Execution Copy
================================================================================
SALE AND SERVICING AGREEMENT
among
NAL AUTO TRUST 1996-4,
Issuer,
and
AUTORICS II, INC.,
Depositor,
and
NAL ACCEPTANCE CORPORATION,
Servicer
and
BANKERS TRUST COMPANY,
Backup Servicer
Dated as of December 9, 1996
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions ................................................. 1
SECTION 1.02. Other Definitional Provisions ............................... 16
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables ................................... 17
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of
the Depositor with Respect to the
Receivables ................................................. 18
SECTION 3.02. Repurchase upon Breach ...................................... 18
SECTION 3.03. Custody of Receivable Files ................................. 19
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer .......................................... 20
SECTION 4.02. Collection and Allocation of Receivable
Payments .................................................... 21
SECTION 4.03. Realization upon Receivables ................................ 21
SECTION 4.04. Insurance ................................................... 22
SECTION 4.05. Maintenance of Security Interests in
Financed Vehicles ........................................... 22
SECTION 4.06. Covenants of Servicer ....................................... 22
SECTION 4.07. Purchase of Receivables upon Breach ......................... 23
SECTION 4.08. Servicing Fee ............................................... 23
SECTION 4.09. Servicer's Certificate ...................................... 23
SECTION 4.10. Annual Statement as to Compliance;
Notice of Default ........................................... 24
SECTION 4.11. Annual Independent Certified Public
Accountants' Report ......................................... 24
SECTION 4.12. Servicer Expenses ........................................... 25
SECTION 4.13. Appointment of Subservicer .................................. 25
SECTION 4.14. Oversight of Servicing ...................................... 25
SECTION 4.15. Duties of Backup Servicer ................................... 26
i
ARTICLE V
Trust Accounts; Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Establishment of Trust Accounts ............................. 27
SECTION 5.02. Collections ................................................. 30
SECTION 5.03. Application of Collections .................................. 30
SECTION 5.04. Additional Deposits ......................................... 30
SECTION 5.05. Distributions ............................................... 30
SECTION 5.06. Reserve Account ............................................. 31
SECTION 5.07. Statements to Certificateholders and
Noteholders ................................................. 33
SECTION 5.08. Transfer of the Notes ....................................... 35
SECTION 5.09. Dealer Reserve Account ...................................... 35
ARTICLE VI
The Depositor
SECTION 6.01. Representations of Depositor ................................ 35
SECTION 6.02. Corporate Existence ......................................... 37
SECTION 6.03. Liability of Depositor; Indemnities ......................... 38
SECTION 6.04. Merger or Consolidation of, or
Assumption of the Obligations of, Depositor ................. 38
SECTION 6.05. Limitation on Liability of Depositor and
Others ...................................................... 39
SECTION 6.06. Depositor May Own Certificates or Notes ..................... 39
SECTION 6.07. Sale of Receivables ......................................... 40
ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer ................................. 40
SECTION 7.02. Indemnities of Servicer ..................................... 41
SECTION 7.03. Merger or Consolidation of, or
Assumption of the Obligations of, Servicer .................. 43
SECTION 7.04. Limitation on Liability of Servicer and
Others ...................................................... 43
SECTION 7.05. NAL Not To Resign as Servicer ............................... 44
SECTION 7.06. Representations of Backup Servicer .......................... 44
SECTION 7.07. Merger or Consolidation of, or
Assumption of the Obligations of, Backup
Servicer .................................................... 45
SECTION 7.08. Resignation as Backup Servicer .............................. 45
ARTICLE VIII
Default
SECTION 8.01. Servicer Default ............................................ 46
SECTION 8.02. Appointment of Successor .................................... 47
SECTION 8.03. Notification to Noteholders and
ii
Certificateholders Waiver of Past Defaults .................. 49
SECTION 8.04. Waiver of Past Defaults ..................................... 49
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables ........................ 49
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment ................................................... 51
SECTION 10.02. Protection of Title to Trust ................................ 52
SECTION 10.03. Notices ..................................................... 54
SECTION 10.04. Assignment by the Depositor or the
Servicer .................................................... 55
SECTION 10.05. Limitations on Rights of Others ............................. 55
SECTION 10.06. Severability ................................................ 55
SECTION 10.07. Separate Counterparts ....................................... 55
SECTION 10.08. Headings .................................................... 55
SECTION 10.09. Governing Law ............................................... 55
SECTION 10.10. Assignment by Issuer ........................................ 55
SECTION 10.11. Nonpetition Covenants ....................................... 56
SECTION 10.12. Limitation of Liability of Owner
Trustee and Indenture Trustee ............................... 56
SCHEDULE A Schedule of Receivables
EXHIBIT A Form of Distribution Date Statement to Noteholders
EXHIBIT B Form of Distribution Date Statement to
Certificateholders
EXHIBIT C Form of Servicer's Certificate
EXHIBIT D Form of Receivables Checklist
EXHIBIT E Form of Receivables Assignment
iii
SALE AND SERVICING AGREEMENT dated as of December 9, 1996, among NAL AUTO
TRUST 1996-4, a Delaware business trust (the "Issuer"), AUTORICS II, INC.,
a Delaware corporation (the "Depositor"), NAL ACCEPTANCE CORPORATION, a
Florida corporation (the "Servicer") and BANKERS TRUST COMPANY, a New York
banking corporation (the "Backup Servicer").
WHEREAS the Issuer desires to purchase a portfolio of receivables arising
in connection with automobile retail installment sale contracts generated by NAL
Acceptance Corporation in the ordinary course of business which were sold by NAL
Acceptance Corporation to the Seller and by the Seller to the Depositor;
WHEREAS the Depositor is willing to sell such receivables to the Issuer;
and
WHEREAS NAL Acceptance Corporation is willing to service such receivables;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
"AA" means Auto Analyst, Inc., a Georgia corporation, and any successor in
interest.
"Amount Financed" means, with respect to any Receivable, the amount
advanced under the Receivable toward the purchase price of the Financed Vehicle
and any related costs, exclusive of any amount allocable to the premium of "dual
interest" insurance covering the Financed Vehicle.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate of
finance charges stated in the related Contract.
"Backup Servicer" means, Bankers Trust Company, a New York banking
corporation, and its successors or assigns, when acting in its capacity as
Backup Servicer under this Agreement.
"Certificate Balance" equals, as of the Closing Date, the Initial
Certificate Balance and, thereafter, will equal the Initial Certificate Balance
reduced by all amounts allocable to principal previously distributed to
Certificateholders.
"Certificate Distribution Account" has the meaning assigned to such term
in the Trust Agreement.
"Certificate Pool Factor" means, as of the close of business on the last
day of a Collection Period, a seven-digit decimal figure equal to the
Certificate Balance (after giving effect to any reductions therein to be made on
the immediately following Distribution Date) divided by the Initial Certificate
Balance. The Certificate Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Certificate Pool Factor will decline to reflect reductions in
the Certificate Balance.
"Certificateholders' or "Holders" (when used in the context of the Holders
of Certificates) has the meaning assigned to such term in the Trust Agreement.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount for such date.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, (i) the excess of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date, over the amount in
respect of interest that is actually deposited in the Certificate Distribution
Account on such preceding Distribution Date, plus (ii) 90 days of interest on
the amount of such excess for such preceding Distribution Date, to the extent
permitted by law, at the Pass-Through Rate.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Quarterly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date. Interest with respect
to the Certificates shall be computed on the basis of a 360-day year consisting
of twelve 30-day months for all purposes of this Agreement and the Basic
Documents.
"Certificateholders' Quarterly Interest Distributable Amount" means, with
respect to any Distribution Date, 90 days of interest at the Pass-Through Rate
on the Certificate Balance on the immediately preceding Distribution Date (or,
in the case of the first Distribution Date, on the Closing Date) after giving
effect to all payments of principal to Certificateholders on such immediately
preceding Distribution Date.
"Certificateholders' Quarterly Principal Distributable Amount" means, with
respect to any Distribution Date prior to the Distribution Date on which the
Notes are paid in full, zero; and with respect to any Distribution Date on or
after the Distribution Date on which the Notes are paid in full, 100% of the
Principal Distribution Amount for such Distribution Date
2
(less, on the Distribution Date on which the Notes are paid in full, the portion
thereof payable as principal of the Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the close
of a particular Distribution Date, the excess of the Certificateholders'
Quarterly Principal Distributable Amount and any outstanding Certificateholders'
Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Certificate
Distribution Account on such particular Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders' Quarterly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; provided, however, that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Balance. In addition, on the Final
Scheduled Distribution Date, the principal required to be included in the
Certificateholders' Principal Distributable Amount will include the lesser of
(a) (i) any Scheduled Payments of principal due and remaining unpaid on each
Precomputed Receivable and (ii) any principal due and remaining unpaid on each
Simple Interest Receivable, in each case, in the Trust as of the Final Scheduled
Distribution Date or (b) the amount that is necessary (after giving effect to
the other amounts to be deposited in the Certificate Distribution Account on
such Distribution Date and allocable to principal) to reduce the Certificate
Balance to zero.
"Certificates" means the Trust Certificates (as defined in the Trust
Agreement).
"Closing Date" means December 18, 1996.
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 5.01(a)(i).
"Collection Period" means the three calendar-month period ending on the
last day of the month preceding the month of each Distribution Date. Any amount
or balance stated as of the last day of a Collection Period shall give effect to
the following calculations as determined as of the close of business on such
last day: (1) all applications of collections, (2) all current and previous
Payaheads, (3) all applications of Payahead Balances and (4) all distributions
to be made on the following Distribution Date.
"Computer Tape" means a computer tape generated by the Servicer which
provides information relating to the Receivables.
"Contract" means a motor vehicle retail installment sale contract.
3
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at Four Albany Street, New York, New York, Corporate Trust and Agency
Group, Structured Finance Team; or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Depositor, or the principal corporate trust office of any successor Indenture
Trustee (of which address such successor Indenture Trustee will notify the
Noteholders and the Depositor).
"Custodial Agreement" means the Custodial Agreement dated as of December
9, 1996, among the Issuer, Bankers Trust Company, as Indenture Trustee and
Custodian, and the Servicer.
"Custodian" means Bankers Trust Company, as Custodian under the Custodial
Agreement and any successor Custodian pursuant to the Custodial Agreement.
"Cutoff Date" means December 9, 1996.
"Dealer" means the dealer, SF1, AA or other entity who sold a Financed
Vehicle and who originated the related Contract or who acquired a Contract and
in either case assigned the related Receivable to NAL under an existing
agreement between it and NAL.
"Dealer Reserve Account" means the account designated as such, established
and maintained pursuant to Section 5.01.
"Delinquency Trigger Event" means, as to any Collection Period, that the
Average Three Month Delinquency Ratio as of the last day of such Collection
Period is greater than 6%. "Average Three Month Delinquency Ratio" means, as of
any date, the ratio of the average aggregate Principal Balances of Receivables
that are 60 days or more delinquent for each of the three prior calendar months
prior to such date to the average of the Pool Balances as of the end of such
periods.
"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 Indenture
Trustee or its nominee or custodian by physical delivery to the Indenture
Trustee or its nominee or custodian endorsed to, or registered in the name
of, the Indenture Trustee or its nominee or custodian or endorsed in
blank, and, with respect to a "certificated security" (as defined in
Section 8-102(1) (a) of the UCC) transfer thereof (i) by delivery of such
certificated security endorsed to, or registered in the name of, the
Indenture Trustee or its nominee or custodian or endorsed in blank to a
financial
4
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 Indenture
Trustee or its nominee or custodian and the sending by such financial
intermediary of a confirmation of the purchase of such certificated
security by the Indenture Trustee 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 Indenture Trustee 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 Indenture Trustee 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 Indenture Trustee 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 (as defined herein) to the Indenture Trustee 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 Indenture
Trustee or its nominee or custodian of the purchase by the Indenture
Trustee or its nominee or custodian of such book-entry security; 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
Indenture Trustee or its
5
nominee or custodian and indicating that such custodian holds such Trust
Account Property solely as agent for the Indenture Trustee 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 Indenture Trustee 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
Indenture Trustee or its nominee or custodian of such uncertificated
security, and the making by such financial intermediary of entries on its
books and records identifying such uncertificated certificates as
belonging to the Indenture Trustee or its nominee or custodian.
"Depositor" means AUTORICS II, Inc., a Delaware corporation and any
successor in interest.
"Distribution Date" means March 15, June 15, September 15 and December 15
of each year or, if such day is not a Business Day, the immediately following
Business Day, commencing on March 17, 1997.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution shall have a credit rating from each
Rating Agency in one of its generic rating categories that signifies investment
grade.
"Eligible Institution" means (a) the corporate trust department of the
Indenture Trustee or the Owner Trustee or (b) a depository institution organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia (or any domestic branch of a foreign bank), which
(i) has either (A) a long-term unsecured debt rating of A or better by each
Rating Agency, or if not rated by each Rating Agency, of A or better by Standard
& Poor's, A1 or better by Moody's and, if rated by one of the Rating Agencies, A
or better by such agency and (ii) whose deposits are insured by the FDIC. If so
qualified, the Indenture Trustee or the Owner Trustee may be considered an
Eligible Institution for the purposes of clause (b) of this definition.
