit in the Spread Account any proceeds or payment required to be so
delivered by the Servicer or Sub-Servicer under the terms of this Agreement
(including deposits of the Purchase Amount) that continues unremedied for a
period of two Business Days (one Business Day with respect to payment of
Purchase Amounts) after written notice is received by the Servicer from the
Trust Collateral Agent or (unless an Insurer Default shall have occurred and be
continuing) the Insurer or after discovery of such failure by a Responsible
Officer of the Servicer (but in no event later than five Business Days after the
Servicer is required to make such delivery or deposit); or
(b) Any failure by the Servicer to observe or perform any other of the
covenants or agreements on the part of the Servicer in this Agreement, which
failure (i) materially and adversely affects the rights of Noteholders
(determined without regard to the availability of
78
funds under the Note Policy) or of the Insurer (unless an Insurer Default shall
have occurred and be continuing), and (ii) continues unremedied for a period of
thirty days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by the Trust
Collateral Agent, or to the Servicer and the Trust Collateral Agent by the
Insurer (or, if an Insurer Default has occurred and is continuing, Noteholders
evidencing in the aggregate not less than 25% of the aggregate outstanding
Principal Balance of the Notes); or
(c) The entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Servicer in an involuntary case
under the federal bankruptcy laws, as now or hereafter in effect, or another
present or future, federal bankruptcy, insolvency or similar law, or appointing
a receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or of any substantial part of its property or
ordering the winding up or liquidation of the affairs of the Servicer or the
commencement of an involuntary case under the federal bankruptcy laws, as now or
hereinafter in effect, or another present or future federal or state bankruptcy,
insolvency or similar law and such case is not dismissed within 60 days; or
(d) 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 or the failure by the
Servicer generally to pay its debts as such debts become due or the taking of
corporate action by the Servicer in furtherance of any of the foregoing; or
(e) Any representation, warranty or statement of the Servicer made in this
Agreement or any certificate, report or other writing delivered pursuant hereto
shall prove to be incorrect in any material respect as of the time when the same
shall have been made, and the incorrectness of such representation, warranty or
statement has a material adverse effect on the interests of the Trust, the
Insurer or the Noteholders (or of the Seller if NAFI is the Servicer) in the
Receivables (determined without regard to the availability of funds under the
Note Policy) and, within 30 days after written notice thereof shall have been
given to the Servicer by the Trust Collateral Agent or the Insurer (or, if an
Insurer Default shall have occurred and be continuing, a Noteholder), the
circumstances or condition in respect of which such representation, warranty or
statement was incorrect shall not have been eliminated or otherwise cured; or
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(f) There shall have occurred an Insurance Agreement Event of Default or
an event of default under any other insurance agreement to which the Insurer and
NAFI and/or the Seller or any other affiliate of NAFI are party; or
(g) The Servicer fails to deliver the report required to be delivered by
the Servicer pursuant to Section 4.12 and such failure remains unremedied for a
period of five days;
(h) A claim is made under the Note Policy; or
(i) so long as an Insurer Default shall not have occurred and be
continuing, the Insurer shall not have delivered a Servicer Extension Notice
pursuant to Section 4.16.
SECTION 10.2. Consequences of a Servicer Termination Event. If a Servicer
Termination Event shall occur, then, and in each and every such case, so long as
such Servicer Termination Event shall not have been remedied, the Trust
Collateral Agent may, with the written consent of the Insurer (unless an Insurer
Default has occurred and is continuing), and at the written direction of the
Insurer (or, if an Insurer Default has occurred and is continuing, Noteholders
evidencing in the aggregate not less than 51% of the aggregate outstanding
Principal Balance of the Notes), the Trust Collateral Agent shall, by notice in
writing to the Servicer, the Seller and the Backup Servicer, (i) terminate all
of the rights and obligations of the Servicer under this Agreement and in and to
any Receivables and the proceeds thereof, subject to compensation, rights of
reimbursement, indemnity and limitation on liability to which the Servicer is
then entitled and the rights of indemnity to which the Trust Collateral Agent
and the Insurer are then entitled pursuant to Section 9.04 hereof, and (ii)
subject to 10.03, appoint the Backup Servicer as the successor Servicer. Such
notice shall specify, to the extent possible, the timing and method of
transition of the servicing of the Receivables from the Servicer to the Backup
Servicer or another successor Servicer appointed pursuant to Section 10.03. On
and after the receipt by the Servicer of such written notice and upon the
effective date of the transfer to the Backup Servicer or such other successor
Servicer specified in such notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Notes or the Receivables or
otherwise, shall pass to and be vested in the Backup Servicer or such other
successor Servicer, pursuant to and under this Section; and, without limitation,
such Person is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, an 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 notice of termination, whether to
complete the transfer and endorsement or assignment of the Receivables and
related documents, or otherwise. The Servicer agrees to cooperate with such
Person in effecting the termination of the Servicer's responsibilities and
rights hereunder, including, without limitation, the transfer to such party for
administration by is of all cash amounts which shall thereafter be received with
respect to the Receivables.
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The Trust Collateral Agent shall not be charged with knowledge of any
event referred to in clauses (a) through (f) above unless a Responsible Officer
of the Trust Collateral Agent at the Corporate Trust Office obtains actual
knowledge of such event or receives written notice of such event from the
Servicer, the Insurer or from a Noteholder. The Trust Collateral Agent promptly
shall send written notice to each Rating Agency and the Insurer of each Servicer
Termination Event of which it is charged with knowledge in accordance with the
preceding sentence.
If the Servicer is terminated pursuant to this Section 10.02, then the
Servicer shall bear all of the costs and expenses of transferring the duties and
obligations of the Servicer to a successor Servicer and except as otherwise
agreed by the Insurer such costs and expenses shall not be reimbursable from the
Trust Property nor payable by the Seller or the Trust Collateral Agent. To the
extent not borne by the Servicer as described above, such costs and expenses
(including attorney's fees and expenses) shall be borne by the Trust Property in
accordance with Section 5.7(b)(ix).
SECTION 10.3. Additional Consequences of a Servicer Termination Event. 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 notice of
termination, whether to complete the transfer and endorsement of the Receivables
and the Other Conveyed Property and related documents to show the Trust as
lienholder or secured party on the related Lien Certificates, 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 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 Receivables and the delivery to the successor Servicer of
all Receivable Files, Monthly Records and a computer tape in readable form as of
the most recent Business Day containing all information necessary to enable the
successor Servicer or a successor Servicer to service the Receivables and the
Other Conveyed Property. If requested by the Controlling Party, the successor
Servicer shall terminate the Lockbox Agreement and direct the Obligors to make
all payments under the Receivables directly to the successor Servicer (in which
event the successor Servicer shall process such payments in accordance with
Section 4.2(e)), or to a lockbox established by the successor Servicer at the
direction of the Controlling Party, at the terminated Servicer's expense. The
terminated Servicer shall grant the Trust Collateral Agent, the successor
Servicer and the Controlling Party reasonable access to the terminated
Servicer's premises at the terminated Servicer's expense.
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SECTION 10.4. Appointment of Successor.
(a) On and after (i) the time the Servicer receives a notice of
termination pursuant to Section 10.2, (ii) upon non-extension of the servicing
term as referred to in Section 4.14, or (iii) upon the resignation of the
Servicer pursuant to Section 9.5, the Backup Servicer (unless the Insurer shall
have exercised its option pursuant to Section 10.3(b) to appoint an alternate
successor Servicer) shall be the successor in all respects to the Servicer in
its capacity as servicer under this Agreement and the transactions set forth or
provided for in this 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
Agreement except as otherwise stated herein. The Trust Collateral Agent and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. If a successor Servicer is acting
as Servicer hereunder, it shall be subject to term-to-term servicing as referred
to in Section 4.14 and to termination under Section 10.2 upon the occurrence of
any Servicer Termination Event applicable to it as Servicer.
