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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 23, 1997
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NATIONAL FINANCIAL AUTO FUNDING TRUST
(Exact name of registrant as specified in its charter)
DELAWARE 333-28829 9999
(State of organization) (Commission File No.) (Primary Standard Industrial
Classification Code Number)
One Park Place
621 N.W. 53rd Street
Boca Raton, FL 33487
(800) 999-7535
(Address and telephone number of Registrant's principal executive offices)
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Item 5. OTHER EVENTS
Description of the Notes and the Receivables Pool
On July 23, 1997 (the "Closing Date"), National Auto Finance 1997-1
Trust (the "97-1 Trust"), a Delaware business trust formed by National Financial
Auto Funding Trust (the "Funding Trust" or the "Registrant") issued
$66,891,200 aggregate principal amount of Notes designated the National Auto
Finance 1997-1 Trust 6.35% Automobile Receivables-Backed Notes, Series 1997-1
(the "Notes"), pursuant to an Indenture, dated as of June 29, 1997, between the
97-1 Trust and Harris Trust and Savings Bank, as Trustee and Trust Collateral
Agent. The Notes are secured by trust property consisting primarily of a
segregated pool (the "Receivables Pool") of non-prime motor vehicle retail
installment sale contracts (the "Receivables"), all of which are secured by new
or used automobiles, light-duty trucks, vans or minivans financed thereby. The
Receivables Pool consisted as of the Closing Date of Receivables having an
aggregate principal balance as of June 29, 1997 (the "Cut-off Date") of
approximately $66,156,163.54. The 97-1 Trust may acquire certain additional
Receivables on or prior to October 30, 1997 with funds deposited in a
Pre-Funding Account in the amount of approximately $6,689,091.18, which
additional Receivables will also secure the Notes. As of the Cut-off Date, the
Receivables had the characteristics described in the Prospectus dated July 17,
1997 filed with the Commission pursuant to Rule 424(b)(5) of the Securities Act
of 1933, as amended. This Current Report on Form 8-K is being filed to satisfy
an undertaking to file copies of certain agreements executed in connection with
the issuance of the Notes, forms of which agreements were filed as Exhibits to
the Registration Statement.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable.
(b) Not applicable.
(c) Exhibits
Exhibit No. Description
- ----------- -----------
1.1 Underwriting Agreement, dated as of July 23, 1997, among
National Financial Auto Funding Trust, National Auto Finance
Company, Inc. and First Union Capital Markets Corp., as
underwriter.
4.1 Indenture, dated as of June 29, 1997, between Wilmington Trust
Company, as owner trustee of the National Auto Finance 1997-1
Trust, and Harris Trust and Savings Bank, as Indenture Trustee
and Trust Collateral Agent.
4.2 Trust Agreement, dated as of July 21, 1997, between National
Financial Auto Funding Trust and Wilmington Trust Company, as
Trustee.
4.3 Sale and Servicing Agreement, dated as of June 29, 1997, among
National Financial Auto Funding Trust, as Seller, National
Auto Finance 1997-1 Trust,
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National Auto Finance Company, Inc., as Servicer, and Harris
Trust and Savings Bank, as Trust Collateral and Backup
Servicer.
4.4 Note Guaranty Surety Bond, dated as of July 23, 1997 and
delivered by Financial Security Assurance Inc.
10.1 The Purchase and Contribution Agreement, dated as of June 29,
1997, between National Auto Finance Company, Inc. and National
Financial Auto Funding Trust.
10.2 The Sale Agreement, dated as of June 29, 1997, between
National Financial Auto Funding Trust II and National
Financial Auto Funding Trust.
10.3 Indemnification Agreement, dated as of July 23, 1997, among
Financial Security Assurance Inc., National Financial Auto
Funding Trust and First Union Capital Markets Corp.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 26, 1997
NATIONAL FINANCIAL AUTO FUNDING TRUST
By: /s/ Keith B. Stein
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Name: Keith B. Stein
Title: Secretary
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INDEX TO EXHIBITS
Exhibit No. Description
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1.1 Underwriting Agreement, dated as of July 23, 1997, among
National Financial Auto Funding Trust, National Auto Finance
Company, Inc. and First Union Capital Markets Corp., as
underwriter.
4.1 Indenture, dated as of June 29, 1997, between Wilmington Trust
Company, as owner trustee of the National Auto Finance 1997-1
Trust, and Harris Trust and Savings Bank, as Indenture Trustee
and Trust Collateral Agent.
4.2 Trust Agreement, dated as of July 21, 1997, between National
Financial Auto Funding Trust and Wilmington Trust Company, as
Trustee.
4.3 Sale and Servicing Agreement, dated as of June 29, 1997, among
National Financial Auto Funding Trust, as Seller, National
Auto Finance 1997-1 Trust, National Auto Finance Company,
Inc., as Servicer, and Harris Trust and Savings Bank, as Trust
Collateral and Backup Servicer.
4.4 Note Guaranty Surety Bond, dated as of July 23, 1997 and
delivered by Financial Security Assurance Inc.
10.1 The Purchase and Contribution Agreement, dated as of June 29,
1997, between National Auto Finance Company, Inc. and National
Financial Auto Funding Trust.
10.2 The Sale Agreement, dated as of June 29, 1997, between
National Financial Auto Funding Trust II and National
Financial Auto Funding Trust.
10.3 Indemnification Agreement, dated as of July 23, 1997, among
Financial Security Assurance Inc., National Financial Auto
Funding Trust and First Union Capital Markets Corp.
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EXHIBIT 1.1
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$66,891,200
NATIONAL AUTO FINANCE 1997-1 TRUST
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UNDERWRITING AGREEMENT
Dated as of July 23, 1997
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$66,891,200
NATIONAL AUTO FINANCE 1997-1 TRUST
UNDERWRITING AGREEMENT
July 23, 1997
First Union Capital Markets Corp.
One First Union Center, TW-10
Charlotte, NC 28288-0610
Ladies and Gentlemen:
NATIONAL FINANCIAL AUTO FUNDING TRUST, a Delaware business
trust (the "Seller"), hereby agrees with you as follows:
Section 1. Authorization of Notes. The Seller has authorized
the issuance by National Auto Finance 1997-1 Trust (the "Trust") of $66,891,200
of 6.35% Class A Automobile Receivables-Backed Notes, Series 1997-1 (the
"Notes"). The Notes will evidence indebtedness of the Trust to be formed
pursuant to a Trust Agreement, dated as of July 21, 1997 (the "Trust
Agreement"), between the Seller and Wilmington Trust Company, a Delaware
corporation, as owner trustee (the "Owner Trustee"). The Notes will be issued
pursuant to an Indenture, dated as of June 29, 1997 (the "Indenture"), between
the Owner Trustee and Harris Trust and Saving Bank (the "Trustee"). The assets
of the Trust (the "Trust Property") will include a pool of non-prime motor
vehicle retail installment sale contracts (the "Contracts"), all monies paid or
payable thereunder on or after the applicable cut-off date, security interests
in the new and used automobiles, light-duty trucks, vans and minivans financed
by the Contracts, a financial guaranty insurance policy (the "Policy") issued by
Financial Security Assurance ("FSA"), certain bank accounts, all proceeds of the
foregoing, and certain other property. The Seller will be the sole owner of the
Certificates issued by the Trust which evidences a beneficial ownership interest
in certain distributions of the Trust (the "Seller Interest"). The Seller
Interest will be subordinated to the Notes. The Contracts will be serviced by
National Auto Finance Company, Inc. (in such capacity, the "Servicer"), an
affiliate of the Seller, and subserviced initially by Omni Financial Services of
America, Inc. ("OFSA"), a wholly owned subsidiary of World Omni Financial Corp.
("World Omni"). The Notes will be purchased by the Underwriter pursuant to this
Agreement. The Notes will be issued on July 23, 1997 or such other date as we
shall mutually agree upon (the "Closing Date").
The Seller has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
33-80813), including a base prospectus relating to the Notes under the
Securities Act of 1933, as amended (the "1933 Act"). The term "Registration
Statement" means such registration statement as amended to the date of the
Underwriting Agreement. The term "Base Prospectus" means the prospectus included
in the Registration Statement. The term "Prospectus" means the Base Prospectus
together with the prospectus supplement specifically relating to the Notes, as
first filed with the Commission pursuant to Rule 424. The term "Preliminary
Prospectus" means a preliminary prospectus supplement specifically relating to
the Notes together with the Base Prospectus.