6
"Eligible Investments" means book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(a) direct obligations of, and obligations fully guaranteed as to
the full and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by federal or
state banking or depository institution authorities; provided, however,
that at the time of the investment or contractual commitment to invest
therein, the commercial paper or other short-term unsecured debt
obligations thereof (other than such obligations the rating of which is
based on the credit of a Person other than such depository institution or
trust company) shall have a short-term credit rating from each Rating
Agency in the highest investment category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each Rating Agency
in the highest investment category granted thereby;
(d) investments in money market mutual funds having a rating from
Standard & Poor's and Moody's and, if any Rating Agency rates such fund,
from such agency in the highest investment category granted by each Rating
Agency so rating such fund (including funds for which the Indenture
Trustee or the Owner Trustee or any of their respective Affiliates is
investment manager or advisor);
(e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) described in clause (b); and
(g) any other investment with respect to which the Issuer or the
Servicer has received written notification from each Rating Agency that
the acquisition of such investment as an Eligible Investment will not
result in a withdrawal or downgrading of the ratings on the Notes or
Certificates.
7
"Excess Spread" shall have the meaning set forth in Section 5.06(a)(ii).
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Distribution Date" means the March, 2002 Distribution
Date.
"Final Scheduled Maturity Date" means December 17, 2001.
"Financed Vehicle" means an automobile, light-duty truck or van, together
with all accessions thereto, securing an Obligor's indebtedness under the
related Receivable.
"Indenture" means the Indenture dated as of December 9, 1996, between the
Issuer and the Indenture Trustee.
"Indenture Trustee" means the Person acting as Indenture Trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture.
"Initial Certificate Balance" shall have the meaning set forth in the
Trust Agreement.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"Insolvency Proceeds" shall have the meaning set forth in Section 9.01.
"Insurance Policies" means any physical damage, credit life, disability,
theft, mechanical breakdown, dual interest or guaranteed auto-protection
insurance policies or coverage relating to the Financed Vehicles or Obligors.
8
"Investment Earnings" means, with respect to any Payment Determination
Date, the investment earnings (net of losses and investment expenses) on amounts
on deposit in the Trust Accounts (other than the Dealer Reserve Account) to be
deposited into the Collection Account and to be deemed to constitute a portion
of the Total Distribution Amount for the related Distribution Date pursuant to
Section 5.01(b).
"Issuer" means NAL Auto Trust 1996-4.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to a Receivable by operation of law as a result of any act or
omission by the related Obligor.
"Liquidated Receivable" means any defaulted Receivable as to which the
Servicer has determined that all amounts which it expects to recover from or on
account of such Receivables have been recovered or with respect to which the
related Financed Vehicle has been realized upon and disposed of and the proceeds
of such disposition have been received; provided that any Receivable which is
120 days or more past due shall be deemed to be a Liquidated Receivable.
"Liquidation Proceeds" means, with respect to any Liquidated Receivable,
the moneys collected in respect thereof, from whatever source, including
Insurance Policy proceeds, net of the sum of any amounts expended by the
Servicer in connection with such liquidation and any amounts required by law to
be remitted to the Obligor on such Liquidated Receivable.
"Loss Trigger Event" means, as to any Collection Period, that the Average
Six Month Realized Loss Ratio as of the last day of such Collection Period is
greater than 5%. The "Average Six Month Realized Loss Ratio" as of any date is
the ratio, expressed on an annualized basis, of the average of the aggregate
Realized Losses in respect of Liquidated Receivables for each of the six
calendar month periods (or lesser number of calendar months from the Cutoff
Date) prior to such date to the average of the Pool Balance as of the beginning
of such periods.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc., and any successors in
interest.
"NAL" means NAL Acceptance Corporation, a Florida corporation and any
successor in interest.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.01.
"Note Final Scheduled Distribution Date" means the December, 2000
Distribution Date.
9
"Note Pool Factor" means, as of the close of business on the last day of a
Collection Period, a seven-digit decimal figure equal to the Outstanding Amount
of the Notes divided by the original Outstanding Amount of the Notes. The Note
Pool Factor will be 1.0000000 as of the Closing Date; thereafter, the Note Pool
Factor will decline to reflect reductions in the Outstanding Amount of the
Notes.
"Noteholder" means the Person in whose name a Note is registered in the
Note Register.
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount for such Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, (i) the excess of the Noteholders' Interest Distributable
Amount for the preceding Distribution Date, over the amount in respect of
interest that is actually deposited in the Note Distribution Account on such
preceding Distribution Date, plus (ii) 90 days of interest on the amount of such
excess for such preceding Distribution Date, to the extent permitted by law, at
the Note Rate.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Quarterly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date. For all purposes of this Agreement and the
Basic Documents, interest with respect to the Notes shall be computed on the
basis of a 360-day year consisting of twelve 30-day months.
"Noteholders' Quarterly Interest Distributable Amount" means, with respect
to any Distribution Date, 90 days of interest on the Notes at the Note Rate on
the Outstanding Amount of the Notes on the immediately preceding Distribution
Date (or, in the case of the first Distribution Date, the Closing Date) after
giving effect to all payments of principal to the Noteholders on such
immediately preceding Distribution Date.
"Noteholders' Quarterly Principal Distributable Amount" means, with
respect to any Distribution Date, for so long as the Notes are outstanding, 100%
of the Principal Distribution Amount; provided, however, that on the
Distribution Date on which the Outstanding Amount of the Notes is reduced to
zero, the portion, if any, of the Principal Distribution Amount that is not
applied to the Notes will be applied to the principal of the Certificates.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
business on a particular Distribution Date, the excess of the Noteholders'
Quarterly Principal Distributable Amount and any outstanding Noteholders'
Principal Carryover Shortfall from
10
the preceding Distribution Date, over the amount in respect of principal that is
actually deposited in the Note Distribution Account on such particular
Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Quarterly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carryover
Shortfall as of the close of the preceding Distribution Date; provided1 however,
that the Noteholders' Principal Distributable Amount shall not exceed the
Outstanding Amount of the Notes. In addition, on the Note Final Scheduled
Distribution Date, the Noteholders' Principal Distributable Amount will not be
less than the amount that is necessary (after giving effect to all other amounts
to be deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the Outstanding Amount of the Notes to zero.
"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) the chairman of
the board, the president or any vice president and (b) a treasurer, assistant
treasurer, the controller or any assistant controller, secretary or assistant
secretary of the Seller, the Depositor, the Servicer or the Backup Servicer, as
appropriate.
"Opinion of Counsel" means one or more written opinions of counsel, who
may be an employee of or counsel to the Seller, the Depositor, Servicer or the
Backup Servicer, which counsel shall be acceptable to the Indenture Trustee, the
Owner Trustee or each Rating Agency, as applicable.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means the Person acting as Owner Trustee under the Trust
Agreement, its successors in interest and any successor owner trustee under the
Trust Agreement.
"Pass-Through Rate" means 8.15% per annum.
"Payahead" on a Receivable that is a Precomputed Receivable means the
amount, as of the close of business on the last day of a Collection Period,
computed in accordance with Section 5.03 with respect to such Receivable.
"Payahead Account" means the account designated as such, established and
maintained pursuant to Section 5.01.
11
"Payahead Balance" on a Receivable that is a Precomputed Receivable means
the sum, as of the close of business on the last day of a Collection Period, of
all Payaheads made by or on behalf of the Obligor with respect to such
Precomputed Receivable, as reduced by applications of previous Payaheads with
respect to such Precomputed Receivable pursuant to Section 5.03.
"Payment Determination Date" means, with respect to any Distribution Date,
the 10th day of the month (or if such day is not a Business Day, the next
succeeding Business Day) of such Distribution Date.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Pool Balance" means, as of the close of business on the last day of a
Collection Period or any other date of determination, the aggregate Principal
Balance of the Receivables as of such day (excluding Purchased Receivables and
Liquidated Receivables).
"Precomputed Receivable" means any Receivable under which the portion of a
payment allocable to earned interest (which may be referred to in the related
Contract as an add-on finance charge) and the portion allocable to the Amount
Financed is determined according to the sum of periodic balances or the sum of
monthly balances or any equivalent method or are monthly actuarial receivables.
"Principal Balance" means (a) with respect to any Precomputed Receivable
as of the close of business on the last day of a Collection Period, the Amount
Financed minus the sum of (i) that portion of all Scheduled Payments due on or
prior to such day allocable to principal using the actuarial or constant yield
method, (ii) any payment of the Purchase Amount with respect to the Precomputed
Receivable allocable to principal and (iii) any prepayment in full applied to
reduce the Principal Balance of the Precomputed Receivable and (b) with respect
to any Simple Interest Receivable as of the close of business on the last day of
a Collection Period, the Amount Financed minus the sum of (i) the portion of all
payments made by or on behalf of the related Obligor on or prior to such day and
allocable to principal using the Simple Interest Method and (ii) any payment of
the Purchase Amount with respect to the Simple Interest Receivable allocable to
principal.
"Principal Distribution Amount" means, with respect to any Distribution
Date, an amount equal to the sum of the following amounts with respect to the
related Collection Period (i) with respect to Precomputed Receivables, the
principal component of all monthly payments scheduled to be received with
respect to such Receivables and all prepayments in full of such Receivables
(including amounts with respect thereto withdrawn from the Payahead Account);
(ii) with respect to Simple Interest Receivables, that portion of all
collections on such Receivables allocable to principal; (iii) the Principal
Balance of all
12
Precomputed Receivables that became Liquidated Receivables during such
Collection Period; (iv) all Liquidation Proceeds attributable to the principal
amount of Simple Interest Receivables that became Liquidated Receivables during
such Collection Period, plus all Realized Losses with respect to such Liquidated
Receivables; and (v) to the extent attributable to principal, the Purchase
Amount of each Receivable that was purchased by NAL or by the Servicer during
the related Collection Period.
"Purchase Amount" means the amount, as of the close of business on the
last day of a Collection Period, required to prepay in full a Receivable under
the terms thereof including interest to the end of the month of purchase.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.07 or by NAL pursuant to Section 3.02.
"Rating Agency" means each of Fitch Investors Service, L.P. and Duff &
helps Credit Rating Co. and their successors in interest.
"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 such Rating Agency) prior notice thereof and that each Rating
Agency shall have notified the Depositor, the Servicer, the Owner Trustee and
the Indenture Trustee in writing that such action will not result in a reduction
or withdrawal of the then current rating of the Notes or the Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Contract listed on Schedule A (which Schedule may
be in the form of microfiche).
"Receivable Files" means the documents specified in Section 3.03.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of December 9, 1996, among NAL, Autorics, Inc., as seller, and the
Depositor, as purchaser.
"Recoveries" means, with respect to any Receivable that becomes a
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in which
such Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts required
by law to be remitted to the Obligor.
13
"Repossession Trigger Event" means, as to any Collection Period, that the
Average Six Month Repossession Ratio as of the last day of such Collection
Period is greater than 12%. "Average Six Month Repossession Ratio" as of any
date is the ratio (expressed on an annualized basis) of the average of the
aggregate Principal Balances of Receivables with respect to which the related
Financed Vehicle has been repossessed by the Servicer for each of the six
calendar months (or lesser number of calendar months since the Cutoff Date)
prior to such date to the average Pool Balances as of the beginning of such
periods.
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 5.01.
"Reserve Account Initial Deposit" means $4,842,428.27.
"Scheduled Payment" on a Precomputed Receivable means that portion of the
payment required to be made by the Obligor during a calendar month sufficient to
amortize the Principal Balance under the actuarial method over the term of the
Receivable and to provide interest at the APR.
"Seller" means AUTORICS, Inc., a Delaware corporation, and any successor
in interest.
"Servicer" means NAL, in its capacity as the servicer of the Receivables,
and each successor to NAL (in the same capacity) pursuant to Section 7.03 or
8.02.
"Servicer Default" means an event specified in Section 8.01.
"Servicer's Certificate" means an Officers' Certificate of the Servicer
delivered pursuant to Section 4.09, substantially in the form of Exhibit C.
"Servicing Fee" means the fee payable to the Servicer for services
rendered during a Collection Period, determined pursuant to Section 4.08.
"Servicing Fee Rate" means 3.00% per annum.
"SFI" means Special Finance, Inc., a Florida corporation, and any
successor in interest.
"Simple Interest Method" means the method of allocating a fixed level
payment to 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 multiplied by the unpaid principal balance multiplied by the period of
time elapsed since the preceding payment of interest was made, and the remainder
of such payment is allocable to principal.
"Simple Interest Receivable" means any Receivable under which the portion
of a payment allocable to interest and the portion
14
allocable to principal is determined in accordance with the Simple Interest
Method.
"Specified Reserve Account Balance" means, with respect to any
Distribution Date, the greater of 9% of the Pool Balance on the close of
business on the last day of the related Collection Period and $1,760,883.01
until the first Distribution Date on which the Pool Balance on the close of
business on the last day of the preceding Collection Period is less than or
equal to $1,760,883.01. On such Distribution Date and thereafter the Specified
Reserve Account Balance shall equal 100% of the Pool Balance on the close of
business on the last day of the related Collection Period. In no event, however,
shall the Specified Reserve Account Balance exceed the aggregate outstanding
principal balance of the Notes and the Certificates.
"Standard & Poor's" means Standard & Poor's Rating Services, a division of
the ▇▇▇▇▇▇-▇▇▇▇ Companies and any successor in interest.
"Total Distribution Amount" means, with respect to a Distribution Date,
the sum of the following amounts with respect to the related Collection Period:
(i) that portion of all collections on the Receivables (including amounts
withdrawn from the Payahead Account but excluding amounts deposited into the
Payahead Account) allocable to principal and interest; (ii) all Liquidation
Proceeds, and all Recoveries in respect of Liquidated Receivables that were
written off in prior Collection Periods; (iii) the Purchase Amount of each
Receivable that was purchased by NAL or by the Servicer during the related
Collection Period; and (iv) Investment Earnings.