(b) The Insurer, or in the event that an Insurer Default shall have
occurred and be continuing, a Note Majority, may exercise at any time its right
to appoint as successor to the Servicer a Person other than the Person serving
as Backup Servicer at the time, and (without limiting its obligations under the
Note Policy) shall have no liability to the Trust Collateral Agent, NAFI, the
Seller, the Person then serving as successor servicer, any Noteholders or any
other Person if it does so. Notwithstanding the above, if the Trust Collateral
Agent shall be legally unable or unwilling to act as Servicer, and an Insurer
Default shall have occurred and be continuing, a Note Majority may petition a
court of competent jurisdiction to appoint any Eligible Sub-Servicer as the
successor to the Servicer. Pending appointment pursuant to the preceding
sentence, the Trust Collateral Agent 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. Subject to Section 9.6, no provision of this Agreement shall be
construed as relieving the Trust Collateral Agent of its obligation to succeed
as successor Servicer upon the termination of the Servicer pursuant to Section
10.2, the resignation of the Servicer pursuant to Section 9.6 or the
non-extension of the servicing term of the Servicer, as referred to in Section
4.14. If upon the termination of the Servicer pursuant to Section 10.2 or the
resignation of the Servicer pursuant to Section 9.6, the Insurer or in the event
that an Insurer Default shall have occurred and be continuing, a Note Majority,
appoints a third party to serve as Servicer other than the Trust Collateral
Agent, the Trust Collateral Agent shall not be relieved of its duties as
successor Servicer hereunder. If the Backup Servicer refuses or is unable to act
as successor Servicer hereunder, the Trust Collateral Agent may, if it shall be
unwilling to so act, or shall, if it is unable to so act, appoint, or petition a
court of competent jurisdiction to appoint, any experienced servicer of
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motor vehicle installment sales contracts and notes having a net worth of not
less than $10,000,000 as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer hereunder. The Trust Collateral Agent shall obtain the prior
written consent of the Insurer (unless an Insurer Default has occurred and is
continuing) before appointing a successor Servicer other than the Backup
Servicer, and any successor Servicer other than the Backup Servicer shall be
satisfactory to the Insurer (unless an Insurer Default has occurred and is
continuing). Pending appointment of a successor to the Servicer hereunder, the
Trust Collateral Agent shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Trust Collateral Agent may
make such arrangements for the compensation of such successor out of payments on
Receivables as it and such successor shall agree; provided however, that no such
compensation to such successor Servicer shall be in excess of that permitted the
Servicer hereunder unless (A) the Trust Collateral Agent and the Insurer (or if
an Insurer Default has occurred and is continuing, holders of Notes evidencing a
majority of the aggregate outstanding Principal Amount of the Notes) agree in
writing to a larger Servicing Fee and (B) each Rating Agency delivers a letter
to the Trust Collateral Agent to the effect that such larger Servicing Fee will
not result in a reduction or the withdrawal of the rating assigned by such
Rating Agency to the Notes; and provided further, however, that the Servicing
Fee to a successor Servicer, including the Trust Collateral Agent, shall not
exceed a monthly fee equal to 1/12th of the product of (i) the aggregate amount
of the Outstanding Principal Balances of all Receivables outstanding as of the
last day of the related Due Period and (ii) two percent (2%). The Seller, the
Trust Collateral Agent, any Sub-Servicer and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.
If the Trust Collateral Agent shall succeed to the Servicer's duties as
Servicer of the Receivables as provided herein, it shall do so in its individual
capacity and not in its capacity as Trust Collateral Agent. In the event that
the Trust Collateral Agent shall not seek to appoint a successor Servicer within
three months of its succession to the Servicer's duties as servicer, it shall
resign as Trust Collateral Agent pursuant to Section 9.6 and the Seller shall,
with the written consent of the Insurer (unless an Insurer Default shall have
occurred and be continuing), appoint, or the Trust Collateral Agent shall
petition a court to appoint, a successor trust collateral agent. To the extent a
successor Servicer is appointed, the Trust Collateral Agent shall not be liable
for the acts or omissions of such successor Servicer.
SECTION 10.5. [RESERVED]
SECTION 10.6. Notification to Noteholders and Rating Agencies. Upon any
termination of, or appointment of a successor to, the Servicer, the Trust
Collateral Agent shall give prompt written notice thereof to each Noteholder and
Rating Agency.
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SECTION 10.7. Waiver of Past Defaults. So long as no Insurer Default shall
have occurred and be continuing, the Insurer (or, if an Insurer Default shall
have occurred and be continuing, the Note Majority) may, on behalf of all
Noteholders, waive any default by the Servicer in the performance of its
obligations hereunder and its consequences. Upon any such waiver of a past
default, such default shall cease to exist, and any Servicer Termination Event
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto. Written notice of such waiver shall be
given promptly to each Rating Agency.
SECTION 10.8. Termination of Trust Collateral Agent. The Trust Collateral
Agent may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Seller and Insurer. Upon receiving such
notice of resignation, the Seller shall, with the written consent of the Insurer
(unless an Insurer Default has occurred and is continuing), promptly appoint a
successor trust collateral agent by written instrument, in triplicate, one copy
of which instrument shall be delivered to the resigning Trust Collateral Agent,
one copy to the Insurer and one copy to the successor trust collateral agent. If
no successor shall have been so appointed and have accepted appointment within
thirty (30) days after the giving of such notice of resignation, the resigning
Trust Collateral Agent may petition any court of competent jurisdiction for the
appointment of a successor trust collateral agent. If the Trust Collateral Agent
shall resign voluntarily, for any reason, except lack of eligibility, then the
Trust Collateral Agent shall bear all of its costs and expenses (including
without limitation its attorney's fees) of transferring the trusteeship to a
successor trustee and such costs and expenses shall not be reimbursable from the
Trust Property nor payable by the Seller or the Servicer.
If any of the following events occur and shall be continuing, the Insurer
(so long as an Insurer Default shall not have occurred and be continuing), or,
in the event that an Insurer Default has occurred and is continuing, the Note
Majority, upon notice to the Noteholders, may terminate all of the duties of the
Trust Collateral Agent under this Agreement:
(i) the Trust Collateral Agent shall cease to meet the eligibility
requirements for the Indenture Trustee as set forth in Section 6.11 of the
Indenture and shall fail to resign after written request therefor by the
Insurer, or
(ii) the Trust Collateral Agent shall become incapable of acting or
shall be adjudged a bankrupt or insolvent, or a receiver of the Trust
Collateral Agent or of its property shall be appointed, or any public
officer shall take charge or control of the Trust Collateral Agent or of
its property or affairs for the purpose of rehabilitation, conservation or
liquidation or
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(iii) the Trust Collateral Agent has failed to perform its duties
hereunder.
On or after the receipt by the Trust Collateral Agent of such written
notice, all authority, power, obligations and responsibilities of the Trust
Collateral Agent under this Agreement, whether with respect to the Notes or the
Other Conveyed Property or otherwise, automatically shall pass to, be vested in
and become obligations and responsibilities of such other successor trust
collateral agent appointed by the Controlling Party. Nothing contained herein
shall be deemed to release the Trust Collateral Agent from any obligation.
The Insurer (or if an Insurer Default shall have occurred and be
continuing, Noteholders holding Notes evidencing in the aggregate a majority of
the outstanding Principal Balance of the Notes) at any time may remove the Trust
Collateral Agent and appoint a successor trust collateral agent by written
instrument or instruments, in triplicate, signed by the Insurer or such Holders,
as the case may be, or their attorneys-in-fact duly authorized, one complete set
of which instruments shall be delivered to the Seller, one complete set to the
Trust Collateral Agent so removed and one complete set to the successor trust
collateral agent so appointed.
SECTION 10.9. Successor to Servicer.
(a) The Trust Collateral Agent, in its capacity as successor to the
Servicer, shall perform such duties and only such duties as are specifically set
forth in this Agreement with respect to the assumption of any servicing duties,
including, without limitation, to supervise, verify, monitor or administer the
performance of the Servicer and no implied covenants or obligations shall be
read into this Agreement against the Trust Collateral Agent.