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Upon the execution of the Underwriting Agreement and the
authorization by the Underwriter of the release of such Notes, the Underwriter
proposes to offer for sale to the public (each such purchaser, a "Purchaser")
the Notes at the prices and upon the terms set forth in the Prospectus.
Section 2. Appointment of Underwriter. Subject to the terms
and conditions set forth herein, the Seller agrees to issue and sell to First
Union Capital Markets Corp. (the "Underwriter"), and the Underwriter agrees to
purchase from the Seller, at the time and place and at the Purchase Price and in
the manner set forth herein, the entire original principal balance of the Notes.
The "Purchase Price" for the Notes, including the underwriting discount, shall
be equal to $66,685,175.10.
Section 3. Purchase, Sale and Delivery. Payment for the Notes
shall be made by a same day federal funds wire payable to the order of the
Seller upon delivery of the Notes registered in global form to the custodian for
DTC, at the offices of Morrison & Foerster LLP, 1290 Avenue of the Americas, New
York, New York 10104, before 4:00 P.M., New York time, on the Closing Date. The
denominations of the Notes to be delivered and the name in which each Note is to
be registered will be set forth in a notice to be delivered by you to the
Trustee.
Section 4. Representations and Warranties. (a) The Seller
hereby represents and warrants to you that as of the date hereof, unless
otherwise stated:
(i) The Registration Statement including a base prospectus
relating to the Notes and the offering thereof from time to time in
accordance with Rule 415 under the 1933 Act has been filed with the
Commission and such Registration Statement, as amended to the date of
the Underwriting Agreement, has become effective. No stop order
suspending the effectiveness of such Registration Statement has been
issued and no proceeding for that purpose has been initiated or
threatened by the Commission. A prospectus supplement specifically
relating to the Notes will be filed with the Commission pursuant to
Rule 424 under the 1933 Act; provided, however, that a supplement to
the Prospectus prepared pursuant to Section 5(ii) hereof shall be
deemed to have supplemented the Base Prospectus only with respect to
the Notes to which it relates. The conditions to the use of a
registration statement on Form S-3 under the 1933 Act, as set forth in
the General Instructions on Form S-3, and the conditions of Rule 415
under the 1933 Act, have been satisfied with respect to the Seller and
the Trust, as the case may be, and the Registration Statement. There
are no contracts or documents that are required to be filed as exhibits
to the Registration Statement pursuant to the 1933 Act or the rules and
regulations thereunder that have not been so filed.
(ii) On the effective date of the Registration Statement, the
Registration Statement and the Base Prospectus conformed in all
material respects to the requirements of the 1933 Act and the rules and
regulations thereunder, and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; on
the date of the Underwriting Agreement and as of the Closing Date, the
Registration Statement and the Prospectus conform, and as amended or
supplemented, if applicable, will conform in all material respects to
the requirements of the 1933 Act and the rules and regulations
thereunder, and on the date of the Underwriting
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Agreement and as of the Closing Date, neither of such documents
includes any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and neither of such documents as
amended or supplemented, if applicable, will include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the foregoing does not
apply to statements or omissions in any of such documents based upon
written information furnished to the Seller by any Underwriter
specifically for use therein.
(iii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, there has been no material adverse change in
the condition (financial or otherwise), business, properties or results
of operations of the Seller or the Trust, as the case may be, whether
or not arising in the ordinary course of the business.
(iv) Each of the Seller and the Trust, as the case may be, is
a Delaware business trust with full power and authority to own its
properties and conduct its business, as presently conducted, and to
enter into and perform its obligations, as the case may be, under this
Agreement, the Sale Agreement, dated as of June 29, 1997 (the "Sale
Agreement"), by and between National Financial Auto Funding Trust II
("Funding Trust II") and the Seller, the Purchase and Contribution
Agreement, dated as of June 29, 1997 (the "Purchase Agreement"), by and
between the Seller and National Auto Finance Company, Inc. ("NAFI"),
the Insurance and Indemnity Agreement, dated as of July 23, 1997 (the
"Insurance and Indemnity Agreement"), by and among NAFI, the Seller and
FSA, the Spread Account Agreement, dated as of July 23, 1997 (the
"Spread Account Agreement"), by and among the Seller, FSA and the
Trustee (together, the "Transaction Documents") and the Notes.
(v) Each of the Transaction Documents has been duly
authorized, executed and delivered by the Seller or the Trust, as the
case may be, and constitutes a valid and binding agreement of the
Seller or the Trust, as the case may be.
(vi) The Notes will conform in all material respects to the
description thereof contained in the Registration Statement and the
Prospectus and, when issued and delivered pursuant to this Agreement,
will have been duly executed, issued and delivered and will be entitled
to the benefits of the Indenture.
(vii) Neither the transfer and assignment of all of the
Seller's right, title and interest in the Contracts and the Trust
Property to the Trustee, nor the issuance nor the delivery of the
Notes, nor the consummation of any other of the transactions herein
contemplated, nor the fulfillment of the terms of the Notes, the
Transaction Documents or this Agreement, will result in the breach of
any term or provision of the organizational documents of the Seller or
the Trust, as the case may be, or conflict with, result in a breach,
violation or acceleration of or constitute a default under, the terms
of any indenture, mortgage, deed of trust or other agreement or
instrument to which the Seller or the Trust, as the case may be, is a
party or by which it is bound, or result in the creation or imposition
of any lien upon any of its material properties pursuant to the terms
of such indenture, mortgage, deed of trust or other such
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instrument, other than the lien created pursuant to the Sale and
Servicing Agreement, or violate any law, statute, order or regulation
applicable to the Seller or the Trust, as the case may be, of any
court, regulatory body, administrative agency or governmental body
having jurisdiction over the Seller or the Trust, as the case may be,
or any of their properties.
(viii) Neither the Seller nor the Trust, as the case may be,
is subject to or in violation of any statute, order or regulation of
any court, regulatory body, administrative agency or governmental body
having jurisdiction over it or any of its properties, which materially
and adversely affects (A) the ability of the Seller or the Trust, as
the case may be, to perform any of its obligations under the
Transaction Documents, or the ability of the Seller or the Trust, as
the case may be, to perform any of its obligations hereunder, or (B)
the business, operations, financial condition, properties or assets of
the Seller or the Trust, as the case may be, and the Seller or the
Trust, as the case may be, is not a party to, bound by or in breach or
violation of any indenture, mortgage, deed of trust or other agreement
or instrument, which materially and adversely affects the ability of
the Seller or the Trust, as the case may be, to perform any of its
obligations under the Transaction Documents, or the ability of the
Seller or the Trust, as the case may be, to perform any of its
obligations hereunder.
(ix) There are no actions, proceedings or investigations to
which the Seller or the Trust, as the case may be, or any of its
affiliates, is a party pending, or, to the knowledge of the Seller or
Trust, as the case may be, threatened, before any court, regulatory
body, administrative agency or other tribunal or governmental
instrumentality (A) asserting the invalidity of the Transaction
Documents or the Notes, (B) seeking to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated by
the Transaction Documents, (C) which might materially and adversely
affect the performance by the Seller or the Trust, as the case may be,
of its obligations under the Transaction Documents or the Notes, (D)
which might materially and adversely affect the validity or
enforceability of the Transaction Documents or the Notes or (E) which
might adversely affect the federal income tax attributes of the Notes
described in the Prospectus.
(x) Any taxes, fees and other governmental charges arising
from the execution and delivery of Transaction Documents and in
connection with the execution, delivery and issuance of the Notes and
with the execution and delivery of the Contracts, including any
amendments thereto and assignments and/or endorsements thereof have
been paid or will be paid by NAFI or the Seller or the Trust.
(xi) As of the Closing Date and each date of purchase of
Contracts thereafter, each of the Seller and the Trust, as the case may
be, will have good and marketable title to, and will be the sole owner
of record of each Contract free and clear of any lien, mortgage,
pledge, charge, encumbrance, adverse claim or other security interest
except for the security interest granted to the Trustee (collectively,
"Liens").
(xii) As of the Closing Date and each date of purchase of
Contracts thereafter, neither the Seller or the Trust, as the case may
be, nor any Person acting on the Seller's or the Trust's, as the case
may be, behalf will have offered, transferred, pledged, sold or
otherwise disposed of any of its right, title and interest in the
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Contracts, the Sale and Servicing Agreement or the Indenture other than
as contemplated by this Agreement, the Sale and Servicing Agreement and
the Indenture; and upon the execution and delivery of the Sale and
Servicing Agreement and the Indenture and the execution and delivery of
the Notes, the Seller or the Trust, as the case may be, will have taken
all necessary steps to convey good and marketable title to the Notes to
the Underwriter, in each case free and clear of any Liens.