"Trigger Event" means any Distribution Date on which one or more of a
Delinquency Trigger Event, a Repossession Trigger Event or a Loss Trigger Event
has occurred with respect to the previously ended Collection Period. A Trigger
Event will be deemed to have terminated as to any Distribution Date (subject to
the reoccurrence of such event) if neither a Delinquency Trigger Event, a Loss
Trigger Event or a Repossession Trigger Event shall have occurred during the
related Collection Period.
"Trigger Event Reserve Account Balance" means, with respect to any
Distribution Date after a Trigger Event has occurred and not terminated, 13.5%
of the Pool Balance on the close of business on the last day of the related
Collection Period.
"Trust" means the Issuer.
"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), including the Reserve Account Initial Deposit, and all
proceeds of the foregoing.
15
"Trust Accounts" has the meaning assigned thereto in Section 5.01.
"Trust Agreement" means the Trust Agreement dated as of December 9, 1996,
between the Depositor and the Owner Trustee.
"Trust Officer" means, in the case of the Indenture Trustee, any Officer
within the Corporate Trust Office of the Indenture Trustee, including any Vice
President, Assistant Vice President, Secretary, Assistant Secretary or any other
officer of the Indenture Trustee 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, with respect to the Owner Trustee, any officer in the Corporate
Trust Administration Department of the Owner Trustee with direct responsibility
for the administration of the Trust Agreement and the Basic Documents on behalf
of the Owner Trustee.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms used
and not otherwise defined herein have the meanings assigned to them in the
Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement 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 certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such 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 certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such
16
terms and to the masculine as well as to the feminine and neuter genders of such
terms.
(f) 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.
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. (a) In consideration of the
Issuer's delivery on the Closing Date to or upon the order of the Depositor of
(i) Certificates with a Certificate Balance of $90,150.45 and (ii)
$87,984,949.15, the Depositor does hereby sell, transfer, assign, set over and
otherwise convey to the Issuer, without recourse (subject to the obligations
herein), all right, title and interest of the Depositor in and to (but none of
the Depositor's obligations with respect to):
(1) the Receivables and all moneys received thereon on and after the
Cutoff Date plus all Payaheads as of the Cutoff Date;
(2) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Receivables, any other right to realize upon
property securing a Receivable and any other interest of the Depositor in
such Financed Vehicles including the Depositor's right, title and interest
in the lien on the Financed Vehicles in the name of the Depositor's agent,
Autorics, Inc., NAL or SFI;
(3) any proceeds with respect to the Receivables from claims on any
Insurance Policies relating to Financed Vehicles or Obligors;
(4) proceeds of any recourse (but none of the obligations) to
Dealers on Receivables;
(5) any Financed Vehicle that shall have secured a Receivable and
shall have been acquired by or on behalf of the Seller, the Depositor, the
Servicer, or the Trust;
(6) the Receivables Files;
(7) all right, title and interest of the Depositor under the
Receivables Purchase Agreement, including, without
17
limitation, the right of the Depositor to cause NAL to purchase
Receivables under certain circumstances;
(8) the Trust Accounts; and
(9) the proceeds of any and all of the foregoing.
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of the Depositor with Respect
to the Receivables. The Depositor makes the following representations and
warranties with respect to the Receivables on which the Issuer relies in
acquiring the Receivables and issuing the Notes and Certificates. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the sale, transfer and
assignment of the Receivables to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) Title. It is the intention of the Depositor that the transfer and
assignment herein contemplated constitute a sale of the Receivables from the
Depositor to the Issuer and that the beneficial interest in and title to the
Receivables not be part of the debtor's estate in the event of the filing of a
bankruptcy petition by or against the Depositor under any bankruptcy law. No
Receivable has been sold, transferred, assigned or pledged by the Depositor to
any Person other than the Issuer. Immediately prior to the transfer and
assignment herein contemplated, the Depositor had good and marketable title to
each Receivable, free and clear of all Liens and rights of others and,
immediately upon the transfer thereof, the Issuer shall have good and marketable
title to each Receivable, free and clear of all Liens and rights of others; and
the transfer has been perfected under the UCC.
(b) All Filings Made. All filings (including UCC filings) necessary in any
jurisdiction to give (i) the Issuer a first perfected ownership interest in the
Receivables and (ii) the Indenture Trustee a first perfected security interest
in the Receivables shall have been made.
SECTION 3.02. Repurchase upon Breach. The Depositor, the Servicer, the
Backup Servicer and the Issuer, as the case may be, shall inform the other
parties to this Agreement, NAL and the Indenture Trustee promptly, in writing,
upon the discovery of any breach of the Depositor's representations and
warranties made pursuant to Section 3.01 or of NAL's representations and
warranties made pursuant to Section 3.02(c) of the Receivables Purchase
Agreement. Unless any such breach shall have been cured by the last day of the
Collection Period following the discovery thereof by NAL or the receipt by NAL
of written notice thereof from the Owner Trustee, the Indenture Trustee, the
Depositor, the
18
Servicer or the Backup Servicer, the Depositor, the Issuer or the Owner Trustee
shall enforce the obligation of NAL under the Receivables Purchase Agreement, to
purchase as of such last day any Receivable with respect to which such a breach
had occurred if such breach has a material and adverse effect on the interests
of the Depositor or the Trust in and to such Receivable. In consideration for
the purchased Receivable, NAL shall remit the Purchase Amount in the manner
specified in Section 6.02 of the Receivables Purchase Agreement. Subject to the
provisions of Section 6.03, the sole remedy of the Issuer, the Owner Trustee,
the Indenture Trustee, the Noteholders or the Certificateholders with respect to
a breach of representations and warranties pursuant to Section 3.01 and the
agreement contained in this Section shall be to require NAL to purchase
Receivables pursuant to this Section and the Receivables Purchase Agreement.
SECTION 3.03. Custody of Receivable Files. (a) In connection with the sale
and transfer of the Receivables pursuant to this Agreement, the Issuer,
simultaneously with the execution and delivery of this Agreement, is entering
into the Custodial Agreement with the Custodian pursuant to which the Issuer
appoints the Custodian, and the Custodian accepts such appointment, to act as
the agent and bailee of the Issuer (initially), the Indenture Trustee (until all
amounts in respect of the Notes have been paid) and thereafter the Issuer,, all
in accordance with the terms of the Custody Agreement, for all purposes of
Article 9 of the UCC, as Custodian of the following documents or instruments,
which are hereby constructively delivered to the Issuer or Indenture Trustee, as
pledgee of the Issuer, as the case may be, with respect to each Receivable:
(i) a list of Receivables in the form of Schedule A hereto,
identifying such Receivable together with the Computer Tape identifying
such Receivable and a completed checklist in the form of Exhibit D hereto
(it being expressly understood and agreed that the Custodian and Indenture
Trustee have no duties or responsibilities for checking or verifying the
accuracy or completeness of such checklist);
(ii) the fully executed original Receivable with manual signatures
and Dealer endorsements, together with executed assignments thereof by
NAL, the Seller and the Depositor in blank, which assignments shall be
substantially in the form of Exhibit E hereto;
(iii) a written confirmation from the Servicer certifying as to the
Insurance Policies covering the Receivable and stating that they are in
full force and effect;
(iv) the original certificate of title relating to the Financed
Vehicle or (a) a copy of the application for a certificate of title and
(b) a copy of the existing title, lien entry form or receipt of
registration or (c) a copy of the related letter guarantee, in each case
noting the lien of
19
NAL, the Seller or SFI; provided, however, that at any time during the
term hereof the Owner Trustee may request and require that the Depositor
cause the party in whose name the lien is noted to transfer such lien to
the Depositor;
(v) an original or copy of the credit application of the Obligor;
and
(vi) financing statements on Form UCC-l listing the Owner Trustee as
the secured party with respect to each Receivable and the other items
conveyed pursuant to Section 2.01 and stamped to indicate filing with the
Office of the Secretary of State of the State of Florida and with the
Office of the Secretary of State of Delaware.
(b) Access to Records. The Servicer or the Custodian, as the case may be,
shall provide to (or in the case of the Custodian shall be required pursuant to
the Custodial Agreement to provide to) the Indenture Trustee, the Issuer, the
Backup Servicer, Noteholders and Certificateholders and their duly authorized
representatives, attorneys or auditors access to the Receivable Files in such
cases where the Indenture Trustee, the Issuer, a Noteholder or a
Certificateholder is required by applicable statutes or regulations to review
the related accounts, records and computer systems maintained by the Servicer or
the Custodian, as the case may be, such access being afforded without charge but
only upon reasonable request and during normal business hours at offices of the
Servicer or the Custodian, as the case may be, designated by the Servicer or the
Custodian. Nothing in this Section shall derogate from the obligation of the
Servicer or the Custodian to observe any applicable law prohibiting disclosure
of information regarding the Obligors, and the failure of the Servicer or the
Custodian to provide access as provided in this Section as the result of such
obligation shall not constitute a breach of this Section.
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer. The Servicer, for the benefit of the
Issuer (to the extent provided herein), shall manage, service, administer and
make collections on the Receivables (other than Purchased Receivables) with
reasonable care, acting prudently and in accordance with customary and usual
servicing procedures for other institutional servicers of receivables of the
type subject to this Agreement and applicable law, and to the degree not
inconsistent with the foregoing, using that degree of skill and attention that
the Servicer exercises with respect to all comparable automotive receivables
that it services for itself or others. The Servicer's duties shall include
collection and posting of all payments, responding to inquiries of Obligors on
such Receivables, investigating delinquencies, sending billing statements to
Obligors, reporting
20
tax information to Obligors, accounting for collections, and furnishing monthly,
and annual statements to the Owner Trustee and the Indenture Trustee with
respect to distributions. Subject to the provisions of Section 4.02, the
Servicer shall follow its customary standards, policies and procedures in
performing its duties as Servicer. Without limiting the generality of the
foregoing, the Servicer is authorized and empowered to execute and deliver, on
behalf of itself, the Issuer, the Owner Trustee, the Indenture Trustee, the
Certificateholders and the Noteholders or any of them, any and all instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other comparable instruments, with respect to such Receivables or to the
Financed Vehicles securing such Receivables. If the Servicer shall commence a
legal proceeding to enforce a Receivable, the Issuer (in the case of a
Receivable other than a Purchased Receivable) shall thereupon be deemed to have
automatically assigned, solely for the purpose of collection, such Receivable to
the Servicer. If in any enforcement suit or legal proceeding it shall be held
that the Servicer may not enforce a Receivable on the ground that it shall not
be a real party in interest or a holder entitled to enforce such Receivable, the
Owner Trustee shall, at the Servicer's expense and direction, take steps to
enforce such Receivable, including bringing suit in its name or the name of the
Owner Trustee, the Indenture Trustee, the Certificateholders or the Noteholders.
The Owner Trustee shall (and the Custodian pursuant to the Custodial Agreement
shall be required) upon the written request of the Servicer furnish the Servicer
with any powers of attorney and other documents reasonably necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder.
SECTION 4.02. Collection and Allocation of Receivable Payments. The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable automotive receivables that it services for itself or others. The
Servicer may grant extensions, rebates or adjustments on a Receivable or arrange
with the Obligor to extend or modify the payment schedule, which actions shall
not, for the purposes of this Agreement, modify the original due dates or
amounts of the Scheduled Payments on a Precomputed Receivable or the original
due dates or amounts of the originally scheduled payments of interest on Simple
Interest Receivables; provided, however, that if the Servicer extends the date
for final payment by the Obligor of any Receivable beyond the Final Scheduled
Maturity Date, it shall promptly repurchase the Receivable from the Issuer in
accordance with the terms of Section 4.07. The Servicer may in its discretion
waive any late payment charge or any other fees that may be collected in the
ordinary course of servicing a Receivable. The Servicer shall not agree to any
alteration of the interest rate on any Receivable or of the amount of any
Scheduled Payment on Precomputed Receivables or the originally scheduled
payments on Simple Interest Receivables.
21
SECTION 4.03. Realization upon Receivables. On behalf of the Issuer, the
Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of and liquidate the
Financed Vehicle securing any Receivable as to which the Servicer shall have
determined eventual payment in full is unlikely. The Servicer shall follow such
customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of automotive receivables, which may include
reasonable efforts to realize upon any recourse to Dealers and selling the
Financed Vehicle at public or private sale. The foregoing shall be subject to
the provision that, in any case in which the Financed Vehicle shall have
suffered damage, the Servicer shall not expend funds in connection with the
repair or the repossession of such Financed Vehicle unless it shall determine in
its discretion that such repair and/or repossession will increase the
Liquidation Proceeds by an amount greater than the amount of such expenses. The
Servicer may not sell any Financed Vehicles to ▇.▇. ▇▇▇▇▇▇▇ Systems, Inc. for
less than 100% of such Financed Vehicles' wholesale value, determined from the
"Black Book".
SECTION 4.04. Insurance. The Servicer shall, in accordance with its
customary servicing procedures, require that each Obligor shall have obtained
physical damage and theft insurance covering the Financed Vehicle as of the
execution of the Receivable. The Servicer shall notify each insurer providing a
"guaranteed auto protection" insurance policy with respect to the Receivables to
include the Indenture Trustee as an additional insured and its payee on each
such policy. Upon receipt of notification that the insurance required pursuant
to the terms of any Receivable is not in place, the Servicer shall obtain "dual
interest" insurance chargeable to the Obligor in accordance with its customary
servicing procedures.