(b) In the absence of bad faith or negligence on its part, the Trust
Collateral Agent may conclusively rely as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trust Collateral Agent and conforming to the requirements of
this Agreement; but in the ease of any such certificates or opinions, which by
any provision hereof are specifically required to be furnished to the Trust
Collateral Agent, the Trust Collateral Agent shall be under a duty to examine
the same and to determine whether or not they conform to the requirements of
this servicing agreement.
(c) The Trust Collateral Agent shall have no liability for any actions
taken or omitted by the Servicer.
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ARTICLE XI
Termination
SECTION 11.1. Optional Purchase of All Receivables.
(a) On the last day of any Due Period as of which the Pool Balance shall
be less than or equal to 10% of the Original Pool Balance plus the aggregate
Principal Balance of the Subsequent Receivables, if any, sold to the Trust, as
of their respective Cut-off Dates, the Seller each shall have the option to
purchase the Owner Trust Estate, other than the Trust Accounts (with the consent
of the Insurer if such purchase would result in a claim on either Policy or
would result in any amount owing to any Noteholder or the Insurer under the
Insurance Agreement remaining unpaid); provided, however, that the amount to be
paid for such purchase (as set forth in the following sentence) shall be
sufficient to pay the full amount of principal, premium, if any, and interest
then due and payable on the Notes. To exercise such option, the Seller shall (i)
deliver written notice of such purchase to the Trust Collateral Agent and the
Servicer not later than the fifteenth day of the month next preceding the month
in which such purchase will occur, and (ii) deposit pursuant to Section 5.6 in
the Collection Account an amount equal to the aggregate Purchase Amount for the
Receivables (including Liquidated Receivables), plus the appraised value of any
other property held by the Trust, such value to be determined by an appraiser
mutually agreed upon by the Servicer, the Insurer and the Trust Collateral
Agent, and shall succeed to all interests in and to the Trust. Written notice of
the exercise of the option to purchase described in this Section 11.1(a) shall
be given to each Rating Agency by the relevant party exercising such option.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.1 of
the Trust Agreement, the Servicer shall instruct the Trust Collateral Agent to
deposit the proceeds from such sale after all payments and reserves therefrom
(including the expenses of such sale) have been made (the "Insolvency Proceeds")
in the Collection Account.
(c) Notice of any termination of the Trust shall be given by the Servicer
to the Owner Trustee, the Trustee, the Trust Collateral Agent, the Insurer and
the Rating Agencies as soon as practicable after the Servicer has received
notice thereof. Such notice shall state (I) the Distribution Date upon or with
respect to which final payment of the Notes shall be made upon presentation and
surrender of the Notes at the office of the Trust Collateral Agent herein
designated, (ii) the amount of any such final payment, (iii) that the Record
Date otherwise applicable to such Distribution Date is not applicable, payments
being made only upon presentation and surrender of the Notes at the office of
the Trust Collateral Agent therein specified and (iv) no amounts will thereafter
be payable under the Notes.
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ARTICLE XII
Administrative Duties of the Servicer
SECTION 12.1. Administrative Duties.
(a) Duties with Respect to the Indenture. The Servicer shall perform all
its duties and the duties of the Issuer under the Indenture. In addition, the
Servicer shall consult with the Owner Trustee as the Servicer deems appropriate
regarding the duties of the Issuer under the Indenture. The Servicer shall
monitor the performance of the Issuer and shall advise the Owner Trustee when
action is necessary to comply with the Issuer's duties under the Indenture. The
Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Servicer shall take all necessary action that is the duty of
the Issuer to take pursuant to the Indenture, including, without limitation,
pursuant to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 5.1, 5.4, 7.3, 8.3,
9.2, 9.3, 11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in this
Agreement or any of the Transaction Documents, the Servicer shall perform
such calculations and 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 as it shall be the duty of the Issuer or the Owner Trustee to
prepare, file or deliver pursuant to this Agreement or any of the
Transaction Documents or under state and federal tax and securities laws,
and at the request of the Owner Trustee shall take all appropriate action
that it is the duty of the Issuer to take pursuant to this Agreement or
any of the Transaction Documents, including, without limitation, pursuant
to Sections 2.6 and 2.11 of the Trust Agreement. In accordance with the
directions of the Issuer or the Owner Trustee, the Servicer shall
administer, perform or supervise the performance of such other activities
in connection with the Collateral (including the Transaction Documents) as
are not covered by any of the foregoing provisions and as are expressly
requested by the Issuer or the Owner Trustee and are reasonably within the
capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Transaction Documents to the contrary, the Servicer shall be responsible
for promptly notifying the Owner Trustee and the Trust Collateral Agent in
the event that any withholding tax is
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imposed on the Issuer's payments (or allocations of income) to an Owner
(as defined in the Trust Agreement) as contemplated by this Agreement. Any
such notice shall be in writing and specify the amount of any withholding
tax required to be withheld by the Owner Trustee or the Trust Collateral
Agent pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Transaction
Documents to the contrary, the Servicer shall be responsible for
performance of the duties of the Issuer or the Seller set forth in Section
5.1(a), (b), (c) and (d) of the Trust Agreement with respect to, among
other things, accounting and reports to Owners (as defined in the Trust
Agreement).
(iv) The Servicer shall perform the duties of the Servicer 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 Servicer under this
Agreement or any of the Transaction Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into transactions
with 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 Servicer's
opinion, no less favorable to the Issuer in any material respect.
(c) Tax Matters. The Servicer shall prepare and file, on behalf of the
Seller, all tax returns, tax elections, financial statements and such annual or
other reports of the Issuer as are necessary for preparation of tax reports as
provided in Article V of the Trust Agreement, including without limitation forms
1099 and 1066. All tax returns will be signed by the Seller.
(d) Non-Ministerial Matters. With respect to matters that in the
reasonable judgment of the Servicer are non-ministerial, the Servicer shall not
take any action pursuant to this Article XII unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee, Trust Collateral Agent and the Insurer of the proposed action and the
Owner Trustee and, with respect to items (A), (B), (C) and (D) below, the
Insurer shall not have withheld consent or provided an alternative direction.
For the purpose of the preceding sentence, "non-ministerial matters" shall
include:
(A) the amendment of or any supplement to the Indenture;
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(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the
Issuer (other than in connection with the collection of the Receivables);
(C) the amendment, change or modification of this Agreement or any
of the Transaction Documents;
(D) the appointment of successor Note Registrars, successor Paying
Agents and successor Trustees pursuant to the Indenture or the appointment
of Successor Servicers or the consent to the assignment by the Note
Registrar, Paying Agent or Trustee of its obligations under the Indenture;
and
(E) the removal of the Trustee or the Trust Collateral Agent.
(e) Exceptions. Notwithstanding anything to the contrary in this
Agreement, except as expressly provided herein or in the other Transaction
Documents, the Servicer, in its capacity hereunder, shall not be obligated to,
and shall not, (1) make any payments to the Noteholders under the Transaction
Documents, (2) sell the Indenture Trust Property pursuant to Section 5.5 of the
Indenture, (3) take any other action that the Issuer directs the Servicer not to
take on its behalf or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.
(f) Notwithstanding anything to the contrary in this Agreement, neither
the Trust Collateral Agent nor any successor Servicer shall be responsible for
any obligations or duties of the Servicer under Section 12.1.
SECTION 12.2. Records. The Servicer shall maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Issuer
and the Trust Collateral Agent at any time during normal business hours.
SECTION 12.3. Additional Information to be Furnished to the Issuer. The
Servicer shall furnish to the Issuer and the Trust Collateral Agent from time to
time such additional information regarding the Collateral as the Issuer and the
Trust Collateral Agent shall reasonably request.
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ARTICLE XIII
Miscellaneous Provisions
SECTION 13.1. Amendment.