(xiii) Each of the Seller and the Trust, as the case may be,
is unaware of any facts or circumstances that would materially
adversely affect the Seller's or the Trust's, as the case may be,
ability to perform its obligations under the Transaction Documents or
its obligations with respect to the Contracts.
(xiv) Each of the representations and warranties of the Seller
set forth in Section 3.1 and Section 8.1 of the Sale and Servicing
Agreement are true and correct.
(xv) Each of the representations and warranties of NAFI set
forth in Section 9.1 of the Sale and Servicing Agreement and Section
4.1 of the Purchase Agreement are true and correct.
(xvi) There has not been any material adverse change in the
business, operations, financial condition, properties or assets of NAFI
since the financial statements dated March 31, 1997 were delivered to
you. Such financial statements (together with notes and schedules, if
any, thereto) fairly present the financial condition of NAFI, as of the
dates indicated, for the periods specified, in conformity with
generally accepted accounting principles applied on a consistent basis
during such periods, except as indicated therein. Since the date of the
latest audited financial statements (together with the notes and
schedules, if any, thereto) previously delivered to you, NAFI has not
sustained any material loss or interference with its business from
court or governmental action, order or decree, or otherwise, and, there
has not been any material reduction in the partners' capital (as such
terms are used in the audited financial statements of NAFI) or a
material adverse change in the financial condition of NAFI or any
material adverse change, or any development involving a prospective
material adverse change in or affecting the general affairs,
management, financial position or results of operations of NAFI, which
would adversely affect the ability of NAFI to perform its obligations
hereunder or NAFI's ability to perform its obligations under the
Purchase Agreements, the Insurance and Indemnity Agreement, the Amended
and Restated Servicing Agreement, dated as of December 8, 1994, (the
"Amended and Restated Servicing Agreement") by and between NAFI and
World Omni, the Supplement to the Amended and Restated Servicing
Agreement, dated July 23, 1997 (the "Supplement to the Amended and
Restated Servicing Agreement") by and between NAFI and OFSA and the
Sale and Servicing Agreement.
(xvii) The Indenture has been qualified under the Trust
Indenture Act of 1939, as amended.
(xviii) The Trust is not required to be registered under the
Investment Company Act of 1940, as amended.
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Section 5. Covenants of the Seller. The Seller hereby
covenants and agrees with you as follows:
(a) To furnish the Underwriter, without charge, copies of the
Registration Statement and any amendments thereto including exhibits
and as many copies of the Prospectus and any supplements and amendments
thereto as the Underwriter may from time to time reasonably request.
(b) Immediately following the execution of the Underwriting
Agreement, the Seller will prepare a prospectus supplement setting
forth the principal amount, notional amount or stated amount, as
applicable, of the Notes covered thereby, the price at which the Notes
are to be purchased by the Underwriter from the Seller, either the
initial public offering price or prices or the method by which the
price or prices at which the Notes are to be sold will be determined,
the selling concessions and reallowances, if any, any delayed delivery
arrangements, and such other information as the Underwriter and the
Seller deem appropriate in connection with the offering of the Notes,
but the Seller will not file any amendment to the Registration
Statement or any supplement to the Prospectus of which the Underwriter
shall not previously have been advised and furnished with a copy within
a reasonable time prior to the proposed filing or to which the
Underwriter shall have reasonably objected. The Seller will use its
reasonable best efforts to cause any amendment to the Registration
Statement to become effective as promptly as possible. During the time
when a Prospectus is required to be delivered under the 1933 Act, the
Seller will comply so far as it is able with all requirements imposed
upon it by the 1933 Act and the rules and regulations thereunder to the
extent necessary to permit the continuance of sales or of dealings in
the Notes in accordance with the provisions hereof and of the
Prospectus, and the Seller will prepare and file with the Commission,
promptly upon request by the Underwriter, any amendments to the
Registration Statement or supplements to the Prospectus which may be
necessary or advisable in connection with the distribution of the Notes
by the Underwriter, and will use its reasonable best efforts to cause
the same to become effective as promptly as possible. The Seller will
advise the Underwriter, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement or any
amended Registration Statement has become effective or any supplement
to the Prospectus or any amended Prospectus has been filed. The Seller
will advise the Underwriter, promptly after it receives notice or
obtains knowledge thereof, of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus, or the suspension of the qualification of
the Notes for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceeding for any such purpose, or of
any request made by the Commission for the amending or supplementing of
the Registration Statement or the Prospectus or for additional
information, and the Seller will use its reasonable best efforts to
prevent the issuance of any such stop order or any order suspending any
such qualification, and if any such order is issued, to obtain the
lifting thereof as promptly as possible.
(c) If, at any time when a prospectus relating to the Notes is
required to be delivered under the 1933 Act, any event occurs as a
result of which the Prospectus as then amended or supplemented would
include any untrue statement of a material
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fact, or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary for any other reason to amend or supplement the Prospectus to
comply with the 1933 Act, to promptly notify the Underwriter thereof
and upon its request to prepare and file with the Commission, at the
Seller's own expense, an amendment or supplement which will correct
such statement or omission or any amendment which will effect such
compliance.
(d) During the period when a prospectus is required by law to
be delivered in connection with the sale of the Notes pursuant to the
Underwriting Agreement, the Seller will file, on a timely and complete
basis, all documents that are required to be filed by the Seller with
the Commission pursuant to Sections 13, 14, or 15(d) of the 1934 Act.
(e) To qualify the Notes for offer and sale under the
securities or "Blue Sky" laws of such jurisdictions as the Underwriter
shall reasonably request and to pay all expenses (including fees and
disbursements of counsel in the amounts previously agreed to) in
connection with such qualification of the eligibility of the Notes for
investment under the laws of such jurisdictions as the Underwriter may
designate provided that in connection therewith the Seller shall not be
required to qualify to do business or to file a general consent to
service of process in any jurisdiction.
(f) To make generally available to the Seller's security
holders, as soon as practicable, but in any event not later than
eighteen months after the date on which the filing of the Prospectus,
as amended or supplemented, pursuant to Rule 424 under the 1933 Act
first occurs, an earnings statement of the Seller covering a
twelve-month period beginning after the date of the Underwriting
Agreement, which shall satisfy the provisions of Section 11(a) and Rule
158 of the 1933 Act.
(g) The Seller agrees that, so long as the Notes shall be
outstanding, it will deliver to you and each Purchaser upon request,
all monthly servicing reports and any other reports available to the
holders of Notes.
(h) The Seller agrees that any person designated in writing by
you or by any other holder of the Notes may consult with the proper
officials and the Seller shall use its reasonable best efforts to
arrange the cooperation of the officials of its affiliates (including,
without limitation, officials in charge of servicing the Contracts) at
such times and as often as you may reasonably request regarding the
information required to be furnished pursuant to Section 5(g) or
regarding the performance of the Seller's covenants and agreements
contained in this Agreement or the Transaction Documents or regarding
the information required to be furnished pursuant to the Transaction
Documents. In addition, the Seller agrees to provide any further
information and documentation as may reasonably be requested by the
holders of the Notes regarding any of the matters set forth herein or
in the Transaction Documents; it being understood that all such
information and documentation may be subject to appropriate
confidentiality agreements.
Section 6. Conditions of Underwriter Obligation. Your
obligation to act as Underwriter for the Notes on the Closing Date shall be
subject to the accuracy in all material
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respects of the representations and warranties of the Seller and the Trust, as
the case may be, herein and in the Transaction Documents, to the performance by
the Seller and the Trust, as the case may be, in all material respects of its
obligations hereunder, and to the execution and delivery of the Transaction
Documents, the Notes, the Amended and Restated Servicing Agreement, the
Assignment of the Amended and Restated Servicing Agreement from World Omni to
OFSA, dated July 23, 1997, the Supplement to the Amended and Restated Servicing
Agreement, the Custodial Agreement, dated July 23, 1997 by and between the
Trustee and OFSA, by all parties thereto, and to the following additional
conditions:
(a) All actions required to be taken and all filings required
to be made by or on behalf of the Seller and the Trust, as the case may
be, under the 1933 Act and the Securities Exchange Act of 1934, as
amended (the "1934 Act") prior to the sale of the Notes shall have been
duly taken or made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall be in effect; (ii) no proceedings for such
purpose shall be pending before or threatened by the Commission, or by
any authority administering any state securities or "Blue Sky" laws;
(iii) any requests for additional information on the part of the
Commission shall have been complied with to the Underwriter's
reasonable satisfaction, (iv) since the respective dates as of which
information is given in the Registration Statement and the Prospectus
except as otherwise stated therein, there shall have been no material
adverse change in the condition (financial or otherwise), business,
properties or results of operations of the Seller and the Trust, as the
case may be; (v) there are no material actions, suits or proceedings
pending before any court or governmental agency, authority or body or
to the knowledge of the Seller and the Trust, as the case may be,
threatened, affecting the Seller and the Trust, as the case may be, or
the transactions contemplated by the Underwriting Agreement; (vi) each
of the Seller and the Trust, as the case may be, is not in violation of
its charter or its by-laws or in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which it is a party or by which it or its
properties may be bound, which violations or defaults separately or in
the aggregate would have a material adverse effect on the Seller and
the Trust, as the case may be.