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles. The
Servicer shall, in accordance with its customary servicing procedures, take such
steps as are necessary to maintain perfection of the security interest created
by each Receivable in the related Financed Vehicle. The Servicer is hereby
authorized to take such steps as are necessary to re-perfect such security
interest on behalf of the Issuer and the Indenture Trustee in the event of the
relocation of a Financed Vehicle or for any other reason.
SECTION 4.06. Covenants of Servicer. The Servicer shall not release the
Financed Vehicle securing any Receivable from the security interest granted by
such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or repossession, nor shall the Servicer impair the rights
of the Issuer, the Indenture Trustee, the Certificateholders or the Noteholders
in such Receivable, nor shall the Servicer (except in the case of an extension
permitted pursuant to Section 4.02) increase the number of scheduled payments
due under a Receivable.
22
Neither NAL nor any Affiliate thereof shall incur liabilities of any kind
to SunTrust Bank, South Florida, National Association ("SunTrust"), if the total
amount of such liabilities outstanding at any time exceeds $10,000 except for
liabilities with respect to which SunTrust has expressly agreed to irrevocably
and unconditionally waive all right of set-off or other claims that it may have
under contract, applicable law or otherwise with respect to any funds or monies
SunTrust may hold from time to time pursuant to the Lock-box Agreement dated
November 27, 1995 between NAL, SunTrust and General Electric Capital
Corporation, or any other agreement related to the holding of any proceeds of
the Receivables or the other property conveyed pursuant to Section 2.01.
SECTION 4.07. Purchase of Receivables upon Breach. The Servicer or the
Owner Trustee shall inform the other party and the Indenture Trustee and the
Depositor promptly, in writing, upon the discovery of any breach pursuant to
Section 4.02, 4.05 or 4.06. Unless the breach shall have been cured by the last
day of the Collection Period following such discovery, the Servicer shall
purchase as of such last day any Receivable with respect to which such breach
had occurred if such breach has a material and adverse effect on the interests
of the Depositor or the Trust in and to such Receivable. If the Servicer takes
any action during any Collection Period pursuant to Section 4.02 that impairs
the rights of the Issuer, the Indenture Trustee, the Certificateholders or the
Noteholders in any Receivable or as otherwise provided in Section 4.02, the
Servicer shall purchase such Receivable as of the last day of such Collection
Period. In consideration of the purchase of any such Receivable pursuant to
either of the two preceding sentences, the Servicer shall remit the Purchase
Amount in the manner specified in Section 5.04. Subject to Section 7.02, the
sole remedy of the Issuer, the Owner Trustee, the Indenture Trustee, the
Certificateholders or the Noteholders with respect to a breach pursuant to
Section 4.02, 4.05 or 4.06 shall be to require the Servicer to purchase
Receivables pursuant to this Section. The Owner Trustee shall have no duty to
conduct any affirmative investigation as to the occurrence of any condition
requiring the repurchase of any Receivable pursuant to this Section.
SECTION 4.08. Servicing Fee. The Servicing Fee for a Distribution Date
shall equal the product of (a) one-fourth, (b) the Servicing Fee Rate and (c)
the Pool Balance as of the first day of the preceding Collection Period. The
Servicer shall also be entitled to all late fees, prepayment charges (including,
in the case of a Receivable that provides for payments according to the "Rule of
78s" and that is prepaid in full, the difference between the Principal Balance
of such Receivable (plus accrued interest to the date of prepayment) and the
principal balance of such Receivable computed according to the "Rule of 78s") ,
and other administrative fees or similar charges allowed by applicable law with
respect to the Receivables, collected (from whatever source) on the Receivables,
plus any reimbursement pursuant to the last paragraph of Section 7.02.
23
SECTION 4.09. Servicer's Certificate. Not later than 11:00 a.m. (New York
time) on the 10th day of each month, or if such lath day is not a Business Day,
the next succeeding Business Day, the Servicer shall deliver to the Owner
Trustee, each Paying Agent, the Indenture Trustee, the Backup Servicer (in
electronic media form acceptable to the Backup Servicer) and the Depositor, with
a copy to the Rating Agencies, a Servicer's Certificate substantially in the
form attached hereto as Exhibit C setting forth the applicable information for
each of the items set forth therein. Receivables to be purchased by the Servicer
or by NAL shall be identified by the Servicer by account number with respect to
such Receivable (as specified in Schedule A).
SECTION 4.10. Annual Statement as to Compliance; Notice of Default. (a)
The Servicer shall deliver to the Owner Trustee and the Indenture Trustee, on or
before February 28 of each year beginning February 28, 1997, an Officers'
Certificate, dated as of December 31 of the preceding year, stating that (i) a
review of the activities of the Servicer during the preceding 12-month period
(or such shorter period as shall have elapsed since the Closing Date) and of its
performance under this Agreement has been made under such officers' supervision
and (ii) to the best of such officers' 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 officers and the nature and status
thereof. The Indenture Trustee shall send a copy of such certificate and the
report referred to in Section 4.11 to each Rating Agency. A copy of such
certificate and the report referred to in Section 4.11 may be obtained by any
Certificateholder or Noteholder by a request in writing to the Owner Trustee
addressed to the Corporate Trust Office. Upon the telephone request of the Owner
Trustee, the Indenture Trustee will promptly furnish the Owner Trustee with a
list of Noteholders as of the date specified by the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Backup Servicer and each Rating Agency, promptly after having
obtained knowledge thereof, but in no event later than five (5) Business Days
thereafter, written notice in an Officers' Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Servicer Default
under Section 8.01.
SECTION 4.11. Annual Independent Certified Public Accounts' Report. The
Servicer shall cause a firm of independent certified public accountants, which
may also render other services to the Servicer, the Depositor or their
Affiliates, to deliver to the Owner Trustee and the Indenture Trustee on or
before February 28 of each year beginning February 28, 1997, a report addressed
to the Board of Directors of the Servicer, to the effect that such firm has
examined the financial statements of the Servicer for the preceding twelve
months or, in the case of the first such report, during such longer period that
24
shall have elapsed since the Closing Date) and issued its report thereon and
that such examination (a) 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; (b) included tests relating to automotive loans serviced for
others in accordance with the requirements of the Uniform Single Audit Program
for Mortgage Bankers (the "Program"), to the extent the procedures in such
Program are applicable to the servicing obligations set forth in this Agreement;
and (c) except as described in the report, disclosed no exceptions or errors in
the records relating to automobile, light-duty truck and van loans serviced for
others that, in the firm's opinion, paragraph four of such Program requires such
firm to report.
Such report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 4.12. Servicer Expenses. The Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder, including
fees and disbursements of independent accountants, taxes imposed on the Servicer
and expenses incurred in connection with distributions and reports to
Certificateholders and Noteholders.
SECTION 4.13. Appointment of Subservicer. The Servicer may at any time
appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; and provided, further, that the
Servicer shall remain obligated and be liable to the Issuer, the Owner Trustee,
the Indenture Trustee, the Certificateholders and the Noteholders for the
servicing and administering of the Receivables in accordance with the provisions
hereof without diminution of such obligation and liability by virtue of the
appointment of such subservicer and to the same extent and under the same terms
and conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of the subservicer shall be as agreed between
the Servicer and its subservicer from time to time, and none of the Issuer, the
Owner Trustee, the Indenture Trustee, the Certificateholders or the Noteholders
shall have any responsibility therefor.
SECTION 4.14. Oversight of Servicing.
(a) Commencing on the date of execution of this Agreement and continuing
until the earlier of (i) the termination of the Trust created by the Trust
Agreement and (ii) the appointment of the Backup Servicer as Servicer under this
Agreement, the Servicer shall, on the last day of each calendar month, deliver
25
to the Backup Servicer in the Computer Tape format acceptable to the Backup
Servicer, such information as is necessary to permit the Backup Servicer to
service the Receivables in accordance with the provisions of this Agreement. The
Backup Servicer shall accept and store, but shall not be required to examine,
such information. Upon notice that the Servicer has resigned or upon the removal
of the Servicer under this Agreement, the Backup Servicer shall assume all
responsibilities of the Servicer (or of Indenture Trustee or any other Person
then acting as successor to such Servicer in accordance with Sections 8.01 and
8.02) under this Agreement within thirty days of such notice or removal. The
Backup Servicer shall service the Receivables in accordance with provisions of
this Agreement.
(b) On the date that each Servicer's Certificate is delivered by the
Servicer to the Owner Trustee and Indenture Trustee, the Servicer shall also
deliver a Computer Tape containing detailed information with respect to the
Receivables for the related Collection Period. The Backup Servicer shall
determine that (i) the Servicer's Certificate appears on its face to be complete
and (ii) that amounts credited to and withdrawn from the Trust Accounts and the
balance of such Trust Accounts are the same as the amount set forth in such
Servicer's Certificate. To the extent verifiable using the information contained
in the Servicer's Certificate, the Backup Servicer shall calculate and check
that the calculations made by the Servicer in the Servicer's Certificate are
mathematically accurate.
(c) In the event of any discrepancies or exceptions noted by the Backup
Servicer in the Servicer's Certificate, the Backup Servicer shall, within three
Business Days of its receipt of the Servicer's Certificate, notify the Servicer
of such discrepancies or exceptions. The Servicer shall consult with the Backup
Servicer and use its best efforts to ensure that such Servicer's Certificate is
corrected, and that subsequent Servicer's Certificates are accurate. If such
discrepancies or exceptions cannot be reconciled within 30 days, the Backup
Servicer's interpretation shall prevail for all subsequent Distribution Dates.
(d) The Backup Servicer will not be responsible for delays attributable to
the Servicer's failure to deliver information, defects in the information
supplied by Servicer or other circumstances beyond the control of the Backup
Servicer.
SECTION 4.15. Duties of Backup Servicer.
(a) The Backup Servicer shall perform such duties and only such duties as
are specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Backup Servicer.
26
(b) In the absence of bad faith or negligence on its part, the Backup
Servicer 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 Backup Servicer and conforming to the requirements of this
Agreement.
(c) The Backup Servicer shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if the
repayment of such funds or adequate written indemnity against such risk or
liability is not reasonably assured to it in writing prior to the expenditure or
risk of such funds or incurrence of financial liability.
(d) The Servicer shall indemnify, defend and hold harmless the Backup
Servicer, its agents, officers, directors or employees from and against any
claim, action, loss, damage, penalty, fine, cost, expense, or other liability,
including court costs and reasonable attorney's fees and expenses, incurred as a
result of its acts or omissions or its breach of its own representations made in
this Agreement or the Backup Servicer's performance of its duties under this
Agreement. The right of indemnification provided hereby shall survive the
termination of this Agreement. The Servicer shall not be liable to the Backup
Servicer, under this Section 4.15 or otherwise, for the improper acts,
negligence or bad faith of the Backup Servicer.
ARTICLE V
Trust Accounts; Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Establishment of Trust Accounts. (a) (i) The Servicer, for
the benefit of the Noteholders and the Certificateholders, shall establish
and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "Collection Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of
the Noteholders and the Certificateholders.
(ii) The Servicer, for the benefit of the Noteholders, shall
establish and maintain in the name of the Indenture Trustee 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 Noteholders.
(iii) The Servicer, for the benefit of the Noteholders and the
Certificateholders, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account (the "Reserve Account"),
bearing a designation clearly
27
indicating that the funds deposited therein are held for the benefit of
the Noteholders and the Certificateholders.
(iv) The Servicer, for the benefit of the Noteholders and the
Certificateholders, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account (the "Payahead Account"),
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Noteholders and the Certificateholders.
(v) The Servicer, for the benefit of the Noteholders, the
Certificateholders and NAL, shall establish and maintain in the name of
the Indenture Trustee an Eligible Deposit Account (the "Dealer Reserve
Account") bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Noteholders, the
Certificateholders, the Depositor and NAL.
(b) With respect to the Collection Account, the Note Distribution Account,
the Reserve Account, the Payahead Account and the Dealer Reserve Amount
(collectively the "Trust Accounts") funds on deposit in such Trust Accounts
(other than the Note Distribution Account) shall be invested by the Indenture
Trustee in Eligible Investments. All such Eligible Investments of the Trust Fund
shall be held by the Indenture Trustee for the benefit of the beneficiaries of
such accounts; provided, that on each Payment Determination Date all interest
and other investment income (net of losses and investment expenses) on funds on
deposit in the Trust Accounts (other than the Dealer Reserve Account) shall be
deposited into the Collection Account and shall be deemed to constitute a
portion of the Total Distribution Amount for the related Distribution Date.
Investment income (net of losses and investment expenses) on the Dealer Reserve
Account will be payable on each Distribution Date to the Depositor. Other than
as permitted by each Rating Agency, funds on deposit in the Trust Accounts shall
be invested in Eligible Investments that will mature not later than the Business
Day immediately preceding the next Distribution Date. Funds deposited in a Trust
Account on a day which immediately precedes a Distribution Date are not required
to be invested overnight.
(c) (i) The Indenture Trustee 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 (including all income thereon) and all such funds,
investments, proceeds and income shall be part of the Trust Estate. The
Trust Accounts shall be under the sole dominion and control of the
Indenture Trustee for the benefit of the Noteholders and the
Certificateholders (and in the case of the Dealer Reserve Account, NAL),
as the case may be. If, at any time, any of the Trust Accounts ceases to
be an Eligible Deposit Account, the Indenture Trustee (or the Servicer on
its behalf) shall within 10 Business Days (or such longer period, not to
exceed
28
30 calendar days, as to which each Rating Agency 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.