(a) This Agreement may be amended from time to time by the parties hereto,
with the consent of the Trustee (which consent may not be unreasonably
withheld), with the prior written consent of the Insurer (so long as no Insurer
Default has occurred and is continuing) but without the consent of any of the
Noteholders, to cure any ambiguity, to correct or supplement any provisions in
this Agreement, to comply with any changes in the Code, or to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement or the
Insurance Agreement; provided, however, that such action shall not adversely
affect in any material respect the interests of any Noteholder or the Insurer.
This Agreement may also be amended from time to time by the parties
hereto, with the consent of the Insurer, the consent of the Trustee and the
consent of the Holders of Notes evidencing not less than a majority of the
outstanding principal amount of the Notes (which consent of such Holders of
Notes given pursuant to this Section 13.1 or pursuant to any other provision of
this Agreement shall be conclusive and binding on such Holder and on all future
Holders of such securities and of any Security issued upon the transfer thereof
or in exchange thereof or in lieu thereof whether or not notation of such
consent is made upon the security) 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 shall (a) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on Receivables or
distributions that shall be required to be made for the benefit of the
Noteholders, or (b) reduce the aforesaid percentage of the outstanding principal
amount of the Notes and the Note Balance, the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all the
outstanding Notes.
Promptly after the execution of any such amendment or consent, the Trust
Collateral Agent shall furnish written notification of the substance of such
amendment or consent to each Noteholder and each Rating Agency. In addition, a
copy of the final executed amendment shall be delivered to each Rating Agency.
It shall not be necessary for the consent of Noteholders pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents (and
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any other consents of Noteholders provided for in this Agreement) and of
evidencing the authorization of any action by Noteholders shall be subject to
such reasonable requirements as the Trustee or the Owner Trustee, as applicable,
may prescribe, including the establishment of record dates.
The Owner Trustee, the Trust Collateral Agent and the Trustee may, but
shall not be obligated to, enter into any amendment which affects the Issuer's,
the Owner Trustee's, the Trust Collateral Agent's or the Trustee's, as
applicable, own rights, duties or immunities under this Agreement or otherwise.
Prior to the execution of any amendment to this Agreement, the Trustee and
the Trust Collateral Agent shall be entitled to receive and rely conclusively
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied.
(b) Notwithstanding anything to the contrary contained in subSection
13.1(a) above, the provisions of the Agreement relating to (i) the Spread
Account Agreement, the Series 1997- 1 Spread Account, the Requisite Amount, a
Trigger Event or any component definition of a Trigger Event and (ii) any
additional sources of funds which may be added to the Series 1997- 1 Spread
Account or uses of funds on deposit in the Series 1997-1 Spread Account may be
amended in any respect by the Seller, the Servicer, the Insurer and the
Collateral Agent (the consent of which shall not be withheld or delayed with
respect to any amendment that does not adversely affect the Collateral Agent)
without the consent of, or notice to, the Noteholders.
SECTION 13.2. Protection of Title to Trust.
(a) The Seller shall execute and file such financing statements and cause
to be executed and filed such continuation statements, all in such manner and in
such places as may be required by law fully to preserve, maintain and protect
the interest of the Issuer and the interests of the Trust Collateral Agent and
the Insurer in the Receivables and the Other Conveyed Property and in the
proceeds thereof. The Seller shall deliver (or cause to be delivered) to the
Insurer, the Owner Trustee and the Trust Collateral Agent file-stamped copies
of, or filing receipts for, any document filed as provided above, as soon as
available following such filing.
(b) Neither the Seller nor the Servicer shall change its name, identity or
corporate structure in any manner that would, could or might make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of Section 9-402(7) of the UCC, unless
it shall have given the Insurer, the Owner
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Trustee, the Trust Collateral Agent and the Trustee at least thirty days' prior
written notice thereof and shall have promptly filed appropriate amendments to
all previously filed financing statements or continuation statements. Promptly
upon such filing, the Seller or the Servicer, as the case may be, shall deliver
an Opinion of Counsel in form and substance reasonably satisfactory to the
Insurer, the Trust Collateral Agent and the Trustee, stating either (A) all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Issuer and
the Trust Collateral Agent in the Receivables, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details are
given, or (B) no such action shall be necessary to preserve and protect such
interest.
(c) Each of the Seller and the Servicer shall have an obligation to give
the Insurer, the Owner Trustee, the Trust Collateral Agent and the Trustee at
least 60 days' prior written notice of any relocation of its principal executive
office if, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall promptly file
any such amendment. The Servicer shall at all times maintain each office from
which it shall service Receivables, and its principal executive office, within
the United States of America.
(d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Collection Account in respect of such
Receivable.
(e) The Servicer shall maintain or cause to be maintained, a computer
systems so that, from and after the time of sale under this Agreement of the
Receivables to the Issuer, such master computer records (including any backup
archives) that refer to a Receivable shall indicate clearly the interest of the
Trust in such Receivable and that such Receivable is owned by the Trust.
Indication of the Trust's interest in a Receivable shall be deleted from or
modified on such computer systems when, and only when, the related Receivable
shall have been paid in full or repurchased by NAFI or the Seller.
(f) If at any time the Seller or NAFI shall propose to sell, grant a
security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate
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clearly that such Receivable has been sold and is owned by the Trust unless such
Receivable has been paid in full or repurchased by NAFI or the Seller.
(g) Upon request, the Servicer shall furnish or cause to be furnished to
the Insurer, the Owner Trustee or to the Trustee, at any time upon request, a
list of all Receivables (by contract number and name of Obligor) then held as
part of the Trust, together with a reconciliation of such list to the
Receivables Schedule and to each of the Servicer's Certificates furnished before
such request indicating removal of Receivables from the Trust. The Trustee shall
hold any such list and Receivables Schedule for examination by interested
parties during normal business hours at the Corporate Trust Office upon
reasonable notice by such Persons of their desire to conduct an examination.
(h) The Servicer shall deliver to the Insurer, the Owner Trustee, the
Trust Collateral Agent and the Trustee:
(1) simultaneously with the execution and delivery of the Agreement
and, if required pursuant to Section 13.1, of each amendment, an Opinion
of Counsel stating that, in the opinion of such Counsel, in form and
substance reasonably satisfactory to the Insurer, either (A) all financing
statements and continuation statements have been executed and filed that
are necessary fully to preserve and protect the interest of the Trust and
the Trustee in the Receivables, and reciting the details of such filings
or referring to prior Opinions of Counsel in which such details are given,
or (B) no such action shall be necessary to preserve and protect such
interest or (C) any action which is necessary to preserve and protect such
interest during the following 12-month period; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cut-off Date, an Opinion of Counsel, dated as of a date during
such 90-day period, stating that, in the opinion of such counsel, either
(A) all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the
interest of the Trust and the Trustee in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in which
such details are given, or (B) no such action shall be necessary to
preserve and protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
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(i) The Servicer shall permit the Trustee, the Trust Collateral Agent, the
Insurer and their respective agents, during regular business hours and upon
reasonable advance notice, to inspect and make copies of the records regarding
any Receivables or any other portion of the Receivables.
SECTION 13.3. Notices. All demands, notices and communications upon or to
the Seller, the Servicer, the Owner Trustee, the Trustee, the Insurer or the
Rating Agencies under this Agreement shall be in writing, personally delivered,
or mailed by certified mail, or sent by confirmed telecopier transmission and
shall be deemed to have been duly given upon receipt (a) in the case of the
Seller to National Financial Auto Funding Trust, One Park Place, ▇▇▇ ▇.▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, (b) in the case of the Servicer to National
Auto Finance Company, Inc., One Park Place, ▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, (c) in the case of the Issuer or the Owner Trustee,
at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
Attention: Corporate Trust Administration, (d) in the case of the Trustee or the
Trust Collateral Agent, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (e)
in the case of the Insurer, to Financial Security Assurance Inc., ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; Attention: Senior Vice President, Surveillance
(in each case in which notice or other communication to the Insurer refers to a
Servicer Termination Event, a claim on a Policy, a Deficiency Notice pursuant to
Section 5.5 of this Agreement or with respect to which failure on the part of
the Insurer to respond shall be deemed to constitute consent or acceptance, then
a copy of such notice or other communication should also be sent to the
attention of each of the General Counsel and the Head -Financial Guaranty Group
and shall be marked to indicate "URGENT MATERIAL ENCLOSED") Telecopier #
▇▇▇-▇▇▇-▇▇▇▇, (f) in the case of Moody's, to ▇▇▇▇▇'▇ Investors Service, Inc.,
ABS Monitoring Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Telecopier # ▇▇▇-▇▇▇-▇▇▇▇, and (g) in the case of Standard & Poor's, to Standard
& Poor's Ratings Group, ▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Asset Backed Surveillance Department, Telecopier # 212- 208-1582. Any
notice required or permitted to be mailed to a Noteholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown in the
Note Register, as applicable. Any notice so mailed within the time prescribed in
the Agreement shall be conclusively presumed to have been duly given, whether or
not the Noteholder shall receive such notice.