(c) Subsequent to the execution of the Underwriting Agreement,
there shall not have occurred any of the following: (i) if at or prior
to the Closing Date, trading in securities on the New York Stock
Exchange shall have been suspended or any material limitation in
trading in securities generally shall have been established on such
exchange, or a banking moratorium shall have been declared by New York
or United States authorities; (ii) if at or prior to the Closing Date,
there shall have been an outbreak or escalation of hostilities between
the United States and any foreign power, or of any other insurrection
or armed conflict involving the United States which results in the
declaration of a national emergency or war, and, in the reasonable
opinion of the Representative, makes it impracticable or inadvisable to
offer or sell the Notes or (iii) if at or prior to the Closing Date, a
general moratorium on commercial banking activities in New York shall
have been declared by either Federal or New York State authorities.
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<PAGE> 10
(d) The representations and warranties of the Seller contained
in Section 4 hereof and of NAFI, the Seller and the Trust in the
Transaction Documents shall be true and correct in all material
respects, and NAFI and the Seller shall have delivered to you
certificates, dated the Closing Date, of an executive officer of NAFI,
acting solely in his capacity as executive officer of NAFI and not in
his individual capacity, to the effect that the signer of such
certificate examined this Agreement, the Transaction Documents, the
Registration Statement and the Prospectus and that: (i) the
representations and warranties of the Seller in Section 4 of this
Agreement and in the Transaction Documents are true and correct in all
material respects, (ii) each of NAFI, the Seller and the Trust have
complied in all material respects with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or prior
to the Closing Date, (iii) nothing has come to his attention that would
lead him to believe that the Registration Statement or the Prospectus
as of the date thereof contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading and (iv) the conditions contained in Section
4(b) have been satisfied. Such certificate shall further state that the
contents thereof constitute representations and warranties of the
Seller to you and each Purchaser as to the matters covered thereby.
(e) You shall have received from Morrison & Foerster LLP, a
favorable opinion, dated the Closing Date and reasonably satisfactory
in form and substance to you and your special counsel. In rendering
such opinion, counsel may rely, to the extent deemed proper and as
stated therein, as to matters of fact on certificates of responsible
officers of NAFI, the Seller, the Trust and public officials. In
rendering such opinion, such counsel may rely to the extent deemed
proper and as stated therein, as to matters of state law of
jurisdictions other than the jurisdictions in which such counsel is
admitted to practice, and opinions of local counsel satisfactory to
your special counsel. Each opinion shall state that it may be relied
upon by the Purchasers and you as if the same had been addressed to
them or to you.
(f) You shall have received from Dewey Ballantine, your
special counsel, a favorable opinion, dated the Closing Date and
reasonably satisfactory in form and substance to you, and NAFI, the
Seller and the Trust shall have furnished to your special counsel such
documents as they may request for the purpose of enabling them to pass
on certain matters.
(g) You shall have received a comfort letter, dated the
Closing Date and satisfactory to you (the "Comfort Letter") from
independent accountants, with respect to the Contracts.
(h) The Notes shall have been rated "AAA" by Standard and
Poor's Ratings Service ("S&P") and "Aaa" by Moody's Investor Services,
Inc. ("Moody's").
(i) The Policy shall have been issued by FSA with respect to
the Notes guaranteeing the payment of the Scheduled Payments under the
Indenture.
(j) You shall have received a certificate of a responsible
officer of FSA stating that the information contained in the sections
of the Prospectus entitled "The
9
<PAGE> 11
Certificate Policy", "The Certificate Insurer" and Appendix A thereto
are true and correct in all material respects.
(k) You shall have received a certificate of a responsible
officer of OFSA stating that the information contained in the Section
of the Prospectus entitled "Omni Financial Services of America, Inc."
is true and correct in all material respects.
(l) You shall have received an opinion of the general counsel
of NAFI, dated the Closing Date and reasonably satisfactory in form and
substance to you and your special counsel.
(m) You shall have received an opinion of counsel to FSA,
dated the Closing Date and reasonably satisfactory in form and
substance to you and your special counsel.
(n) You shall have received an opinion of counsel to the
Trustee dated the Closing Date and reasonably satisfactory in form and
substance to you and your special counsel.
(o) You shall have received an opinion of counsel to OFSA,
dated the Closing Date and reasonably satisfactory in form and
substance to you and your special counsel.
(p) You shall have received an opinion of local Delaware
counsel to the Seller and the Trust, dated the Closing Date, and
reasonably satisfactory in form and substance to you and your special
counsel.
(q) You shall have received an opinion of counsel to the
trustee of the Seller and the Trust, dated the Closing Date and
reasonably satisfactory in form and substance to you and your special
counsel.
(r) You shall have received from counsel in each state in
which 10% or more of the Obligors on the Contracts, by aggregate
principal balance, are located a favorable opinion as to the lack or
necessity of noting the Trust's security interest on the certificates
of title for the Financed Vehicles to maintain its first priority
security interest, subject to certain exceptions and qualifications.
(s) All proceedings in connection with the transactions
contemplated by this Agreement and all documents incident hereto shall
be reasonably satisfactory in form and substance to you and your
special counsel.
(t) You and your special counsel shall have received such
other information, certificates and documents as you or they may
reasonably request.
Section 7. Survival. The Seller agrees that the
representations, warranties and agreements made by it herein, in any certificate
or other instrument delivered pursuant hereto and in the Transaction Documents
shall be deemed to be relied upon by you, notwithstanding any investigation
heretofore or hereafter made by or on behalf of you, and that such
10
<PAGE> 12
representations, warranties and agreements made by the Seller shall survive the
delivery and payment for the Notes.
Section 8. Expenses. In the event that no closing of the sale
of the Notes occurs through no fault of the Seller or because the conditions set
forth in Sections 6(e) and 6(f) have not been met, then the Seller's liability
to the Underwriter shall be limited to the reimbursement of the Underwriter's
expenses incurred through the date of termination for its reasonable
out-of-pocket and incidental expenses. In addition, whether or not the Notes are
issued or sold, the Seller shall pay the reasonable fees and expenses associated
with the transactions contemplated hereby including, without limitation, the
following fees and expenses:
(a) Rating Agency fees payable to S&P and Moody's with respect
to their rating of the Notes;
(b) The fees and expenses of the Seller's and NAFI's counsel
and any special counsel required to be retained;
(c) Fees charged by the firm of independent public accountants
referred to in Section 6(g) for the Comfort Letter;
(d) Reasonable copying costs for the Prospectus;
(e) Legal fees and expenses of Dewey Ballantine, special
counsel to the Underwriter;
(f) Trustee's fees and reasonable fees of counsel to the
Trustee;
(g) Fees and expenses of the Underwriter (including legal fees
and expenses) in connection with compliance with Blue Sky laws;
(h) The Commission's registration fee; and
(i) The expenses of printing and distributing this Agreement,
the Registration Statement, any Preliminary Prospectus, the Prospectus,
any amendments or supplements to the Registration Statement or the
Prospectus.
; provided that the Seller shall not be liable for the fees and expenses of the
Underwriter in the event that this Agreement is terminated without cause by the
Underwriter or if the Underwriter defaults in its obligation to purchase the
Notes hereunder.