(ii) With respect to the Trust Account Property, the Indenture
Trustee agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Deposit Accounts,
subject to the last sentence of Section 5.01(c) (i); and each such
Eligible Deposit Account shall be subject to the exclusive custody
and control of the Indenture Trustee, and the Indenture Trustee
shall have sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance
with paragraph (a) of the definition of "Delivery" and shall be
held, pending maturity or disposition, solely by the Indenture
Trustee or a financial intermediary (as such term is defined in
Section 8-313(4) of the UCC) acting solely for the Indenture
Trustee;
(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 Indenture Trustee, 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 VIII of the UCC and that is not governed by
clause (C) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture
Trustee's (or its nominee's) ownership of such security.
(iii) The Servicer shall have the power, revocable by the Indenture
Trustee or by the Owner Trustee with the consent of the Indenture Trustee,
to instruct the Indenture Trustee to make withdrawals and payments from
the Trust Accounts for the purpose of permitting the Servicer or the Owner
Trustee to carry out its respective duties hereunder or permitting the
Indenture Trustee to carry out its duties under the Indenture.
29
(d) The Servicer shall on or prior to each Distribution Date (and prior to
deposits to the Note Distribution Account or the Certificate Distribution
Account) transfer from the Collection Account to the Payahead Account an amount
equal to the increase in the Payahead Balance as described in Section 5.03
received by the Servicer during the related Collection Period or, if the
Payahead Balance decreased during such Collection Period, shall transfer an
amount equal to the amount of such decrease from the Payahead Account to the
Collection Account.
SECTION 5.02. Collections. The Servicer shall remit within two Business
Days of receipt thereof to the Collection Account all payments by or on behalf
of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Liquidation Proceeds and Recoveries, both as collected
during the Collection Period.
SECTION 5.03. Application of Collections. All collections for the
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied first, in the
case of Precomputed Receivables, to the Scheduled Payment and, in the case
of Simple Interest Receivables, to interest and principal in accordance
with the Simple Interest Method. With respect to Precomputed Receivables,
any remaining excess shall be added to the Payahead Balance, and shall be
applied to prepay the Precomputed Receivable (in reduction of the Payahead
Balance as evidenced by a transfer of the net amount of such reduction
from the Payahead Account to the Collection Account), but only if the sum
of such excess and the previous Payahead Balance shall be sufficient to
prepay the Receivable in full. Otherwise, any such remaining excess
payments shall constitute a Payahead (as shall the accumulated amount of
such excess on the Receivables as of the Cut-off Date) and shall increase
the Payahead Balance. With respect to a Precomputed Receivable the related
payment on behalf of which is less than the Scheduled Payment, amounts (to
the extent of the related Payahead Balance) in respect of such deficiency
will be transferred from the Payahead Account to the Collection Account in
accordance with Section 5.01(d).
SECTION 5.04. Additional Deposits. The Servicer and the Depositor shall
deposit or cause to be deposited in the Collection Account the aggregate
Purchase Amount with respect to Purchased Receivables, and the Servicer shall
deposit therein all amounts to be paid under Section 9.01. The Servicer will
deposit the aggregate Purchase Amount with respect to Purchased Receivables in
the Collection Account when such obligations are due.
30
SECTION 5.05. Distributions. (a) On each Payment Determination Date, the
Servicer shall calculate all amounts required to be deposited in the Note
Distribution Account and the Certificate Distribution Account.
(b) On each Distribution Date, the Servicer shall instruct the Indenture
Trustee (based on the information contained in the Servicer's Certificate
delivered on the related Payment Determination Date pursuant to Section 4.09) to
make the following deposits and distributions for receipt by the Servicer or
deposit in the applicable account by 1:00 p.m. (New York time), to the extent of
the Total Distribution Amount, in the following order of priority:
(i) only in the event NAL is not the Servicer, to the Servicer, the
Servicing Fee (and all unpaid Servicing Fees from prior Collection
Periods);
(ii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clause (i), the Noteholders'
Interest Distributable Amount;
(iii) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) and
(ii), the Certificateholders' Interest Distributable Amount;
(iv) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) through (iii), the
Noteholders' Principal Distributable Amount;
(v) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) through
(iv), the Certificateholders' Principal Distributable Amount;
(vi) to the Reserve Account, the Total Distribution Amount remaining
after application of clauses (i) through (v), as and to the extent
provided in Section 5.06;
(vii) for so long as NAL is the Servicer, to the Servicer, from the
Total Distribution Amount remaining after the application of clauses (i)
through (vi), the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods; and
(viii) to the Depositor, any remaining amount.
Notwithstanding that the Notes have been paid in full, the Indenture Trustee
shall continue to maintain the Collection Account hereunder until the
Certificate Balance is reduced to zero.
31
SECTION 5.06. Reserve Account. (a) (i) On the Closing Date, the Owner
Trustee will deposit, on behalf of the Depositor, the Reserve Account Initial
Deposit into the Reserve Account from the net proceeds of the sale of the Notes
and the Certificates.
(ii) If on a Distribution Date (i) the amount on deposit in the
Reserve Account, after any withdrawals therefrom on or prior to such
Distribution Date, is less than the Specified Reserve Account Balance,
there shall be deposited into the Reserve Account on such Distribution
Date pursuant to Section 5.05(b)(vi) the portion of the Total
Distribution Amount on such Distribution Date remaining after payment of
the Servicing Fee (but only in the event NAL is not the Servicer), the
Noteholders' Interest Distributable Amount, the Certificateholders'
Interest Distributable Amount, the Noteholders' Principal Distributable
Amount and the Certificateholders' Principal Distributable Amount (such
amount, the "Excess Spread") until the amount on deposit in the Reserve
Account equals the Specified Reserve Account Balance for such Distribution
Date or (ii) the amount on deposit in the Reserve Account, after any
withdrawals therefrom on or prior to such Distribution Date, is less than
the Trigger Event Reserve Account Balance and a Trigger Event has occurred
and not terminated, there shall be deposited into the Reserve Account on
such Distribution Date pursuant to Section 5.05(b)(vi) the Excess Spread,
if any, for such Distribution Date until the amount on deposit in the
Reserve Account equals the Trigger Event Reserve Account Balance.
(b) Unless a Trigger Event has occurred and has not terminated, if the
amount on deposit in the Reserve Account on any Distribution Date (after giving
effect to all deposits thereto or withdrawals therefrom on such Distribution
Date) is greater than the Specified Reserve Account Balance for such
Distribution Date, the Servicer shall instruct the Indenture Trustee to
distribute the amount of such excess to the Depositor. If a Trigger Event has
occurred and has not terminated, if the amount on deposit in the Reserve Account
on any Distribution Date (after giving effect to all deposits thereto or
withdrawals therefrom on such Distribution Date) is greater than the Trigger
Event Reserve Account Balance for such Distribution date, the Servicer shall
instruct the Indenture Trustee to distribute the amount of such excess to the
Depositor.
(c) In the event that the Noteholders' Interest Distributable Amount for a
Distribution Date exceeds the amount deposited into the Note 'Distribution
Account pursuant to Section 5.05(b)(ii) on such Distribution Date, the Servicer
shall instruct the Indenture Trustee to withdraw from the Reserve Account on
such Distribution Date an amount equal to such excess, to the extent of funds
available therein, and deposit such amount into the Note Distribution Account on
such Distribution Date.
32
(d) In the event that the Certificateholders' Interest Distributable
Amount for a Distribution Date exceeds the amount deposited into the Certificate
Distribution Account pursuant to Section 5.05(b) (iii) on such Distribution
Date, the Servicer shall instruct the Indenture Trustee to withdraw from the
Reserve Account on such Distribution Date an amount equal to such excess, to the
extent of funds available therein after giving effect to paragraph (c) above,
and deposit such amount into the Certificate Distribution Account on such
Distribution Date.
(e) In the event that the Noteholders' Principal Distributable Amount for
a Distribution Date exceeds the amount deposited into the Note Distribution
Account pursuant to Section 5.05(b)(iv) on such Distribution Date, the Servicer
shall instruct the Indenture Trustee to withdraw from the Reserve Account on
such Distribution Date an amount equal to such excess, to the extent of funds
available therein after giving effect to paragraphs (c) and (d) above, and
deposit such amount into the Note Distribution Account on such Distribution
Date.
(f) In the event that the Certificateholders' Principal Distributable
Amount for a Distribution Date exceeds the amount deposited into the Certificate
Distribution Account pursuant to Section 5.05(b)(v) on such Distribution Date,
the Servicer shall instruct the Indenture Trustee to withdraw from the Reserve
Account on such Distribution Date an amount equal to such excess, to the extent
of funds available therein after giving effect to paragraphs (c), (d) and (e)
above, and deposit such amount into the Certificate Distribution Account on such
Distribution Date.
(g) Following the payment in full of the aggregate Outstanding Amount of
the Notes and the Certificate Balance and of all other amounts owing or to be
distributed hereunder or under the Indenture or the Trust Agreement to
Noteholders and Certificateholders and the termination of the Trust, any amount
remaining on deposit in the Reserve Account shall be distributed to the
Depositor.
(h) Upon any distribution to the Depositor of amounts from the Reserve
Fund in accordance with the terms hereof, neither the Noteholders nor the
Certificateholders will have any rights in, or claims to, such amounts.
SECTION 5.07. Statements to Certificateholders and Noteholders. (a) On or
prior to each Distribution Date, the Servicer shall provide to the Indenture
Trustee (with a copy to each Rating Agency and each Paying Agent) for the
Indenture Trustee to forward to each Noteholder of record as of the most recent
Record Date and to the Owner Trustee (with a copy to each Paying Agent) for the
Owner Trustee to forward to each Certificateholder of record as of the most
recent Record Date a statement substantially in the form of Exhibits A and B,
33
respectively, setting forth at least the following information as to the Notes
and the Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal allocable
to the Notes and to the Certificates;
(ii) the amount of such distribution allocable to interest allocable
to the Notes and to the Certificates;
(iii) the Pool Balance as of the close of business on the last day
of the preceding Collection Period;
(iv) the Outstanding Amount of the Notes, the Note Pool Factor, the
Certificate Balance and the Certificate Pool Factor as of the close of
business on the last day of the preceding Collection Period, after giving
effect to payments allocated to principal reported under clause (i) above;
(v) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period;
(vi) the amount of aggregate Realized Losses, if any, with respect
to the related Collection Period;
(vii) the aggregate Principal Balance of Receivables that are 30 to
59 days, 60 to 89 days and 90 days or more delinquent;
(viii) the Average Three Month Delinquency Ratio, the Average Six
Month Repossession Ratio and the Average Six Month Realized Loss Ratio as
of the last day of the related Collection Period;
(ix) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall, if
any, after giving effect to payments on such Distribution Date, and the
changes in such amounts from the preceding statement;
(x) the aggregate Purchase Amounts for Receivables, if any, that
were purchased by NAL or the Servicer during the related Collection
Period;
(xi) the balance, if any, of the Reserve Account after giving effect
to deposits and withdrawals to be made on such Distribution Date, and the
change in such balance from the preceding statement; and
(xii) the aggregate Payahead Balance.
Each amount set forth under clauses (i), (ii), (v) and (ix) above shall be
expressed as a dollar amount per $1,000 of
34
original principal balance of a Certificate or Note, as applicable.
(b) On or prior to the 15th day of each month that is not a month in
which a Distribution Date occurs and on or prior to each Distribution
Date, the Indenture Trustee shall forward to each Noteholder of record and
the Owner Trustee shall forward to each Certificateholder of record the
Servicer's Certificate provided to it pursuant to Section 4.09 (except
that on any Distribution Date information otherwise provided to such
holder pursuant to clause (a) of this Section 5.08 need not have been
included in such certificate).
SECTION 5.08. Transfer of the Notes. In the event any Holder of the Notes
shall wish to transfer such Note, the Servicer shall provide to such Holder and
any prospective transferee designated by such Holder information regarding the
Notes and the Receivables and such other information as shall be necessary to
satisfy the condition to eligibility set forth in Rule 144A(d)(4) for transfer
of any such Note without registration thereof under the Securities Act of 1933,
as amended, pursuant to the exemption from registration provided by Rule 144A.
SECTION 5.09. Dealer Reserve Account. (a) On the Closing Date, the Owner
Trustee will deposit, on behalf of the Depositor, an amount equal to $173,150.76
into the Dealer Reserve Account.
(b) On each Distribution Date, the Servicer shall be entitled to withdraw
from the Dealer Reserve Account for payment to NAL, an amount equal to the
amount payable or paid by NAL to Dealers (other than SF1 and AA) during the
related Collection Period in respect of dealer reserves on the Receivables and
amounts to which NAL may be entitled from such dealer reserves under NAL's
agreements with such Dealers. After payment in full, or the provision for such
payment, of all amounts payable to Dealers (other than SF1 and AA) in respect of
dealer reserves on the Receivables, any funds remaining on deposit in the Dealer
Reserve Account will be paid to the Depositor. Amounts on deposit in the Dealer
Reserve Account will not be available to make payments on the Securities or for
any other purpose other than that set forth above in this clause (b).
35
ARTICLE VI
The Depositor
SECTION 6.01. Representations of Depositor. The Depositor makes the
following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Depositor is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Delaware, with the corporate power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the corporate
power, authority and legal right to acquire and own the Receivables.
(b) Due Qualification. The Depositor is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such qualifications.