SECTION 13.4. Assignment. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything to the contrary contained herein, except as
provided in Sections 8.4 and 9.3 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not be
assigned by the Seller or the Servicer without the prior written consent of the
Owner Trustee, the Trust Collateral Agent, the Trustee and the Insurer
94
(or if an Insurer Default shall have occurred and be continuing the Holders of
Notes evidencing not less than 66% of the principal amount of the outstanding
Notes).
SECTION 13.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the parties hereto and for the benefit
of the Trustee and the Noteholders, as third-party beneficiaries. The Insurer
and its successors and assigns shall be a third-party beneficiary to the
provisions of this Agreement, and shall be entitled to rely upon and directly
enforce such provisions of this Agreement so long as no Insurer Default shall
have occurred and be continuing. Except as expressly stated otherwise herein,
any right of the Insurer to direct, appoint, consent to, approve of, or take any
action under this Agreement, shall be a right exercised by the Insurer in its
sole and absolute discretion. The Insurer may disclaim any of its rights and
powers under this Agreement (but not its duties and obligations under the Note
Policy) upon delivery of a written notice to the Owner Trustee. Nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Owner Trust Estate
or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 13.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 13.7. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 13.8. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 13.9. 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 HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 13.10. Assignment to Trustee. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to
95
the Trustee pursuant to the Indenture for the benefit of the Noteholders and the
Insurer of all right, title and interest of the Issuer in, to and under the
Receivables and/or the assignment of any or all of the Issuer's rights and
obligations hereunder to the Trustee.
SECTION 13.11. Nonpetition Covenants. (a) Notwithstanding any prior
termination of this Agreement, the Servicer and the Seller shall not, prior to
the date which is one year and one day after the termination of this Agreement
with respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer 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 any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement, the Servicer
shall not, prior to the date that is one year and one day after the termination
of this Agreement with respect to the Seller, acquiesce to, petition or
otherwise invoke or cause 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,
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.
SECTION 13.12. Limitation of Liability of Owner Trustee and Trustee.
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee 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. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Chase Manhattan Bank Delaware not in its
individual capacity but solely in its capacity as Trustee of the Seller and in
no event shall Chase Manhattan Bank Delaware
96
in its individual capacity have any liability for the representations,
warranties, covenants, agreements or other obligations of the Seller 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 Seller.
(c) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by ▇▇▇▇▇▇ Trust and Savings Bank not
in its individual capacity but solely as Trust Collateral Agent and in no event
shall ▇▇▇▇▇▇ Trust and Savings Bank, 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.
(d) In no event shall Wilmington Trust Company, in any of its capacities
hereunder, be deemed to have assumed any duties of the Owner Trustee under the
Delaware Business Trust Statute, common law, or the Trust Agreement.
SECTION 13.13. Independence of the Servicer. For all purposes of this
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer, the Trust Collateral Agent or the
Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized by this
Agreement, the Servicer shall have no authority to act for or represent the
Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.
SECTION 13.14. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) 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 13.15. Insurer as Controlling Party. Each Noteholder by purchase
of the Notes held by it acknowledges that as partial consideration of the
issuance of the Note Policy, the Insurer shall have certain rights hereunder for
so long as no Insurer Default shall have occurred and be continuing. So long as
an Insurer Default has occurred and is continuing, any provision giving the
Insurer the right to direct, appoint or consent to, approve of, or take any
action under this Agreement shall be inoperative during the period of such
Insurer Default and such right shall instead vest in the Trust Collateral Agent
acting at the written direction of the Holders of Notes. The Insurer may
disclaim any of its rights and powers under this Agreement (but not its duties
and obligations under the Note Policy) upon delivery of a written
97
notice to the Trust Collateral Agent. The Insurer may give or withhold any
consent hereunder in its sole and absolute discretion.
IN WITNESS WHEREOF, the parties hereto have caused this Sale and Servicing
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the day and the year first above written.
NATIONAL AUTO FINANCE 1997-1 TRUST, by the
Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee on behalf of the Trust,
By:
Name:
Title:
NATIONAL FINANCIAL AUTO FUNDING TRUST,
Seller, by Chase Manhattan Bank Delaware,
not in its individual capacity but solely as
Trustee of National Financial Auto Funding
Trust,
By:
Name:
Title:
NATIONAL AUTO FINANCE COMPANY, INC., in its
its individual capacity and as Servicer,
By:
Name:
Title:
98
▇▇▇▇▇▇ TRUST AND SAVINGS BANK, not in its
individual capacity but solely as Trust
Collateral Agent and Backup Servicer
By:
Name:
Title:
99
SCHEDULE A
SCHEDULE OF RECEIVABLES
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Trust Collateral Agent on
behalf of the Noteholders and the Insurer as of the Closing Date with respect to
the Initial Receivables transferred to the Trust on the Closing Date and as of
each Subsequent Transfer Date with respect to the Subsequent Receivables
transferred to the Trust on such Subsequent Transfer Date (unless another date
or time period is otherwise specified or indicated in the particular
representation or warranty):
1. immediately prior to the Closing Date or the Subsequent Transfer Date,
as the case may be, the Seller had a valid and enforceable security interest in
the related Financed Vehicle, and such security interest had been duly perfected
and was prior to all other present and future liens and security interests
(except future tax liens and liens that, by statute, may be granted priority
over previously perfected security interests) that now exist or may hereafter
arise, and the Seller had the full right to assign such security interest to the
Trust Collateral Agent;
2. on and after the Closing Date or the Subsequent Transfer Date, as the
case may be, there shall exist under the Receivable a valid, subsisting and
enforceable first priority perfected security interest in the Financed Vehicle
securing such Receivable (other than, as to the priority of such security
interest, any statutory lien arising by operation of law after the Closing Date
or the Subsequent Transfer Date, as the case may be, which is prior to such
interest) and at such time as enforcement of such security interest is sought
there shall exist a valid, subsisting and enforceable first priority perfected
security interest in such Financed Vehicle in favor of the Trust Collateral
Agent (other than, as to the priority of such security interest, any statutory
lien arising by operation of law after the Closing Date or the Subsequent
Transfer Date, as the case may be, which is prior to such interest);
3. no Receivable has been sold, assigned or pledged to any other Person
other than an endorsement to the Servicer for purposes of servicing or any such
pledge has been released; immediately prior to the transfer and assignment
herein contemplated, the Seller has good and marketable title thereto free and
clear of any lien, encumbrance, equity, pledge, charge, claim or security
interest and is the sole owner thereof and has full right to transfer such
Receivable to the Trust Collateral Agent. No Dealer has a participation in, or
other right to receive, proceeds of any Receivable. None of NAFI, the Master
Trust, Funding Trust II nor the Seller has taken any action to convey any right
to any Person that would result in such Person having a right to payments
received under the related insurance policies, Dealer Agreements or Originator
Agreements or to payments due under such Receivable;
1
4. upon the transfers pursuant to Sections 2.1 and 2.2, the Trust
Collateral Agent will have a first priority ownership or security interest in
each such Receivable free and clear of any encumbrance, lien, pledge, charge,
claim, security interest or rights of others; the purchase of each such
Receivable by NAFI from a Dealer or Originator was not an extension of financing
to such Dealer or Originator;
5. no such Receivable is delinquent for more than thirty days in payment
as to any scheduled payment;
6. there is no lien against any related Financed Vehicle for delinquent
taxes;
7. there is no right of rescission, offset, defense or counterclaim to the
obligation of the related Obligor to pay the unpaid principal or interest due