Section 9. Indemnification. (a) The Seller will indemnify and
hold harmless the Underwriter against any losses, claims, damages or liabilities
to which the Underwriter may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, or the Registration
Statement or the Prospectus, including any amendment or supplement thereto and
materials incorporated by reference in any of the foregoing documents, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will promptly reimburse the
11
<PAGE> 13
Underwriter for any legal or other expenses (as such expenses are incurred)
reasonably incurred by the Underwriter in connection with investigating,
preparing to defend or defending, or appearing as a third party witness in
connection with, any such action or claim; provided, however, (i) that the
Seller shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Seller by you expressly for use therein and (ii) such indemnity
with respect to any Preliminary Prospectus shall not inure to the benefit of the
Underwriter from whom the Purchaser asserting any such action or claim purchased
the Notes which are the subject thereof if such Purchaser did not receive a copy
of the Prospectus (or the Prospectus as amended or supplemented) at or prior to
the confirmation of sale of such Notes to such Purchaser in any case where such
delivery is required by the Act and the untrue statement or omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Prospectus (or the Prospectus as amended or supplemented) and such corrected
Prospectus was available by the date of such confirmation. The Seller
acknowledges that the Underwriter may enter into one or more dealer agreements
in connection with the offering of the Notes and agrees that the terms of this
Section 9(a) will accrue to the benefit of such dealers.
(b) The Underwriter hereby agrees to indemnify and hold harmless the
Seller and its affiliates, their respective directors, officers, controlling
persons (within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act, if any, agents and employees of the Seller or any of the
Seller's affiliates (collectively, "Seller Indemnified Persons", and
individually, a "Seller Indemnified Person") from and against any and all
claims, liabilities, losses, damages and expenses incurred by any Indemnified
Person (including reasonable fees and disbursements of the Seller's and a Seller
Indemnified Person's counsel) which arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, including
any amendment or supplement thereto and materials incorporated by reference in
any of the foregoing documents, or any other prospectus relating to the Notes,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statements or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Seller by the Underwriter specifically for use
therein and the Underwriter shall reimburse the Seller, its affiliates, and each
of their directors, officers, or controlling persons for any legal and other
expenses reasonably incurred by the Seller, its affiliates, or any such
directors, officers, employees, agents or controlling persons in investigating
or defending or preparing to defend against any such loss, claim, damage,
liability or action.
(c) The Seller acknowledges that the statements set forth
under the caption "Underwriting" in the Prospectus Supplement constitute the
only information furnished to the Seller by or on behalf of any Underwriter for
use in the Registration Statement, any Preliminary Prospectus or the Prospectus,
and the Underwriter represents and warrants that such statements are correct as
to it. Furthermore, the Underwriter will not be responsible for
12
<PAGE> 14
any claims liabilities, losses, damages, or expenses which are finally
judicially determined to have resulted primarily from the Seller's or NAFI's bad
faith or negligence.
(d) In order to provide for just and equitable contribution,
if a claim for indemnification is made pursuant to these provisions but is found
in a final judgment by a court of competent jurisdiction (not subject to further
appeal) that such indemnification is not available for any reason (except, with
respect to indemnification sought solely pursuant to clause (b) of the first
paragraph hereof, for the reasons specified in the second sentence thereof),
even though the express provisions hereof provide for indemnification in such
case, then the Seller or the Underwriter as the case may be shall contribute to
such claim, liability, loss, damage or expense for which such indemnification or
reimbursement is held unavailable in such proportion as is appropriate to
reflect the relative benefits to the Seller or the Underwriter as the case may
be in connection with the transactions contemplated by the engagement. The
relative benefits received by the Seller or the Underwriter as the case may be
shall be deemed to be in the same proportion as the total net proceeds from the
placement of securities (before deducting expenses) received by the Seller or
the Underwriter as the case may be. The Seller and the Underwriter agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation other than described above.
(e) The foregoing right to indemnity and contribution shall be
in addition to any rights that any party or Underwriter Indemnified Person or
Seller Indemnified Person may have at common law or otherwise and shall remain
in full force and effect following the completion or any termination of your
engagement. Each party hereby consents to personal jurisdiction and to service
and venue in any court in which any claim which is subject to this agreement is
brought against any Underwriter Indemnified Person or Seller Indemnified Person.
Section 10. Termination.
(a) This Agreement may be terminated by you at any time upon the giving
of notice prior to the Closing Date: (A) if there has been, since the respective
dates as of which information is given in the Registration Statement or the
Prospectus, any material adverse change in the condition (financial or
otherwise), of NAFI or the Seller or in the business, properties or results of
operations of NAFI or the Seller, whether or not arising in the ordinary course
of business, or (B) if there has occurred any outbreak or escalation of
hostilities or other calamity or crisis the effect of which on the financial
markets of the United States is such as to make it, in your reasonable judgment,
impracticable to market the Notes or enforce contracts for the sale of the
Notes, or (C) if trading generally on either the American Stock Exchange or the
New York Stock Exchange has been suspended, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities have been
required, by either of said exchanges or by order of the Securities and Exchange
Commission or any other governmental authority, or (D) if a banking moratorium
has been declared by either federal or New York authorities. In the event of any
such termination, no party will have any liability to any other party hereto,
except as otherwise provided in Section 8 or 9 hereof.
(b) This Agreement may not be terminated by the Seller without the
written consent of the Underwriter until after December 31, 1997.
13
<PAGE> 15
(c) Notwithstanding anything herein to the contrary, in the event the
Seller does not perform any obligation under this Agreement or any
representation and warranty hereunder is incomplete or inaccurate in any
material respect, this Agreement and all of the Underwriter's obligations
hereunder may be immediately cancelled by the Underwriter by notice thereof to
the Seller. Any such cancellation shall be without liability of any party to any
other party except that the provisions of Sections 8 and 9 hereof shall survive
any such cancellation.
Section 11. Survival. The provisions of Section 5(g) and
Section 9 of this Agreement shall survive the termination of this Agreement.
Section 12. Notices. All communications provided for or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered to or mailed by certified or registered mail,
postage prepaid, or transmitted by facsimile and confirmed by a similar mailed
writing, if to you, addressed to you, at the address first stated in this
Agreement, or to such other address as you may designate in writing to the
Seller and, if to the Seller, addressed to the Seller at One Park Place, 621
N.W. 53rd Street, Boca Raton, Florida 33487 or to such other address as the
Seller may have designated in writing to you.
Section 13. Successors. This Agreement will inure to the
benefit of and be binding upon the Seller and its successors and assigns and you
and your successors and assigns, except that no Purchaser will be bound by any
part of this Agreement. No other person will have any right or obligation
hereunder, except that the provisions of this Agreement, including, without
limitation, the representations and warranties and the covenants and agreements
of the Seller contained herein are intended to be for the benefit of all
Purchasers and shall be enforceable by any such Purchaser, whether or not an
express assignment to such Purchaser of rights under this Agreement has been
made by you, any intervening Purchaser or any of your or their successors and
assigns.
Section 14. Entire Agreement. This Agreement and the documents
referred to herein and to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties.
Section 15. Miscellaneous. This Agreement may be executed in
two or more counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
Section 16. Defined Terms. Capitalized terms used herein but
not defined herein shall have the meaning ascribed to them in the Sale and
Servicing Agreement and/or the Indenture.
Section 17. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL. (A) THIS AGREEMENT SHALL BE GOVERNED BY AND
14
<PAGE> 16
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF NEW YORK.
(B) THE UNDERWRITER AND THE SELLER HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK, AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE RESPECTIVE
ADDRESS SET FORTH HEREIN AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED
FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE
PREPAID. THE UNDERWRITER AND THE SELLER EACH HEREBY WAIVE ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT
OF EITHER THE UNDERWRITER OR THE SELLER, AS THE CASE MAY BE, TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT ITS RIGHT TO BRING ANY
ACTION OR PROCEEDING AGAINST THE UNDERWRITER OR ITS PROPERTY OR THE SELLER OR
ITS PROPERTY IN THE COURT OF ANY OTHER JURISDICTION.
(C) THE UNDERWRITER AND THE SELLER EACH HEREBY WAIVE ANY RIGHT
TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 18. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Chase Manhattan Bank Delaware ("Chase Delaware"), not
individually or personally but solely as trustee of the Seller ("Seller's
Trustee"), in the exercise of the powers and authority conferred and vested in
it, (b) each of the representations, undertakings and agreements herein made on
the part of the Seller or the Seller's Trustee is made and intended not as
personal representations, undertakings and agreements by Chase Delaware but is
made and intended for the purpose for binding only the Seller, (c) nothing
herein contained shall be construed as creating any liability on Chase Delaware,
individually or personally, to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly waived by the
Seller, NAFI and by any Person claiming by, through or under the Seller and NAFI
and (d) under no circumstances shall Chase Delaware be personally liable for the
payment of any indebtedness or expenses of the Seller or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Seller under this Agreement.
15
<PAGE> 17
If you are in agreement with the foregoing, please sign a
counterpart hereof and return the same to that company, whereupon this Agreement
shall become a binding agreement between you and the Seller.