(c) Power and Authority. The Depositor has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; the
Depositor has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Issuer, and the Depositor shall have
duly authorized such sale and assignment to the Issuer by all necessary
corporate action; and the execution, delivery and performance of this Agreement
has been duly authorized by the Depositor by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Depositor enforceable in accordance with its terms.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the certificate of
incorporation or bylaws of the Depositor, or any indenture, agreement or other
instrument to which the Depositor 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 or other instrument (other than
pursuant to the Basic Documents); or violate any law or, to the best of the
Depositor's knowledge, any order, rule or regulation applicable
36
to the Depositor of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Depositor or its properties.
(f) No Proceedings. There are no proceedings or investigations pending, or
to the Depositor's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (i) asserting the invalidity
of this Agreement, the Receivables Purchase Agreement, the Indenture or any of
the other Basic Documents, the Notes or the Certificates, (ii) seeking to
prevent the issuance of the Notes or the Certificates or the consummation of any
of the transactions contemplated by this Agreement, the Receivables Purchase
Agreement, the Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement, the Receivables Purchase Agreement, the
Indenture, any of the other Basic Documents, the Notes or the Certificates or
(iv) which might adversely affect the federal or state income tax attributes of
the Notes or the Certificates.
(g) Principal Place of Business. The principal. place of business and
chief executive office of the Depositor are located at the place set forth in
Section 10.03(a) and such location has not changed since the date the Depositor
was incorporated.
(h) Use of Names. The legal name of the Depositor is the name used by it
in this Agreement and the Depositor has not changed its name since the date of
its incorporation and does not have trade names, fictitious names, assumed names
or "doing business" names.
(i) Solvency. The Depositor is solvent and will not become insolvent after
giving effect to the transactions contemplated in this Agreement; the Depositor
is paying its debts, if any, as they become due; the Depositor, after giving
effect to the transactions contemplated in this Agreement, will have adequate
capital to conduct its business.
SECTION 6.02. Corporate Existence. (a) During the term of this Agreement,
the Depositor will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation 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, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
37
(b) During the term of this Agreement, the Depositor shall observe the
applicable legal requirements for the recognition of the Depositor as a legal
entity separate and apart from its Affiliates, including the following:
(i) the Depositor shall maintain corporate records and books of
account separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the Depositor
shall not commingle its assets and funds with those of its Affiliates;
(iii) the Depositor shall hold such appropriate meetings of its
board of directors as are necessary to authorize all the Depositor's
corporate actions required by law to be authorized by the board of
directors, shall keep minutes of such meetings and of meetings of its
stockholder(s) and observe all other customary corporate formalities (and
any successor Depositor not a corporation shall observe similar procedures
in accordance with its governing documents and applicable law);
(iv) the Depositor shall at all times hold itself out to the public
under the Depositor's own name as a legal entity separate and distinct
from its Affiliates;
(v) all transactions and dealings between the Depositor and its
Affiliates will be conducted on an arm's-length basis;
(vi) except as provided for by the Basic Documents, the Depositor
shall not utilize NAL as its agent and shall not agree to act as the agent
of any other Person; and
(vii) the Depositor shall at all times have at least one director
that is an "Independent Director" as such term is defined in the
certificate of incorporation.
SECTION 6.03. Liability of Depositor; Indemnities. (a) The Depositor shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Depositor under this Agreement.
(b) The Depositor shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Certificateholders and the
Noteholders and any of the officers, directors, employees and agents of the
Issuer, the Owner Trustee and the Indenture Trustee from and against any loss,
liability or expense incurred by reason of (i) the Depositor'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 Depositor's or the Issuer's violation of
38
federal or state securities laws in connection with the offering and sale of the
Notes and the Certificates.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee and the termination of
this Agreement and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Depositor 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 Depositor, without interest.
SECTION 6.04. Merger or Consolidation of, or Assumption of the Obligations
of, Depositor. Any Person (a) into which the Depositor may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Depositor shall be a party or (c) which may succeed to the properties and assets
of the Depositor substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Depositor under this Agreement, shall be the successor to the Depositor
hereunder without the execution or filing of any document or any further act by
any of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 3.dl shall have been breached and no Servicer Default, and
no event that, after notice or lapse of time, or both, would become a Servicer
Default shall have occurred and be continuing, (ii) the Depositor shall have
delivered to the Owner Trustee and the Indenture Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, (iii) the Rating Agency
Condition shall have been satisfied with respect to such transaction and (iv)
the Depositor shall have delivered to the Owner Trustee and the Indenture
Trustee an Opinion of Counsel stating that, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary fully to preserve and
protect the interest of the Owner Trustee and Indenture Trustee, respectively,
in the Receivables and reciting the details of such filings, or (B) no such
action shall be necessary to preserve and protect such interests.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with clauses (i), (ii), (iii) and (iv)
above shall be conditions to the consummation of the transactions referred to in
clause (a), (b) or (c) above.
39
SECTION 6.05. Limitation on Liability of Depositor and Others. The
Depositor and any director, officer, employee or agent of the Depositor may rely
in good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor 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 6.06. Depositor May Own Certificates or Notes. The Depositor and
any Affiliate thereof may in its individual or any other capacity become the
owner or pledgee of Certificates or Notes with the same rights as it would have
if it were not the Depositor or an Affiliate thereof, except as expressly
provided herein or in any Basic Document.
SECTION 6.07. Sale of Receivables. The Depositor shall take no actions
inconsistent with the Trust's ownership of the Receivables. The Depositor shall
promptly respond to any third-party inquiries regarding the Receivables by
indicating that ownership thereof has been transferred to the Trust.
ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer. The Servicer makes the
following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the state
of its incorporation, with the corporate power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the corporate power, authority and legal right to acquire, own, sell and
service the Receivables.
(b) Due Qualification. The Servicer is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) shall require such qualifications.
40
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; and
the execution, delivery and performance of this Agreement have been duly
authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer enforceable in accordance with its terms.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof shall not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement or other
instrument to which the Servicer 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 or other instrument (other than this
Agreement); or violate any law or any order, rule or regulation applicable to
the Servicer of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Servicer or its properties.
(f) No Proceedings. There are no proceedings or investigations pending or,
to the Servicer's best knowledge, threatened, before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Servicer or its properties: (i) asserting the invalidity of this
Agreement, the Receivables Purchase Agreement, the Indenture, any of the other
Basic Documents, the Notes or the Certificates, (ii) seeking to prevent the
issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Receivables Purchase Agreement,
the Indenture or any of the other Basic 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, the Receivables Purchase Agreement, the
Indenture, any of the other Basic Documents, the Notes or the Certificates or
(iv) relating to the Servicer and which might adversely affect the federal or
state income tax attributes of the Notes or the Certificates.
(g) No Insolvent Obligors. As of the Cutoff Date, no Obligor on a
Receivable is shown on the Receivable Files as the subject of a bankruptcy
proceeding.
41
SECTION 7.02. Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement:
(a) The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Noteholders, the
Certificateholders, and the Depositor, their respective officers, directors,
employees and agents from and against any and all costs, expenses, losses,
damages, claims and liabilities, arising out of or resulting from the use,
ownership or operation by the Servicer or any Affiliate thereof of a Financed
Vehicle.
(b) The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Backup Servicer and the Depositor and
their respective officers, directors, employees and agents from and against any
taxes that may at any time be asserted against any such Person with respect to
the transactions contemplated herein and in the Basic Documents, 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, and as of the date of, the sale of the
Receivables to the Issuer or the issuance and original sale of the Certificates
and the Notes, or asserted with respect to ownership of the Receivables, or
federal or other income taxes arising out of distributions on or transfers of
the Certificates or the Notes) and costs and expenses in defending against the
same.
(c) The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Depositor, the
Certificateholders and the Noteholders and their respective officers, directors,
employees and agents from and against any and all costs, expenses, losses,
claims, damages and liabilities to the extent that such cost, expense, loss,
claim, damage or liability arose out of, or was imposed upon any such Person
through, the 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.
(d) The Servicer shall indemnify, defend and hold harmless the Owner
Trustee and the Indenture Trustee and their respective officers, directors,
employees and agents from and against 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 herein and in the Trust
Agreement contained, in the case of the Owner Trustee, and in the Indenture
contained, in the case of the Indenture Trustee, except to the extent that such
cost, expense, loss,
42
claim, damage or liability: (i) in the case of the Owner Trustee, shall be due
to the willful misfeasance, bad faith or negligence (except for errors in
judgment) of the Owner Trustee or, in the case of the Indenture Trustee, shall
be due to the willful misfeasance, bad faith or negligence (except for errors in
judgment) of the Indenture Trustee; or (ii) in the case of the Owner Trustee,
shall arise from the breach by the Owner Trustee of any of its representations
or warranties set forth in Section 7.03 of the Trust Agreement.
(e) The Servicer shall pay any and all taxes levied or assessed upon all
or any part of the Owner Trust Estate.
For purposes of this Section, in the event of the termination of the
rights and obligations of NAL (or any successor thereto pursuant to Section
7.03) as Servicer pursuant to Section 8.01, or a resignation by such Servicer
pursuant to this Agreement, such Servicer shall be deemed to be the Servicer
pending appointment of a successor Servicer (other than the Indenture Trustee)
pursuant to Section 8.02.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement and shall include reasonable fees and expenses of counsel and expenses
of litigation. If the Servicer shall have made any indemnity payments pursuant
to this Section and the Person to or on behalf of whom such payments are made
thereafter collects any of such amounts from others, such Person shall promptly
repay such amounts to the Servicer, without interest.
SECTION 7.03. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party, (c) which may succeed to the properties and assets of
the Servicer substantially as a whole or (d) with respect to the Servicer's
obligations hereunder, which is a corporation 50% or more of the voting stock of
which is owned, directly or indirectly, by NAL, which Person executed an
agreement of assumption to perform every obligation of the Servicer hereunder,
shall be the successor to the Servicer under this Agreement without further act
on the part of any of the parties to this Agreement; provided, however, that (i)
immediately after giving effect to such transaction, no Servicer Default and no
event which, after notice or lapse of time, or both, would become a Servicer
Default shall have occurred and be continuing, (ii) the Servicer shall have
delivered to the Owner Trustee and the Indenture Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent provided for in this Agreement relating to
such transaction have been complied with,
43
(iii) the Rating Agency Condition shall have been satisfied with respect to such
transaction, (iv) immediately after giving effect to such transaction, the
successor to the Servicer shall become the Administrator under the
Administration Agreement in accordance with Section 8 of such Agreement and (v)
the Servicer shall have delivered to the Owner Trustee and the Indenture Trustee
an Opinion of Counsel stating that, in the opinion of such counsel, either (A)
all financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Owner Trustee and the Indenture Trustee, respectively, in the
Receivables and reciting the details of such filings or (B) no such action shall
be necessary to preserve and protect such interests. Notwithstanding anything
herein to the contrary, the execution of the foregoing agreement of assumption
and compliance with clauses (i), (ii), (iii), (iv) and (v) above shall be
conditions to the consummation of the transactions referred to in clause (a),
(b) or (c) above.
SECTION 7.04. Limitation on Liability of Servicer and Others. Neither the
Servicer nor any of the directors, officers, employees or agents of the Servicer
shall be under any liability to the Issuer, the Noteholders or the
Certificateholders, except as provided under this Agreement, for any action
taken or for refraining from the taking of any action pursuant to this Agreement
or for errors in judgment; provided, however, that this provision shall not
protect the Servicer or any such person against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties or by reason of reckless disregard of obligations
and duties under this Agreement. The Servicer and any director, officer,
employee or agent of 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 under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its duties to service the Receivables in accordance with this
Agreement and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of this Agreement and the Basic
Documents and the rights and duties of the parties to this Agreement and the
Basic Documents and the interests of the Certificateholders under the Trust
Agreement and the Noteholders under the Indenture.
SECTION 7.05. NAL Not To Resign as Servicer. Subject to the provisions of
Section 7.03, NAL shall not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement except upon a determination that
the performance of its duties under this Agreement shall no longer be
permissible
44
under applicable law. Notice of any such determination permitting the
resignation of NAL shall be communicated to the Owner Trustee and the Indenture
Trustee at the earliest practicable time (and, if such communication is not in
writing, shall be confirmed in writing at the earliest practicable time) and any
such determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Owner Trustee and the Indenture Trustee concurrently with or
promptly after such notice. No such resignation shall become effective until the
Indenture Trustee or a successor Servicer shall (i) have assumed the
responsibilities and obligations of NAL in accordance with Section 8.02 and (ii)
have become the Administrator under the Administration Agreement in accordance
with Section 8 of such Agreement.
SECTION 7.06. Representations of Backup Servicer. The Backup Servicer
makes the following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Backup Servicer is duly organized
and validly existing as a New York banking corporation in good standing under
the laws of the state of its incorporation, with the corporate power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at all
relevant times, and has, the corporate power, authority and legal right to
acquire, own, sell and service the Receivables.
(b) Due Qualification. The Backup Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Backup Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; and
the execution, delivery and performance of this Agreement have been duly
authorized by the Backup Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Backup Servicer enforceable in accordance with its
terms.
45
SECTION 7.07. Merger or Consolidation of, or Assumption of the Obligations
of, Backup Servicer. Any Person (a) into which the Backup Servicer may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Backup Servicer shall be a party, (c) which may succeed to the properties
and assets of the Backup Servicer substantially as a whole or (d) with respect
to the Backup Servicer's obligations hereunder, shall be the successor to the
Backup Servicer under this Agreement without further act on the part of any of
the parties to this Agreement.