under such Receivable; the operation of the terms of such Receivable or the
exercise of any right thereunder will not render such Receivable unenforceable
in whole or in part or subject to any right of rescission, offset, defense or
counterclaim, and no such right of rescission, offset, defense or counterclaim
has been asserted;
8. no Receivable is assumable by another Person in a manner which would
release the Obligor thereon from such Obligor's obligations to the Seller with
respect to such Receivable;
9. there are no prior liens or claims for work, labor or material
affecting any related Financed Vehicle which are or may become a lien prior to
or equal with the security interest granted by such Receivable;
10. each such Receivable, and the sale of the Financed Vehicle securing
such Receivable, where applicable, complied, at the time it was made and as of
the Closing Date or related Subsequent Transfer Date, as applicable, in all
material respects with applicable state and federal laws (and regulations
thereunder), including, without limitation, usury, disclosure and consumer
protection laws, equal credit opportunity, fair credit reporting,
truth-in-lending or other similar law, the Federal Trade Commission Act, and
applicable state laws regulating retail installment sales contracts and loans in
general and motor vehicle retail installment sales contracts and loans in
particular, and the transfer of such Receivable to the Trust will not violate
any such laws;
11. each such Receivable is a legal, valid and binding obligation of the
Obligor thereunder and is enforceable in accordance with its terms, except only
as such enforcement may be limited by laws affecting the enforcement of
creditors' rights generally whether enforcement is sought in a proceeding in
equity or at law, and all parties to such Receivable
2
had full legal capacity to execute such Receivable and all documents related
thereto and to grant the security interest purported to be granted thereby at
the time of execution and grant;
12. as of the Closing Date or such Subsequent Transfer Date, as the case
may be, the terms of each such Receivable have not been impaired, waived,
altered or modified in any respect, except by written instruments that are part
of the Receivable Documents, and no such Receivable has been satisfied,
subordinated or rescinded;
13. at the time of origination of each such Receivable, the proceeds of
such Receivable were fully disbursed, there is no requirement for future
advances thereunder, and all fees and expenses in connection with the
origination of such Receivable have been paid;
14. there is no default, breach, violation or event of acceleration
existing under any such Receivable (except payment delinquencies permitted by
paragraph 5 above) and no event which, with the passage of time or with notice
or with both, would constitute a default, breach, violation or event of
acceleration under any such Receivable or would otherwise affect the value or
marketability of such contract; NAFI and the Seller have not waived any such
default, breach, violation or event of acceleration; and as of the applicable
Cut-off Date, the related Financed Vehicle has not been repossessed;
15. at the origination date of each such Receivable, the related Financed
Vehicle was covered by a comprehensive and collision insurance policy (a) in an
amount at least equal to the lesser of (i) the actual cash value of the related
Financed Vehicle or (ii) the unpaid balance owing of such Receivable, less the
related Unearned Finance Charge, (b) naming NAFI as a loss payee and (c)
insuring against loss and damage due to fire, theft, transportation, collision
and other risks generally covered by comprehensive and collision coverage; each
Receivable requires the Obligor to maintain physical loss and damage insurance,
naming NAFI as an additional insured party;
16. each such Receivable was acquired by NAFI from either a Dealer with
which it ordinarily does business or from an Originator; such Dealer or
Originator, as applicable, had full right to assign to NAFI such Receivable and
the security interest in the related Financed Vehicle (and the Dealer that
assigned any such Receivable to any such Originator had full right to assign to
such Originator such Receivable and the security interest in the related
Financed Vehicle) and the Dealer's or Originator's assignment thereof to NAFI is
legal, valid and binding (and any assignment by an Dealer to any Originator is
legal, valid and binding) and NAFI had full right to assign to the Seller such
Receivable and the respective security interest in the related Financed Vehicle
and NAFI's respective assignment thereof to the Seller is legal, valid and
binding;
3
17. each such Receivable contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate for the
realization against the related Financed Vehicle of the benefits of the
security;
18. scheduled payments under each such Receivable are due monthly (or, in
the case of the first payment, no later than the forty-fifth day after the date
of the Receivable) in substantially equal amounts to maturity (other than with
respect to those Receivables designated as balloon contracts on the related
Receivable Schedule), and will be sufficient to fully amortize such Receivable
at maturity, assuming that each scheduled payment is made on its Due Date; such
scheduled payments are applicable only to payment of principal and interest on
such Receivable and not to the payment of any insurance premiums (although the
proceeds of the extension of credit on such Receivable may have been used to pay
insurance premiums); and the original term to maturity of each such Receivable
was not more than 60 months;
19. the collection practices used with respect to each such Receivable
have been in all material respects legal, proper, prudent and customary in the
automobile installment sales contract or installment loan servicing business;
20. there is only one original of each such Receivable, the Servicer or a
Sub-Servicer is currently in possession of the Receivable Documents for such
Receivable and there are no custodial agreements in effect adversely affecting
the rights of the Seller to make the deliveries required hereunder on the
Closing Date or the Subsequent Transfer Date, as the case may be;
21. as of the Cut-off Date or Subsequent Cut-off Date, as applicable, no
Obligor was the subject of a current bankruptcy proceeding;
22. with respect to each Due Period, the aggregate of the interest due on
all the Receivables in such Due Period from scheduled payments is in excess of
the sum of (i) the Servicing Fee due and any fees due to the Trust Collateral
Agent and the Insurer, each with respect to such Due Period and (ii) the amount
of interest payable on the Notes with respect to such Due Period, in each case
assuming that each scheduled payment is made on its Due Date;
23. the Receivables constitute "chattel paper" within the meaning of the
UCC as in effect in the applicable jurisdiction and all filings (including
without limitation, UCC filings) required to be made and all actions required to
be taken or performed by any Person in any jurisdiction to give the Trust
Collateral Agent a first priority perfected lien on, or ownership interest in,
the Receivables and the proceeds thereof and the remaining Trust Property have
been made, taken or performed;
4
24. the information regarding such Receivables set forth in the applicable
Receivable Schedule is true and correct in all material respects at the
applicable Cut-off Date and the Closing Date or Subsequent Closing Date, as
applicable; each Receivable was originated in the United States of America and
at the time of origination, materially conformed to all requirements of the NAFI
underwriting policies and guidelines then in effect; and no Obligor is the
United States of America or any state or any agency, department, subdivision or
instrumentality thereof;
25. by the Closing Date and prior to each Subsequent Transfer Date, as
applicable, NAFI will have caused the portions of NAFI's servicing records
relating to the Receivables to be clearly and unambiguously marked to show that
the Receivables constitute part of the Trust Property and are owned by the Trust
in accordance with the terms of this Agreement;
26. the computer tape or listing made available by NAFI to the Trust
Collateral Agent on the Closing Date and on each Subsequent Transfer Date was
complete and accurate as of the applicable Cut-off Date, and includes a
description of the same Receivables that are described in the applicable
Receivable Schedule;
27. no Receivable was originated in, or is subject to the laws of, any
jurisdiction, the laws of which would make unlawful, void or voidable the sale,
transfer and assignment of such Receivable under this Agreement or the
Subsequent Transfer Agreement, as applicable, or pursuant to transfers of the
Notes. The Seller has not entered into any agreement with any account debtor
that prohibits, restricts or conditions the assignment of any portion of the
Receivables;
28. no selection procedures adverse to the Noteholders or to the Insurer
have been utilized in selecting such Receivable from all other similar
Receivables originated by NAFI;
29. as of the Initial Cut-off Date, the APR of the Initial Receivables was
approximately 19.38% and the weighted average remaining scheduled maturity on
the Initial Receivables was approximately 50.31 months and the percentage of the
aggregate outstanding balance of the Initial Receivables relating to the
financing of used Financed Vehicles was 80.45%. The final scheduled payment date
on the Initial Receivable with the latest maturity is June 29, 2002. Each
Receivable amortizes based on a Simple Interest Method or Actuarial Method; and
30. no Receivable provides for a prepayment penalty.