Very truly yours,
NATIONAL FINANCIAL AUTO
FUNDING TRUST, as Seller
By: CHASE MANHATTAN BANK
DELAWARE, not in its individual
capacity but solely as Trustee of the
National Financial Auto Funding Trust
By:
--------------------------------------
Name:
Title:
BY AFFIXING ITS SIGNATURE HERETO, NATIONAL AUTO FINANCE
COMPANY, INC. ALSO HEREBY AGREES TO BE JOINTLY AND SEVERALLY LIABLE FOR THE
OBLIGATIONS OF NATIONAL FINANCIAL AUTO FUNDING TRUST AND BE BOUND BY SECTION 17
OF THIS AGREEMENT AS IF SET FORTH HEREIN IN REGARD TO IT.
NATIONAL AUTO FINANCE COMPANY, INC.
By:
--------------------------------------
Name:
Title:
The foregoing Agreement is
hereby accepted and entered
into as of the date hereof.
FIRST UNION CAPITAL
MARKETS CORP.
By:
--------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.1
================================================================================
NATIONAL AUTO FINANCE 1997-1 TRUST
6.35% AUTOMOBILE RECEIVABLES-BACKED NOTES
----------------------------------
INDENTURE
DATED AS OF JUNE 29, 1997
----------------------------------
HARRIS TRUST AND SAVINGS BANK
INDENTURE TRUSTEE AND TRUST COLLATERAL AGENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions..................................................2
SECTION 1.2 Incorporation by Reference of the Trust Indenture Act........9
SECTION 1.3 Rules of Construction........................................9
SECTION 1.4 Action by or Consent of Noteholders.........................10
SECTION 1.5 Material Adverse Effect.....................................10
SECTION 1.6 Conflict with TIA...........................................10
ARTICLE II
THE NOTES
SECTION 2.1 Form........................................................10
SECTION 2.2 Execution, Authentication and Delivery......................10
SECTION 2.3 Temporary Notes.............................................11
SECTION 2.4 Registration; Registration of Transfer and Exchange.........11
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes..................13
SECTION 2.6 Persons Deemed Owner........................................14
SECTION 2.7 Payment of Principal and Interest; Defaulted Interest.......14
SECTION 2.8 Cancellation................................................15
SECTION 2.9 Release of Collateral.......................................15
SECTION 2.10 Book-Entry Notes............................................16
SECTION 2.11 Notices to Clearing Agency..................................16
SECTION 2.12 Definitive Notes............................................17
ARTICLE III
COVENANTS
SECTION 3.1 Payment of Principal and Interest...........................17
SECTION 3.2 Maintenance of Office or Agency.............................17
SECTION 3.3 Money for Payments to be Held in Trust......................18
SECTION 3.4 Existence...................................................19
SECTION 3.5 Protection of Trust Property................................19
SECTION 3.6 Opinions as to Trust Property...............................20
SECTION 3.7 Performance of Obligations; Servicing of Receivables........21
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<PAGE> 3
SECTION 3.8 Negative Covenants..........................................22
SECTION 3.9 Annual Statement as to Compliance...........................22
SECTION 3.10 Trust May Consolidate, Etc. Only on Certain Terms...........23
SECTION 3.11 [Reserved]..................................................23
SECTION 3.12 No Other Business...........................................23
SECTION 3.13 No Borrowing................................................23
SECTION 3.14 Servicer's Obligations......................................23
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities...........23
SECTION 3.16 Capital Expenditures........................................23
SECTION 3.17 Compliance with Laws........................................23
SECTION 3.18 Restricted Payments.........................................23
SECTION 3.19 Notice of Events of Default.................................24
SECTION 3.20 Further Instruments and Acts................................24
SECTION 3.21 Amendments of Sale and Servicing Agreement and
Trust Agreement.............................................24
SECTION 3.22 Income Tax Characterization.................................24
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture.....................24
SECTION 4.2 Application of Trust Money..................................26
SECTION 4.3 Repayment of Monies Held by Note Paying Agent...............26
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default...........................................26
SECTION 5.2 Rights Upon Event of Default................................28
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee........................................29
SECTION 5.4 Remedies....................................................32
SECTION 5.5 Optional Preservation of the Receivables....................33
SECTION 5.6 Priorities..................................................33
SECTION 5.7 Limitation of Suits.........................................34
SECTION 5.8 Unconditional Rights of Noteholders To Receive
Principal and Interest......................................35
SECTION 5.9 Restoration of Rights and Remedies..........................35
SECTION 5.10 Rights and Remedies Cumulative..............................36
SECTION 5.11 Delay or Omission Not a Waiver..............................36
SECTION 5.12 Control by Noteholders......................................36
SECTION 5.13 Waiver of Past Defaults.....................................37
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<PAGE> 4
SECTION 5.14 Undertaking for Costs.......................................37
SECTION 5.15 Waiver of Stay or Extension Laws............................37
SECTION 5.16 Action on Notes.............................................37
SECTION 5.17 Performance and Enforcement of Certain Obligations..........38
SECTION 5.18 Subrogation.................................................38
SECTION 5.19 Preference Claims...........................................39
ARTICLE VI
THE INDENTURE TRUSTEE AND THE TRUST COLLATERAL AGENT
SECTION 6.1 Duties of Indenture Trustee.................................39
SECTION 6.2 Rights of Indenture Trustee and the Trust
Collateral Agent............................................42
SECTION 6.3 Individual Rights of Indenture Trustee......................43
SECTION 6.4 Indenture Trustee's Disclaimer..............................43
SECTION 6.5 Notice of Defaults..........................................43
SECTION 6.6 Reports by Indenture Trustee to Holders.....................43
SECTION 6.7 Compensation and Indemnity..................................43
SECTION 6.8 Replacement of Indenture Trustee............................44
SECTION 6.9 Successor Indenture Trustee by Merger.......................46
SECTION 6.10 Appointment of Co-Indenture Trustee or
Separate Indenture Trustee..................................46
SECTION 6.11 Eligibility: Disqualification...............................47
SECTION 6.12 Preferential Collection of Claims Against Trust.............48
SECTION 6.13 Appointment and Powers......................................48
SECTION 6.14 Performance of Duties.......................................48
SECTION 6.15 Limitation on Liability.....................................48
SECTION 6.16 Reliance Upon Documents.....................................49
SECTION 6.17 Successor Trust Collateral Agent............................49
SECTION 6.18 Compensation................................................50
SECTION 6.19 Representations and Warranties of the Indenture
Trustee and the Trust Collateral Agent......................51
SECTION 6.20 Waiver of Setoffs...........................................51
SECTION 6.21 Control by the Controlling Party............................51
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 Trust To Furnish To Indenture Trustee Names and
Addresses of Noteholders....................................52
SECTION 7.2 Preservation of Information; Communications to
Noteholders.................................................52
SECTION 7.3 Reports by Trust............................................52
SECTION 7.4 Reports by Indenture Trustee................................53
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ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 Collection of Money.........................................53
SECTION 8.2 Release of Trust Property...................................53
SECTION 8.3 Opinion of Counsel..........................................54
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders......54
SECTION 9.2 Supplemental Indentures with Consent of Noteholders.........55
SECTION 9.3 Execution of Supplemental Indentures........................57
SECTION 9.4 Effect of Supplemental Indenture............................57
SECTION 9.5 Conformity With Trust Indenture Act.........................57
SECTION 9.6 Reference in Notes to Supplemental Indentures...............57
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1 Redemption..................................................58
SECTION 10.2 Form of Redemption Notice...................................58
SECTION 10.3 Notes Payable on Redemption Date............................59
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and Opinions, etc...................59
SECTION 11.2 Form of Documents Delivered to Indenture Trustee............61
SECTION 11.3 Acts of Noteholders.........................................62
SECTION 11.4 Notices, etc. to Indenture Trustee, Trust and
Rating Agencies.............................................62
SECTION 11.5 Notices to Noteholders; Waiver..............................63
SECTION 11.6 Alternate Payment and Notice Provisions.....................64
SECTION 11.7 Conflict with Trust Indenture Act...........................64
SECTION 11.8 Effect of Headings and Table of Contents....................64
SECTION 11.9 Successors and Assigns......................................64
SECTION 11.10 Separability................................................65
SECTION 11.11 Benefits of Indenture.......................................65
SECTION 11.12 Legal Holidays..............................................65
SECTION 11.13 Governing Law...............................................65
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SECTION 11.14 Counterparts................................................65
SECTION 11.15 Recording of Indenture......................................65
SECTION 11.16 Trust Obligation............................................65
SECTION 11.17 No Petition.................................................66
SECTION 11.18 Inspection..................................................66
SECTION 11.19 Limitation of Liability.....................................66
EXHIBIT
Exhibit A -- Form of Note
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INDENTURE dated as of June 29, 1997, between NATIONAL AUTO FINANCE
1997-1 TRUST, a Delaware business trust (the "Trust"), and HARRIS TRUST AND
SAVINGS BANK, an Illinois banking corporation, as indenture trustee (the
"Indenture Trustee") and Trust Collateral Agent.