SECTION 7.08. Resignation as Backup Servicer. Subject to the provisions of
Section 7.07, the Backup Servicer may resign upon 30 days' written notice to the
Indenture Trustee and the Owner Trustee; provided, however, that no such
resignation shall become effective unless and until a successor reasonably
acceptable to the Indenture Trustee and the Owner Trustee shall have assumed the
responsibilities and obligations of the Backup Servicer and the Rating Agency
Condition shall have been satisfied in connection therewith; provided, further,
that if the Backup Servicer shall have resigned after its determination that the
performance of its duties under this Agreement shall no longer be permissible
under applicable law as evidenced by an Opinion of Counsel to such effect
delivered to the Owner Trustee and the Indenture Trustee, then, in the event a
successor Backup Servicer is not appointed within 30 days after such a
resignation, the Backup Servicer may petition a court for its removal.
ARTICLE VIII
Default
SECTION 8.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deliver or cause to be delivered to the
Owner Trustee or the Indenture Trustee, as applicable, for deposit in any of the
Trust Accounts or the Certificate Distribution Account any required payment or
to direct the Owner Trustee or the Indenture Trustee, as applicable, to make any
required distributions therefrom, which failure continues unremedied for a
period of five Business Days after discovery of such failure by an officer of
the Servicer, or after the date on which written notice of such failure shall
have been given (A) to the Servicer by the Owner Trustee or the Indenture
Trustee, as applicable, or (B) to the Servicer, and to the Owner Trustee and the
Indenture Trustee, as applicable, by the Holders of Notes, evidencing not less
than 25% of the Outstanding Amount of the Notes or, if the Notes have been paid
in full, by Holders of Certificates evidencing not less than 25% of the
outstanding Certificate Balance; or
46
(b) failure by the Servicer duly to observe or to perform in any material
respect any other covenants or agreements of the Servicer set forth in this
Agreement or any other Basic Document, which failure shall (i) materially and
adversely affect the rights of Certificateholders or Noteholders and (ii)
continue unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
(A) to the Servicer by the Owner Trustee or the Indenture Trustee or (B) to the
Servicer, and to the Owner Trustee and the Indenture Trustee by the Holders of
Notes or Certificates, as applicable, evidencing not less than 25% of the
Outstanding Amount of the Notes or 25% of the outstanding Certificate Balance;
or
(c) the occurrence of an Insolvency Event with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Holders of Notes evidencing
not less than 25% of the Outstanding Amount of the Notes, by notice then given
in writing to the Servicer (and to the Indenture Trustee and the Owner Trustee
if given by the Noteholders) may terminate all the rights and obligations (other
than the obligations set forth in Section 7.02 hereof) of the Servicer under
this Agreement. On or after the receipt by the Servicer of such written notice,
all authority and power of the Servicer under this Agreement, whether with
respect to the Notes, the Certificates or the Receivables or otherwise, shall,
without further action, pass to and be vested in the Indenture Trustee or such
successor Servicer as may be appointed under Section 8.02; and, without
limitation, the Indenture Trustee and the Owner Trustee are hereby authorized
and empowered to execute and deliver, for the benefit of the predecessor
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 related documents,
or otherwise. The predecessor Servicer shall cooperate with the successor
Servicer, the Indenture Trustee and the Owner Trustee in effecting the
termination of the responsibilities and rights of the predecessor Servicer under
this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
predecessor Servicer for deposit, or shall thereafter be received by it with
respect to any Receivable. All reasonable costs and expenses (including, without
limitation, attorneys' fees and any expenses relating to the conversion of
computer files) incurred in connection with transferring the Receivable Files to
the successor Servicer and amending this Agreement to reflect such succession as
Servicer pursuant to this Section shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses. Upon
receipt of notice
47
of the occurrence of a Servicer Default, the Owner Trustee shall give notice
thereof to each Rating Agency.
SECTION 8.02. Appointment of Successor. (a) Upon the Servicer's receipt of
notice of termination pursuant to Section 8.01 or the Servicer's resignation in
accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in the case
of termination, only until the date specified in such termination notice or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the later of (i) the date 45 days
from the delivery to the Owner Trustee, the Indenture Trustee and the Backup
Servicer of written notice of such resignation (or written confirmation of such
notice) in accordance with the terms of this Agreement and (ii) the date upon
which the predecessor Servicer shall become unable to act as Servicer, as
specified in the notice of resignation and accompanying Opinion of Counsel. In
the event of the Servicer's termination hereunder, the Indenture Trustee shall
appoint a successor Servicer, and the successor Servicer shall accept its
appointment (including its appointment as Administrator under the Administration
Agreement as set forth in Section 8.02(b)) by a written assumption in form
acceptable to the Owner Trustee and the Indenture Trustee. If the Indenture
Trustee appoints the Backup Servicer as successor Servicer in accordance with
Section 7.03 or 8.01 (after confirmation from each Rating Agency that such
appointment will not result in the withdrawal or downgrade of the then current
ratings of the Notes and the Certificates), the Backup 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 herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof; provided, however,
that the Backup Servicer shall not be liable for any acts or omissions of the
Servicer occurring prior to such succession or for any breach by the Servicer of
any of its representations and warranties contained herein or in any related
document or agreement. Notwithstanding the above, if the Backup Servicer is
legally unable or unwilling to act as Servicer, the Indenture Trustee will
appoint a successor Servicer to act as Servicer, the effectiveness of which
appointment shall be subject to confirmation from each Rating Agency that such
appointment will not result in the withdrawal or downgrade of the then current
ratings of the Notes and the Certificates. As compensation for acting as
successor Servicer, the Backup Servicer shall be entitled to receive the
Servicing Fee. In the event that a successor Servicer has not been appointed at
the time when the predecessor Servicer has ceased to act as Servicer in
accordance with this Section, the Indenture Trustee without further action shall
automatically be appointed the successor Servicer and the Indenture Trustee
shall be entitled to the Servicing Fee. Notwithstanding the above, the Indenture
Trustee shall, if it
48
shall be legally unable so to act, appoint or petition a court of competent
jurisdiction to appoint any established institution, having a net worth of not
less than $50,000,000 and whose regular business shall include the servicing of
automotive receivables, as the successor to the Servicer under this Agreement.
(b) Upon appointment, the successor Servicer (including the Indenture
Trustee acting as successor Servicer) shall (i) be the successor in all respects
to the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto placed on the
predecessor Servicer and shall be entitled to the Servicing Fee and all the
rights granted to the predecessor Servicer by the terms and provisions of this
Agreement and (ii) become the Administrator under the Administration Agreement
in accordance with Section 8 of such Agreement.
(c) The Servicer may not resign unless it is prohibited from serving as
such by law.
SECTION 8.03. Notification to Noteholders and Certificateholders. Upon
any termination of, or appointment of a successor to the Servicer pursuant to
this Article VIII, the Owner Trustee shall give prompt written notice thereof to
Certificateholders, and the Indenture Trustee shall give prompt written notice
thereof to Noteholders and each Rating Agency.
SECTION 8.04. Waiver of Past Defaults. The Holders of Notes evidencing not
less than a majority of the Outstanding Amount of the Notes or the Holders of
Certificates evidencing not less than a majority of the outstanding Certificate
Balance (in the case of any default which does not adversely affect the
Indenture Trustee or the Noteholders) may, on behalf of all Noteholders and
Certificateholders, waive in writing any default by the Servicer in the
performance of its obligations hereunder and its consequences, except a default
in making any required deposits to or payments from any of the Trust Accounts in
accordance with this Agreement or in respect of a covenant or the Servicer or
provision herein that cannot be waived without the consent of each
Securityholder (which event the related waiver will require the approval of the
Holders of all Securities). Upon any such waiver of a past default, such default
shall cease to exist, and any Servicer Default 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.
49
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables. (a) As of the last day
of any Collection Period immediately preceding a Distribution Date as of which
the then outstanding Pool Balance is 5% or less of the Original Pool Balance,
the Servicer shall have the option to purchase the Owner Trust Estate, other
than the Trust Accounts and the Certificate Distribution Account. To exercise
such option, the Servicer shall deposit pursuant to Section 5.04 in the
Collection Account an amount equal to the aggregate Purchase Amount for the
Receivables (including defaulted Receivables), plus the appraised value of any
such other property held by the Trust other than the Trust Accounts and the
Certificate Distribution Account, such value to be determined by an appraiser
mutually agreed upon by the Servicer, the Owner Trustee and the Indenture
Trustee, and shall succeed to all interests in and to the Trust. Notwithstanding
the foregoing, the Servicer shall not be permitted to exercise such option
unless the amount to be deposited in the Collection Account pursuant to the
preceding sentence is greater than or equal to the sum of the Outstanding Amount
of the Notes and the Certificate Balance and all accrued but unpaid interest
(including any overdue interest) thereon to and including the last day of the
Collection Period immediately preceding the redemption date.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.02 of
the Trust Agreement, the Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "Insolvency Proceeds") in the Collection Account. On the
Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Distribution
Date, on the Distribution Date immediately following such deposit), the Servicer
shall instruct the Indenture Trustee to make the following deposits (after the
application on such Distribution Date of the Total Distribution Amount and funds
on deposit in the Reserve Account pursuant to Sections 5.05 and 5.06) from the
Insolvency Proceeds and any funds remaining on deposit in the Reserve Account
(including the proceeds of any sale of investments therein as described in the
following sentence)
(i) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited into
the Note Distribution Account on such Distribution Date;
(ii) to the Certificate Distribution Account, any portion of the
Certificateholders' Interest Distributable
50
Amount not otherwise deposited into the Certificate Distribution Account
on such Distribution Date;
(iii) to the Note Distribution Account, the Outstanding Amount of
the Notes (after giving effect to the reduction in the Outstanding Amount
of the Notes to result from the deposits made in the Note Distribution
Account on such Distribution Date and on prior Distribution Dates); and
(iv) to the Certificate Distribution Account, the Certificate
Balance (after giving effect to the reduction in the Certificate Balance
to result from the deposits made in the Certificate Distribution Account
on such Distribution Date and on prior Distribution Dates).
Any investments on deposit in the Reserve Account or Note Distribution Account
which will not mature on or before such Distribution Date shall be sold by the
Indenture Trustee at such time as will result in the Indenture Trustee receiving
the proceeds from such sale not later than the Payment Determination Date
preceding such Distribution Date. Any Insolvency Proceeds remaining after the
deposits described above shall be paid to the Depositor.
(c) As described in Article 9 of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner Trustee and
the Indenture Trustee as soon as practicable after the Servicer has received
notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement.
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment. This Agreement may be amended by the Depositor,
the Servicer and the Issuer, with the consent of the Indenture Trustee, but
without the consent of any of the Noteholders or the Certificateholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement or for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions in this Agreement or of modifying in any manner the rights
of the Noteholders or the Certificateholders; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel delivered to the Owner
Trustee and the Indenture Trustee, adversely affect in any
51
material respect the interests of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor, the
Servicer and the Issuer, with the consent of the Indenture Trustee, the consent
of the Holders of Notes evidencing not less than a majority of the Outstanding
Amount of the Notes and the consent of the Holders (as defined in the Trust
Agreement) of outstanding Certificates evidencing not less than a majority of
the outstanding Certificate Balance, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; 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 the Certificateholders or (b)
reduce the aforesaid percentage of the Outstanding Amount of the Notes and the
Certificate Balance, the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all the outstanding Notes and
the Holders (as defined in the Trust Agreement) of all the outstanding
Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee and each Rating Agency.
It shall not be necessary for the consent of Certificateholders or
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.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
10.02(i) (1). The Owner Trustee and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's or
the Indenture Trustee's, as applicable, own rights, duties or immunities under
this Agreement or otherwise. No amendment to this Agreement will have any effect
on the rights and obligations of the Backup Servicer hereunder unless the Backup
Servicer shall consent thereto in writing.
SECTION 10.02. Protection of Title to Trust. (a) The Depositor shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all
52
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 of the Indenture Trustee in
the Receivables and in the proceeds thereof. The Depositor shall deliver (or
cause to be delivered) to the Owner Trustee and the Indenture Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither the Depositor 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 ss. 9-402(7) of the UCC,
unless it shall have given the Owner Trustee and the Indenture Trustee at least
five days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements.
(c) Each of the Depositor and the Servicer shall have an obligation to
give the Owner Trustee and the Indenture 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 or new
financing statement. 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 and the Payahead Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables, the Servicer's
master computer records (including any backup archives) that refer to a
Receivable shall indicate clearly the interest of the Issuer and the Indenture
Trustee in such Receivable and that such Receivable is owned by the Issuer and
has been pledged to the Indenture Trustee. Indication of the Issuer's and the
Indenture Trustee's interest in a Receivable shall be deleted from or modified
on the Servicer's computer systems when, and only when, the related Receivable
shall have been paid in full or repurchased.
53
(f) If at any time the Depositor or the Servicer 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 clearly that such Receivable has been sold and is owned by the
Issuer and has been pledged to the Indenture Trustee.
(g) The Servicer shall permit the Indenture Trustee, the Backup Servicer
and their agents at any time during normal business hours to inspect, audit and
make copies of and abstracts from the Servicer's records regarding any
Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee or to
the Indenture Trustee, within five Business Days, 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 Schedule of Receivables and to each of
the Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee:
(1) promptly after the execution and delivery of this Agreement and
of each amendment hereto, an Opinion of Counsel 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 Owner Trustee and the
Indenture 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; 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 Closing 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 Owner Trustee and the Indenture 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.
54
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.