5
EXHIBIT 5.10
FORM OF STATEMENT TO NOTEHOLDERS
1
EXHIBIT 2.2A
OFFICER'S CERTIFICATE OF NATIONAL AUTO FINANCE COMPANY, INC.
The undersigned, a duly authorized officer of National Auto Finance
Company, Inc. (the "Company"), hereby certifies that:
1. Capitalized terms used but not defined herein have the meanings set
forth in the Sale and Servicing Agreement (the "Sale and Servicing Agreement"),
dated as of June 29, 1997, among National Financial Auto Funding Trust (the
"Seller"), the Company, as the Servicer, National Auto Finance 1997-1 Trust and
▇▇▇▇▇▇ Trust and Savings Bank, not in its individual capacity but solely as
Trust Collateral Agent and Backup Servicer. This certificate is being delivered
pursuant to Section 2.2(b)(ix)(A) of the Sale and Servicing Agreement.
2. The sale and Subsequent Receivables by the Company to the Seller on the
date hereof pursuant to the Purchase and Contribution Agreement and the related
Conveyance (which Conveyance is datd as of the date hereof) was made in good
faith for legitimate business purposes and was not made with intent to hinder,
delay or defraud any Person to which the Company has been, is or will become, on
or after the date hereof, indebted.
3. The Company did not receive less than a reasonably equivalent value in
exchange for the sale of the Subsequent Receivables by the Company to the Seller
on the date hereof pursuant to the Purchase and Contribution Agreement and the
related Conveyance.
4. The Company is not insolvent on the date hereof and will not become
insolvent as a result of the sale of Subsequent Receivables by the Company to
the Seller on the date hereof pursuant to the Purchase and Contribution
Agreement and the related Conveyance.
5. The Company is not engaged in a business or transaction, and is not
about to engage in a business or transaction, for which any property remaining
with the Company after such business or transaction would be an unreasonably
small capital.
6. The Company has not incurred, and does not believe that it will incur,
debts that are beyond the Company's ability to pay as such debts mature.
7. No Servicer Termination Event has occurred and is continuing.
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to
be duly executed this day of , 19 .
1
NATIONAL AUTO FINANCE COMPANY, INC., in its
individual capacity and as Servicer,
By:
Name:
Title:
2
EXHIBIT 2.2B
OFFICER'S CERTIFICATE OF NATIONAL FINANCIAL AUTO FUNDING TRUST
The undersigned, a duly authorized officer of National Financial Auto
Funding Trust (the "Seller"), hereby certifies that:
1. Capitalized terms used but not defined herein have the meanings set
forth in the Sale and Servicing Agreement (the "Sale and Servicing Agreement"),
dated as of June 29, 1997, among the Seller, National Auto Finance Company, Inc.
(the "Company"), as the Servicer, National Auto Finance 1997-1 Trust (the
"1997-1 Trust") and ▇▇▇▇▇▇ Trust and Savings Bank, not in its individual
capacity but solely as Trust Collateral Agent and Backup Servicer. This
certificate is being delivered pursuant to Section 2.2(b)(ix)(B) of the Sale and
Servicing Agreement.
2. The sale and Subsequent Receivables by the Seller to the 1997-1 Trust
on the date hereof pursuant to the Sale and Servicing Agreement and the related
Subsequent Transfer Agreement (which Subsequent Transfer Agreement is dated as
of the date hereof) was made in good faith for legitimate business purposes and
was not made with intent to hinder, delay or defraud any Person to which the
Funding Trust has been, is or will become, on or after the date hereof,
indebted.
3. The Funding Trust did not receive less than a reasonably equivalent
value in exchange for the sale of the Subsequent Receivables by the Funding
Trust to the 1997-1 Trust on the date hereof pursuant to the Sale and Servicing
Agreement and the related Subsequent Transfer Agreement.
4. The Funding Trust is not insolvent on the date hereof and will not
become insolvent as a result of the sale of Subsequent Receivables by the
Funding Trust to the 1997-1 Trust on the date hereof pursuant to the Sale and
Servicing Agreement and the related Subsequent Transfer Agreement..
5. The Funding Trust is not engaged in a business or transaction, and is
not about to engage in a business or transaction, for which any property
remaining with the Funding Trust after such business or transaction would be an
unreasonably small capital.
6. The Funding Trust has not incurred, and does not believe that it will
incur, debts that are beyond the Funding Trust's ability to pay as such debts
mature.
1
7. No Servicer Termination Event has occurred and is continuing.
IN WITNESS WHEREOF, the Funding Trust has caused this Officer's
Certificate to be duly executed this ____ day of ________, 1999___.
NATIONAL FINANCIAL AUTO FUNDING TRUST,
by Chase Manhattan Bank Delaware, not
in its individual capacity but solely
as Trustee of National Financial Auto
Funding Trust,
By:
Name:
Title:
2
EXHIBIT A
SUBSEQUENT TRANSFER AGREEMENT
TRANSFER No. ___ OF SUBSEQUENT Receivables pursuant to a Sale and
Servicing Agreement dated as of July __, 1997 (the "Sale and Servicing
Agreement"), among NATIONAL AUTO FINANCE 1997-1 TRUST, a Delaware business trust
(the "Issuer"), NATIONAL FINANCIAL AUTO FUNDING TRUST, a Delaware business trust
(the "Seller"), NATIONAL AUTO FINANCE COMPANY, INC., a Delaware corporation (the
"Servicer"), and ▇▇▇▇▇▇ TRUST AND SAVINGS BANK, an Illinois banking corporation,
not in its individual capacity, but solely as Trust Collateral Agent and Backup
Servicer (the "Trust Collateral Agent").
W I T N E S S E T H:
WHEREAS pursuant to the Sale and Servicing Agreement, the Seller wishes to
convey the Subsequent Receivables to the Issuer; and
WHEREAS, the Issuer is willing to accept such conveyance subject to the
terms and conditions hereof.
NOW, THEREFORE, the Issuer, the Seller, the Servicer and the Trust
Collateral Agent hereby agree as follows:
1. Defined Terms. Capitalized terms used herein shall have the meanings
ascribed to them in the Sale and Servicing Agreement unless otherwise defined
herein.
"Subsequent Cut-off Date" shall mean, with respect to the Subsequent
Receivables conveyed hereby, , 1997.
"Subsequent Transfer Date" shall mean. with respect to the Subsequent
Receivables conveyed hereby, , 1997.
2. Receivables Schedule. Annexed hereto is a supplement to Schedule A to
the Sale and Servicing Agreement listing the Receivables that constitute the
Subsequent Receivables to be conveyed pursuant to this Agreement on the
Subsequent Transfer Date. Such Receivable Schedule is marked as Schedule I to
this Subsequent Transfer Agreement and is hereby incorporated in and made a part
of this Subsequent Transfer Agreement and the Sale and Servicing Agreement.