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Trust's 6.35% Automobile
Receivables-Backed Notes (the "Notes"):
As security for the payment and performance by the Trust of its
obligations under this Indenture and the Notes, the Trust has agreed to assign
the Collateral (as defined below) to the Trust Collateral Agent for the benefit
of the Indenture Trustee on behalf of the Noteholders.
Financial Security Assurance Inc. (the "Insurer") has issued and
delivered a financial guaranty insurance policy, dated the Closing Date (with
endorsements, the "Note Policy"), pursuant to which the Insurer guarantees
Scheduled Payments, as defined in the Note Policy.
As an inducement to the Insurer to issue and deliver the Note Policy,
the Trust and the Insurer have executed and delivered the Insurance and
Indemnity Agreement, dated as of July 23, 1997 (as amended from time to time,
the "Insurance Agreement"), among the Insurer, the Trust, National Auto Finance
Company, Inc. ("NAFI") and National Financial Auto Funding Trust.
As an additional inducement to the Insurer to issue the Note Policy,
and as security for the performance by the Trust of the Insurer Trust Secured
Obligations and as security for the performance by the Trust of the Trustee
Trust Secured Obligations, the Trust has agreed to assign the Collateral (as
defined below) to the Trust Collateral Agent for the benefit of the Trust
Secured Parties, as their respective interests may appear.
GRANTING CLAUSE
The Trust hereby Grants to the Trust Collateral Agent at the Closing
Date, for the benefit of the Trust Secured Parties all of the Trust's right,
title and interest in and to (a) the Initial Receivables and all monies received
thereon on or after the Initial Cutoff Date (including amounts due on or before
the Initial Cutoff Date but received by NAFI, the Seller or the Issuer on or
after the Initial Cutoff Date); (b) any proceeds and the right to receive
proceeds with respect to the Initial Receivables from claims on any physical
damage, credit life or disability insurance policies or other insurance policies
covering Financed Vehicles or Obligors, including rebates of insurance premiums
relating to the Receivables and any proceeds from the liquidation of the Initial
Receivables; (c) all rights against Dealers pursuant to Dealer Agreements or
against Originators pursuant to Originator Agreements; (d) the related
Receivables Files and any and all other documents that NAFI keeps on file in
accordance with its customary procedures relating to the Receivables, the
Obligors or the Financed Vehicles; (e) property (including the right to receive
future Liquidation Proceeds) that secures a Receivable and that has been
acquired by or
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on behalf of the Trust pursuant to liquidation of such Receivable; (f) all funds
on deposit from time to time in the Trust Accounts (less all investments and
proceeds thereof), and all rights of the Issuer therein; (g) the rights and
benefits, but none of its obligations or burdens, under the Conveyance
Agreements, including the delivery requirements, representations and warranties
and the cure and repurchase obligations of NAFI under the Purchase Agreement;
and (h) the proceeds of any and all of the foregoing.
The foregoing Grant is made in trust to the Trust Collateral Agent, for
the benefit first, of the Indenture Trustee on behalf of the Holders of the
Notes, and second, for the benefit of the Insurer. The Trust Collateral Agent
hereby acknowledges such Grant, accepts the trusts under this Indenture.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Definitions. Except as otherwise specified herein, the following terms
have the respective meanings set forth below for all purposes of this Indenture.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to them in the Sale and Servicing Agreement.
SECTION 1.1
Act: As defined in Section 11.3(a) hereof.
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. A Person shall not be
deemed to be an Affiliate of any person solely because such other Person has the
contractual right or obligation to manage such Person unless such other Person
controls such Person through equity ownership or otherwise.
Authorized Officer: With respect to the Trust and the Servicer, any
officer or agent acting pursuant to a power of attorney of the Owner Trustee or
the Servicer, as applicable, who is authorized to act for the Owner Trustee or
the Servicer, as applicable, in matters relating to the Trust and who is
identified on the list of Authorized Officers delivered by each of the Owner
Trustee and the Servicer to the Indenture Trustee on the Closing Date (as such
list may be modified or supplemented from time to time thereafter).
Book Entry Notes: A beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.10 hereof.
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Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which commercial banks in Florida, Illinois, Delaware or the state of New
York are authorized or obligated by law, executive order or governmental decree
to be closed.
Certificate of Trust: The certificate of trust of the Trust
substantially in the form of Exhibit B to the Trust Agreement.
Clearing Agency: An organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
Clearing Agency Participant: A broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
Closing Date: July 23, 1997.
Collateral: As defined in the Granting Clause hereof.
Controlling Party: The Insurer, so long as no Insurer Default shall
have occurred and be continuing, and the Indenture Trustee, for so long as an
Insurer Default shall have occurred and be continuing.
Conveyance Agreements: The Sale and Servicing Agreement, the Sale
Agreement, the Assignment Agreement and the Purchase and Contribution Agreement.
Corporate Trust Office: The principal office of the Indenture Trustee
at which at any particular time its corporate trust business shall be
administered which office at date of the execution of this Agreement is located
at 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606, Attention:
Indenture Trust Division or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, the Insurer, the
Servicer and the Trust, or the principal corporate trust office of any successor
Indenture Trustee (the address of which the successor Indenture Trustee will
notify the Noteholders and the Trust).
Default: Any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.
Definitive Notes: As defined in Section 2.10 hereof.
Event of Default: As defined in Section 5.1 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Final Scheduled Distribution Date: The Distribution Date occurring in
November, 2003.
Grant: Means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other
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agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of the Collateral and all other
monies payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring proceedings in the name of the Granting party or otherwise and generally
to do and receive anything that the Granting party is or may be entitled to door
receive thereunder or with respect thereto.
Holder or Noteholder: The Person in whose name a Note is registered on
the Note Register.
Indebtedness: With respect to any Person at any time, (a) indebtedness
or liability of such Person for borrowed money whether or not evidenced by
bonds, debentures, notes or other instruments, or for the deferred purchase
price of property or services (including trade obligations); (b) obligations of
such Person as lessee under leases which should have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases; (c) current liabilities of such Person in respect of unfunded vested
benefits under plans covered by Title IV of ERISA; (d) obligations issued for or
liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
Indenture: This Indenture as amended and supplemented from time to
time.
Indenture Trustee: Harris Trust and Savings Bank, an Illinois banking
corporation, not in its individual capacity but as indenture trustee under this
Indenture, or any successor indenture trustee under this Indenture.
Independent: When used with respect to any specified Person, that the
person (a) is in fact independent of the Trust, any other obligor upon the
Notes, the Seller and any Affiliate of any of the foregoing persons, (b) does
not have any direct financial interest or any material in direct financial
interest in the Trust, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Trust, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
Independent Certificate: A certificate or opinion to be delivered to
the Trust Collateral Agent and the Indenture Trustee under the circumstances
described in, and otherwise complying with, the applicable requirements of
Section 11.1 hereof, prepared by an Independent appraiser or other expert
appointed pursuant to a Trust Order and approved by the Trust Collateral Agent
in the exercise of reasonable care, and such opinion or certificate shall state
that the signer has
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read the definition of "Independent" in this Indenture and that the signer is
Independent within the meaning thereof.
Initial Cut-off Date: June 29, 1997.
Insurance Agreement Indenture Cross Default: As defined in the
Insurance Agreement.
Insurer Trust Secured Obligations: All amounts and obligations which
the Trust may at any time owe to or on behalf of the Insurer under this
Indenture, the Insurance Agreement or any other Transaction Document.
Interest Rate: 6.35% per annum, computed on the basis of a 360-day year
consisting of twelve 30-day months.
Internal Revenue Code: The Internal Revenue Code of 1986, as amended
from time to time, and Treasury Regulations promulgated thereunder.
Note or Notes: The 6.35% Automobile Receivables-Backed Notes,
substantially in the form of Exhibit A.