SECTION 10.03. Notices. All demands, notices, communications and
instructions upon or to the Depositor, the Servicer, the Owner Trustee, the
Indenture Trustee or each Rating Agency under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Depositor, to NAL Acceptance Corporation, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Telephone: ▇▇▇-▇▇▇-▇▇▇▇; Fax:
▇▇▇-▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, (b) in the case of the Servicer, to
NAL Acceptance Corporation, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, (c) in the case of the Issuer or the Owner Trustee, at the
Corporate Trust Office (as defined in the Trust Agreement), (d) in the case of
the Indenture Trustee or Backup Servicer, at the Corporate Trust Office, (e) in
the case of the Rating Agencies, to Fitch Investors Service, L.P., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and Duff & ▇▇▇▇▇▇ Credit Rating Co., ▇▇
▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telephone: ▇▇▇-▇▇▇-▇▇▇▇, Fax:
▇▇▇-▇▇▇-▇▇▇▇, Attention: Asset-Backed Research and Monitoring; or, as to each of
the foregoing, at such other address as shall be designated by written notice to
the other parties.
SECTION 10.04. Assignment by the Depositor or the Servicer.
Notwithstanding anything to the contrary contained herein, except as provided in
the remainder of this Section, as provided in Sections 6.04 and 7.03 herein and
as provided in the provisions of this Agreement concerning the resignation of
the Servicer, this Agreement may not be assigned by the Depositor or the
Servicer.
SECTION 10.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Depositor, the Servicer, the Backup
Servicer, the Issuer, the Owner Trustee, the Certificateholders, the Indenture
Trustee and the Noteholders, and 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 10.06. 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.
55
SECTION 10.07. 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 10.08. 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 10.09. 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 10.10. Assignment by Issuer. The Depositor and the Servicer hereby
acknowledge and consent to any mortgage, pledge, assignment and grant of a
security interest by the Issuer to the Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders of all right, title and interest of
the Issuer in, to and under the Receivables and the assignment of any or all of
the Issuer's rights and obligations hereunder to the Indenture Trustee.
SECTION 10.11. Nonpetition Covenants. (a) Notwithstanding any prior
termination of this Agreement, the Servicer, the Backup Servicer and the
Depositor shall not, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Issuer or the Depositor,
acquiesce, petition or otherwise invoke or cause the Issuer or the Depositor to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer or the Depositor under any
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or the Depositor or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the Issuer
or the Depositor.
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
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 beneficial owner of the
Issuer 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
56
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 accepted by Bankers Trust Company, not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company 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.
57
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
NAL AUTO TRUST 1996-4
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Owner Trustee on behalf of the
Trust
By: ________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
AUTORICS II, Inc.,
Depositor
By: ________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President/Finance
NAL ACCEPTANCE CORPORATION, Servicer
By: ________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President/Finance
BANKERS TRUST COMPANY, Backup
Servicer
By: ________________________________
Name:
Title:
Acknowledged and accepted as of the day and year
first above written:
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
By: ________________________________
Name:
Title:
SCHEDULE A
Schedule of Receivables
EXHIBIT A
NAL Acceptance Corporation
NAL Auto Trust 1996-4 Distribution Date Statement to Noteholders
--------------------------------------------------------------------------------
Principal Distribution Amount
($ per $1,000 original principal amount)
Interest Distribution Amount
($ per $1,000 original principal amount)
Pool Balance
Note Balance
Note Pool Factor
Certificate Balance
Servicing Fee
Servicing Fee Per $1,000 original principal amount
Realized Losses
Noteholders' Interest Carryover Shortfall per $1,000 original
principal amount
Noteholders' Principal Carryover Shortfall per $1,000 original
principal amount
Purchase Amounts
Reserve Account Balance
Payahead Balance
Average Three Month Delinquency Ratio
Average Six Month Realized Loss Ratio
Average Six Month Repossession Ratio
Delinquency Trigger Event [YES] [NO]
Repossession Trigger Event [YES] [NO]
Loss Trigger Event [YES] [NO]
Delinquent Receivables
30 days
60 days
90 days
A-1
EXHIBIT B
NAL Acceptance Corporation
NAL Auto Trust 1996-4 Distribution Date Statement to
Certificateholders
--------------------------------------------------------------------------------
Principal Distribution Amount
Principal Per $1,000 Initial Certificate Balance
Interest Distribution Amount
Interest Per $1,000 Initial Certificate Balance
Pool Balance
Note Balance
Note Pool Factor
Certificate Balance
Certificate Pool Factor
Servicing Fee
Servicing Fee Per $1,000 Initial Certificate Balance
Realized Losses
Noteholders' Interest Carryover Shortfall per $1,000 original
Note principal amount
Noteholders' Principal Carryover Shortfall per $1,000 original
Note principal amount
Certificateholders' Interest Carryover Shortfall per $1,000
Initial Certificate Balance
Certificateholders' Principal Carryover Shortfall per $1,000
Initial Certificate Balance
Purchase Amounts
Reserve Account Balance
Payahead Balance
Average Three Month Delinquency Ratio
Average Six Month Realized Loss Ratio
Average Six Month Repossession Ratio
Delinquency Trigger Event [YES] [NO]
Repossession Trigger Event [YES] [NO]
Loss Trigger Event [YES] [NO]
B-1
Delinquent Receivables
30 days
60 days
90 days
--------------------------------------------------------------------------------
B-2
EXHIBIT C
Form of Servicer's Certificate
NAL Acceptance Corporation
NAL Auto Trust 1996-4 Monthly Servicer's Certificate (1)
[___________________, 199__]
Dates Covered: From & Incl. ___________ To & Incl. ___________
I. Collections
Principal Payments Received ............................. $
Interest Payments Received .............................. $
Liquidation Proceeds .................................... $
Recoveries on Previously Liquidated Receivables ......... $
Aggregate Purchase Amount for Purchased Receivables ..... $
Amount Attributable to Interest ....................... $
Amount Attributable to Principal ...................... $
Investment Earnings ..................................... $
Total Collections ....................................... $
II. Distributions*
Total Required Principal Reduction of the Securities $
Principal Distribution Amount
Notes ($________ per $1,000 original principal amount)
Certificates ($____ per $1,000 original principal amount)
Interest Distribution Amount
Notes ($________ per $1,000 original principal amount)
Certificates ($________ per $1,000 original principal amount)
Total Distributable Amount
Notes ($________ per $1,000 original principal amount)
Certificates ($________ per $1,000 original principal amount)
----------
(1) Items that are marked with an * will be delivered quarterly.
C-1
Additional Required Distributions
Servicing Fee ......................................... $
Deposit to the Reserve Account ........................ $
Reserve Account
Withdrawals for this Distribution Date ................ $
Cumulative Withdrawals ................................ $
III. Payahead Account Information
Beginning Period Balance .............................. $
Amounts Deposited into Payahead Account ............... $
Amounts Withdrawn from Payahead Account ............... $
Ending Balance ........................................ $
IV. Pool Balance and Portfolio Information
Beginning End
of Period of Period
Pool Balance .................. $ $
Note Balance* ................. $ $
Note Pool Factor ..............
Certificate Balance* .......... $ $
Certificate Pool Factor*
Remaining Number of Receivables
Weighted Average A/R ..........
Weighted Average Remaining Term
V. Reconciliation of the Reserve Account
Beginning Balance ..................................... $
Withdrawals from Reserve Account ...................... $
Amounts Available for Deposit
to Reserve Account .................................. $
Specified Reserve Account Balance ..................... $
Amounts Deposited to Reserve Account .................. $
Ending Balance ........................................ $
VI. Loss and Delinquency Report Activity
Realized Losses for Collection Period ................. $
Liquidated Receivables $
Aggregate Principal Balance ......................... $
Liquidation Proceeds ................................ $
Recoveries on Previously
Liquidated Receivables ............................ $
Cumulative Realized Losses .......................... $
Delinquency
30-59 days
Principal Amount .................................... $
Number of Receivables ............................... $
C-2
60-89 days
Principal Amount .................................... $
Number of Receivables ...............................
90 days or more
Principal Amount .................................... $
Number of Receivables ...............................
Total Amount
Principal Amount .................................... $
Number of Receivables ...............................
VII. Original Deal Parameter Inputs
Aggregate Principal Balance of the
Receivables as of the Cutoff Date ..................... $
Weighted Average APR of the Receivables
as of the Cutoff Date ................................. %
Weighted Average Remaining Term of the
Receivables as of the Cutoff Date ..................... months
Number of Receivables ...................................
Initial Reserve Account Balance ......................... $
C-3
EXHIBIT D
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(RIGHT SIDE OF FILE)
RISK
NAME: ___________________ CODE: ______________________ ACCOUNT #: ______________
================================================================================
(X) (X)
UNDER EXCEPTIONS INT DOCUMENTATION AUDIT COMMENTS
--------------------------------------------------------------------------------
Application
--------------------------------------------------------------------------------
Credit Report
--------------------------------------------------------------------------------
Explanation
Derogatory Credit
--------------------------------------------------------------------------------
Credit Decision Notification
--------------------------------------------------------------------------------
Investigation Work
A) Home Address Verified
B) Employment Verified
--------------------------------------------------------------------------------
1040's/W-2/Paystubs
--------------------------------------------------------------------------------
Current Telephone ▇▇▇▇ in
Applicant's Name and Address
--------------------------------------------------------------------------------
Reference Sheet (5 included)
--------------------------------------------------------------------------------
Other Stips - Specify
--------------------------------------------------------------------------------
Insurance Confirmation
by NAL Insurance Dept.
--------------------------------------------------------------------------------
Loan/Lease Worksheet
--------------------------------------------------------------------------------
Copy of Funding Check
--------------------------------------------------------------------------------
Collections/Other
Correspondence
--------------------------------------------------------------------------------
Approved Dealer
--------------------------------------------------------------------------------
GE Approval
================================================================================
_______________________________ __________________________________
Signature - Funder Date
_______________________________ __________________________________
Signature - Auditor Date
D-1
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(RIGHT SIDE OF FILE)
RISK
NAME: ___________________ CODE: ______________________ ACCOUNT #: ______________
================================================================================
(X) (X)
UNDER EXCEPTIONS INT DOCUMENTATION AUDIT COMMENTS
--------------------------------------------------------------------------------
Contract:
A) Trade-In/Down Payment
B) Note Rate
C) Term
D) Monthly Payment
E) Add's Approved
F) Dealer Advance Per Approval
--------------------------------------------------------------------------------
Original Assignment
--------------------------------------------------------------------------------
Copy of Application for
Certificate of Title
--------------------------------------------------------------------------------
Certificate of Origin (MSO)(New)
Copy of Title (Used)
--------------------------------------------------------------------------------
Lien Guarantee/
Lien Registration
--------------------------------------------------------------------------------
▇▇▇▇ of Sale /
Buyer's Order Signed
--------------------------------------------------------------------------------
Manufacturers Invoice (New)
--------------------------------------------------------------------------------
Copy Black Book /
NADA Valuation
--------------------------------------------------------------------------------
Odometer Statement (Used)
--------------------------------------------------------------------------------
Photocopy of Driver's License
--------------------------------------------------------------------------------
Add's Documentation
--------------------------------------------------------------------------------
Notice to Cosigner
--------------------------------------------------------------------------------
Signed Disclosure Form for
A & H Insurance (if applicable)
--------------------------------------------------------------------------------
Customer Phone Interview
Correspondence
================================================================================
_______________________________ __________________________________
Signature - Funder Date
_______________________________ __________________________________
Signature - Auditor Date
D-2
EXHIBIT E
Form of Assignment
Reference is made to the Sale and Servicing Agreement dated as of December
9, 1996 (the "Sale and Servicing Agreement") among NAL Auto Trust 1996-4,
Autorics II, Inc. ("Autorics II"), NAL Acceptance Corporation ("NAL") and
Bankers Trust Company. All capitalized terms used herein without definition
shall have the respective meanings specified in the Sale and Servicing
Agreement.
[NAL] [Autorics, Inc.] [Autorics II] hereby assigns to _____________ for
which the Custodian is acting as custodian and bailee under the terms of the
Custodial Agreement all right, title and interest of [NAL] [Autorics, Inc.]
[Autorics II] in and to (but none of [NAL] [Autorics, Inc.] [Autorics II]'s
obligations with respect to)
(1) the Receivables and all moneys received thereon on and after the
Cutoff Date plus all Payaheads as of the Cutoff Date;
(2) the security interests in the Financed Vehicles granted by Obligors
pursuant to the Receivables, any other right to realize upon property securing a
Receivable and any other interest of [NAL] [Autorics, Inc.] [Autorics II] in
such Financed Vehicles including [NAL] [Autorics, Inc.] [Autorics II]'s right,
title and interest in the lien on the Financed Vehicles in the name of the
Depositor's agent, Autorics, Inc., NAL or SF1;
(3) any proceeds with respect to the Receivables from claims on any
Insurance Policies relating to Financed Vehicles or Obligors;
(4) proceeds of any recourse (but none of the obligations) to Dealers on
Receivables;
(5) any Financed Vehicle that shall have secured a Receivable and shall
have been acquired by or on behalf of the Seller, the Depositor, the Servicer,
or the Trust;
(6) the Receivables Files;
(7) all right, title and interest of [Autorics, Inc.] [Autorics II] under
the Receivables Purchase Agreement, including, without limitation, the right of
[Autorics, Inc.] [Autorics II] to cause NAL to purchase Receivables under
certain circumstances;
E-1
(8) the Trust Accounts; and
(9) the proceeds of any and all of the foregoing.
[NAL] [AUTORICS, INC.]
[AUTORICS II, INC.]
By: ________________________________
Name:
Title:
E-2