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3. Conveyance of Subsequent Receivables. In consideration of the Issuer's
delivery to or upon the order of the Seller of $ , the Seller does
hereby sell, transfer, assign, set over and otherwise convey to the Issuer,
without recourse (except as expressly provided in the Sale and Servicing
Agreement) and does hereby grant to the Trustee, in trust for exclusive use and
benefit of all present and future Noteholders and the Insurer, all right, title
and interest of the Seller in and to the following, whether now owned or
hereafter acquired:
(a) the Subsequent Receivables and all moneys received thereon, on and
after the related Subsequent Cut-off Date (including amounts due on or before
the Subsequent Cut-off Date but received by NAFI, the Seller or the Issuer on or
after the Subsequent Cut-off Date);
(b) any proceeds and the right to receive proceeds with respect to the
Subsequent Receivables from claim and the right to receive proceeds on any
physical damage, credit life or disability insurance policies or other policies
covering Financed Vehicles or Obligors, including rebating of insurance premiums
relating to the Receivables, and any proceeds from the liquidation of the
Subsequent Receivables;
(c) all rights of the Seller against the Dealers pursuant to Dealer
Agreements or against Originators pursuant to Originator Agreements;
(d) the related Receivables Files; and any and all other documents that
NAFI keeps on file in accordance with its customary procedures relating to the
Receivables, the Obligors or the Financed Vehicles;
(e) property (including the right to receive future Liquidation Proceeds)
that secures a Receivable and that has been acquired by or on behalf of the
Trust pursuant to liquidation of such Receivable;
(f) all funds on deposit from time to time in the Trust Accounts (less all
investments and proceeds thereof), and all rights of the Issuer therein;
(g) all of the Seller's right, title and interest in its rights and
benefits, but none of its obligations or burdens, under each of the Subsequent
Purchase Agreements, including the delivery requirements, representations and
warranties and the cure and repurchase obligations of NAFI under each of the
Subsequent Purchase Agreements, on or after the related Subsequent Cut-off Date;
and
(h) the proceeds of any and all of the foregoing.
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4. Representations and Warranties of the Seller. The Seller hereby
represents and warrants to the Issuer as of the date of this Agreement and as of
the Subsequent Transfer Date that:
(a) Schedule of Representations. The representations and warranties set
forth on the Schedule of Representations attached hereto as Schedule B are true
and correct.
(b) Organization and Good Standing. The Seller is a Delaware business
trust duly organized, validly existing, and in good standing under the laws of
the State of Delaware, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Receivables and the Other
Conveyed Property transferred to the Trust.
(c) Due Qualification. The Seller has obtained all necessary licenses and
approvals in all jurisdictions where the failure to do so would materially and
adversely affect Seller's ability to transfer the Receivables and the Other
Conveyed Property to the Trust pursuant to this Agreement, or the validity or
enforceability of the Receivables and the Other Conveyed Property or to perform
Seller's obligations hereunder and under the Seller's Transaction Documents.
(d) Power and Authority. The Seller has the power and authority to execute
and deliver this Agreement and its Transaction Documents and to carry out its
terms and their terms, respectively; the Seller has full power and authority to
sell and assign the Receivables and the Other Conveyed Property to be sold and
assigned to and deposited with the Trust by it and has duly authorized such sale
and assignment to the Trust; and the execution, delivery and performance of this
Agreement and the Seller's Transaction Documents have been duly authorized by
the Seller.
(e) Valid Sale, Binding Obligations. This Agreement effects a valid sale,
transfer and assignment of the Receivables and the Other Conveyed Property,
enforceable against the Seller and creditors of and purchasers from the Seller;
and this Agreement and the Seller's Transaction Documents, when duly executed
and delivered, shall constitute legal, valid and binding obligations of the
Seller enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
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(f) No Violation. The consummation of the transactions contemplated by
this Agreement and the Transaction Documents and the fulfillment of the terms of
this Agreement and the Transaction Documents shall not conflict with, result in
any breach of any of the terms and provisions of or constitute (with or without
notice, lapse of time or both) a default under the certificate of incorporation
or by-laws of the Seller, or any indenture, agreement, mortgage, deed of trust
or other instrument to which the Seller is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than this Agreement, or violate any law, order, rule
or regulation applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Seller or any of its properties.
(g) No Proceedings. There are no proceedings or investigations pending or,
to the Seller's knowledge, threatened against the Seller, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Seller or its properties (A)
asserting the invalidity of this Agreement or any of the Transaction Documents,
(B) seeking to prevent the issuance of the Securities or the consummation of any
of the transactions contemplated by this Agreement or any of the Transaction
Documents, (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Seller of its obligations under, or the
validity or enforceability of, this Agreement or any of the Transaction
Documents, or (D) seeking to adversely affect the federal income tax or other
federal, state or local tax attributes of the Securities.
(h) Approvals. All approvals, authorizations, consents, order or other
actions of any person, corporation or other organization, or of any court,
governmental agency or body or official, required in connection with the
execution and delivery by the Seller of this Agreement and the consummation of
the transactions contemplated hereby have been or will be taken or obtained on
or prior to the Closing Date.
(i) No Consents. The Seller is not required to obtain the consent of any
other party or any consent, license, approval or authorization, or registration
or declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Agreement which has not already been obtained.
(j) Chief Executive Office. The chief executive office of the Seller is at
One Park Place, ▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇.
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(k) Principal Balance. The aggregate Principal Balance of the Receivables
listed on the supplement to Schedule A annexed hereto and conveyed to the Issuer
pursuant to this Agreement as of the Subsequent Cut-off Date is $ .
(l) Contract Files. The Seller does hereby deliver to the Custodian the
original motor vehicle retail installment sale contracts and Receivables Files
for each Receivable identified in the Receivable Schedule.
5. Receivable File. The Seller does hereby deliver to the Custodian the
original motor vehicle retail installment sale contracts and Receivables Files
for each Receivable identified in the Receivable Schedule.
6. Conditions Precedent. The obligation of the Issuer to acquire the
Receivables hereunder is subject to the satisfaction, on or prior to the
Subsequent Transfer Date, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Seller in Section 4 of this Agreement and in Section 6.1
of the Sale and Servicing Agreement shall be true and correct as of the date of
this Agreement and as of the Subsequent Transfer Date.
(b) Sale and Servicing Agreement Conditions. Each of the conditions set
forth in Section 2.2(b) to the Sale and Servicing Agreement shall have been
satisfied.
(c) Additional Information. The Seller shall have delivered to the Issuer
such information as was reasonably requested by the Issuer to satisfy itself as
to (i) the accuracy of the representations and warranties set forth in Section 4
of this Agreement and in Section 6.1 of the Sale and Servicing Agreement and
(ii) the satisfaction of the conditions set forth in this Section 5.
7. Ratification of Agreement. As supplemented by this Agreement, the Sale
and Servicing Agreement is in all respects ratified and confirmed and the Sale
and Servicing Agreement as so supplemented by this Agreement shall be read,
taken and construed as one and the same instrument.
8. Counterparts. This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.
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9. 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 HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
10. Third-Party Beneficiaries. This Agreement shall incure to the benefit
of and be binding upon the parties hereto and their respective successor and
permitted assigns. Except as otherwise provided in this Section 9, no other
person shall have any right or obligation hereunder. The Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Agreement, and shall be entitled to rely upon and directly enforce such
provisions of this Agreement so long as no Insurer Default shall have occurred
and be continuing. Except as expressly stated otherwise herein or in the
Transaction Documents, any right of the Insurer to direct, appoint, consent to,
approve of, or take any action under this Agreement, shall be a right exercised
by the Insurer to direct, appoint, consent to, approve of, or take any action
under this Agreement, shall be a right exercised by the Insurer in its sole and
absolute discretion. The Insurer may disclaim any of its rights and powers under
this Agreement (but not its duties and obligations under the Policy) upon
delivery of a written notice to the Trustee.
IN WITNESS WHEREOF, the Issuer, the Seller and the Servicer have caused
this Agreement to be duly executed and delivered by their respective duly
authorized officers as of day and the year first above written.
NATIONAL AUTO FINANCE 1997-1 TRUST by
Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee on behalf of the Trust,
By
Title:
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NATIONAL FINANCIAL AUTO FUNDING TRUST,
Seller, by Chase Manhattan Bank Delaware,
not in its individual capacity, but solely
as Trustee of National Financial Auto
Funding
Trust,
By
Title:
NATIONAL AUTO FINANCE COMPANY, INC.,
Servicer,
By
Title:
Acknowledged and Accepted:
▇▇▇▇▇▇ TRUST AND SAVINGS BANK, not in its individual capacity but solely as
Trust Collateral Agent and Backup Servicer
By
Title:
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EXHIBIT B
FORM OF SERVICER'S CERTIFICATE
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