Note Owner: With respect to a Book-Entry Note, the person who is the
owner of such Book-Entry Note, as reflected on the books of the Clearing Agency,
or on the books of a Person maintaining an account with such Clearing Agency
(directly as a Clearing Agency Participant or as an indirect participant, in
each case in accordance with the rules of such Clearing Agency).
Note Paying Agent The Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11
and is authorized by the Trust to make payments to and distributions from the
Collection Account and the Note Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Trust.
Note Policy: The insurance policy issued by the Insurer with respect to
the Notes, including any endorsements thereto.
Note Policy Claim Amount: As defined in the Sale and Serving
Agreement.
Note Prepayment Amount: As of the Distribution Date on or immediately
following the last day of the Pre-Funding Period, after giving effect to any
transfer of Additional Receivables on such date, an amount equal to the
remaining Pre-Funded Amount in the Pre-Funding Account on the Mandatory
Redemption Date.
Note Register and Note Registrar As defined in Section 2.4 hereof.
Officer's Certificate: A certificate signed by any Authorized Officer
of the Trust, under the circumstances described in, and otherwise complying
with, the applicable requirements of Section 11.1 and TIA ss.314, and delivered
to the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Trust. Each certificate with respect to compliance
with a condition
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or covenant provided for in this Agreement shall include (1) a statement that
the Authorized Officer signing the certificate has read such covenant or
condition; (2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements contained in such certificate are
based; (3) a statement that in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Opinion of Counsel: One or more opinions of counsel who may, except as
otherwise expressly provided in this Indenture, be employees of or counsel to
the Trust and, if addressed to the Insurer, satisfactory to the Insurer, and
which shall comply with any applicable requirements of Section 11.1, and if
addressed to the Insurer, satisfactory to the Insurer.
Outstanding As of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Indenture
Trustee or any Note Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision therefor, satisfactory to the Indenture Trustee); and
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser;
provided, however, that Notes which have been paid with proceeds of the Note
Policy shall continue to remain Outstanding for purposes of this Indenture until
the Insurer has been paid as subrogee hereunder or reimbursed pursuant to the
Insurance Agreement as evidenced by a written notice from the Insurer delivered
to the Indenture Trustee, and the Insurer shall be deemed to be the Holder
thereof to the extent of any payments thereon made by the Insurer; provided,
further, that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Transaction Document, Notes
owned by the Trust, any other obligor upon the Notes, the Seller or any
Affiliate of any of the foregoing Persons shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Indenture Trustee shall
be protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that a Responsible Officer of the
Indenture Trustee either actually knows to be so owned or has received written
notice thereof shall be so disregarded. Notes so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Indenture Trustee the pledgees right so to act with respect
to
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such Notes and that the pledgee is not the Trust, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons.
Outstanding Amount: The aggregate principal amount of all Notes
Outstanding at the date of determination.
Predecessor Note: With respect to any particular Note, every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purpose of this definition, any Note authenticated
and delivered under Section 2.5 in lieu of a mutilated, lost, destroyed or
stolen Note shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Note.
Preference Claim: As defined in Section 5.19(b) hereof.
Proceeding: Any suit in equity, action at law or other judicial or
administrative proceeding.
Rating Agency: Each of Moody's and Standard & Poor's, so long as such
Persons maintain a rating on the Notes; and if either Moody's or Standard &
Poor's no longer maintains a rating on the Notes, such other nationally
recognized statistical rating organization selected by the Seller and (so long
as an Insurer Default shall not have occurred and be continuing) acceptable to
the Insurer.
Rating Agency Condition: With respect to any action, that each Rating
Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Insurer, the
Indenture Trustee, the Owner Trustee and the Trust in writing that such action
will not result in a reduction or withdrawal of the then current rating of the
Notes.
Record Date: With respect to a Distribution Date or Redemption Date,
the close of business on the Business Day immediately preceding such
Distribution Date or Redemption Date.
Redemption Date: In the case of a redemption of the Notes pursuant to
Section 10.1(a) or a payment to Noteholders pursuant to Section 10.1(b), the
Distribution Date specified by the Servicer or the Trust pursuant to Section
10.1(a) or (b) as applicable.
Redemption Price: (a) In the case of a redemption of the Notes pursuant
to Section 10.1(a), an amount equal to the unpaid principal amount of the then
outstanding principal amount of each class of Notes being redeemed plus accrued
and unpaid interest thereon to but excluding the Redemption Date, or (b) in the
case of a payment made to Noteholders pursuant to Section 10.1(b), the amount on
deposit in the Note Distribution Account, but not in excess of the amount
specified in clause (a) above.
Responsible Officer: With respect to the Indenture Trustee, the Trust
Collateral Agent or the Owner Trustee (as defined in the Trust Agreement), any
officer within the Corporate Trust
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Office of the Indenture Trustee or the Owner Trustee, as the case may be,
including any Managing Director, Vice President, Assistant Vice President,
Assistant Treasurer, Assistant Secretary or any other officer of the Indenture
Trustee or the Owner Trustee, as the case may be, 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.
Sale and Servicing Agreement: The Sale and Servicing Agreement dated as
of June 29, 1997, among the Seller, the Servicer, the Trust and the Trust
Collateral Agent, as the same may be amended or supplemented from time to time
in accordance with the terms thereof.
Scheduled Payments: As defined in the Note Policy.
Service Contract: With respect to a Financed Vehicle, the agreement, if
any, financed under the related Receivable that provides for the repair of such
Financed Vehicle.
State: Any one of the 50 states of the United States of America or the
District of Columbia.
Transaction Documents: As defined in the Insurance Agreement.
Termination Date: The latest of (i) the expiration of the Note Policy
and the return of the Note Policy to the Insurer for cancellation, (ii) the date
on which the Insurer shall have received payment and performance of all Insurer
Trust Secured obligations, and (iii) the date on which the Indenture Trustee
shall have received payment and performance of all Trustee Trust Secured
Obligations.
Trust: The party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
Trust Collateral Agent: Initially, Harris Trust and Savings Bank, in
its capacity as trust collateral agent on behalf of the Trust Secured Parties,
including its successors in interest, until and unless a successor Person shall
have become the Trust Collateral Agent pursuant to Section 6.17 hereof, and
thereafter "Trust Collateral Agent" shall mean such successor Person.
Trust Indenture Act or TIA: The Trust Indenture Act of 1939, as amended
and as in force on the date hereof, unless otherwise specifically provided.
Trust Order and Trust Request: A written order or request signed in the
name of the Trust by any one of its Authorized Officers and delivered to the
Indenture Trustee.
Trust Property: All money, instruments, rights and other property that
are subject or intended to be subject to the lien and security interest of this
Indenture for the benefit of the Noteholders (including all property and
interests Granted to the Trust Collateral Agent), including all proceeds
thereof.
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Trust Secured Obligations: The Insurer Trust Secured Obligations and
the Trustee Trust Secured Obligations.
Trust Secured Parties: Each of the Indenture Trustee in respect of the
Trustee Trust Secured Obligations and the Insurer in respect of the Insurer
Trust Secured Obligations.
Trustee Trust Secured Obligations: All amounts and obligations which
the Trust may at any time owe to or on behalf of the Indenture Trustee for the
benefit of the Noteholders under this Indenture or the Notes.
UCC: The Uniform Commercial Code, as in effect in the relevant
jurisdiction, as amended from time to time.
SECTION 1.2 Incorporation by Reference of the Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Trust.
All other TIA terms used in this Indenture that are defined by the TIA,
or defined by Commission rule have the meaning assigned to them by such
definitions.
SECTION 1.3 Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
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SECTION 1.4 Action by or Consent of Noteholders. Whenever any provision
of this Agreement refers to action to be taken, or consented to, by Noteholders,
such provision shall be deemed to refer to the Noteholder of record as of the
Record Date immediately preceding the date on which such action is to be taken,
or consent given, by Noteholders. Solely for the purposes of any action to be
taken, or consented to, by Noteholders, any Note registered in the name of
National Financial Auto Funding Trust or any Affiliate thereof shall be deemed
not to be outstanding; provided, however, that, solely for the purpose of
determining whether the Indenture Trustee or the Trust Collateral Agent is
entitled to rely upon any such action or consent, only Notes which the Owner
Trustee, the Indenture Trustee or the Trust Collateral Agent, respectively,
knows to be so owned shall be so disregarded.
SECTION 1.5 Material Adverse Effect. Whenever a determination is to be
made under this Agreement as to whether a given event, action, course of conduct
or set of facts or circumstances could or would have a material adverse effect
on the Noteholders (or any similar or analogous determination), such
determination shall be made without taking into account the funds available from
claims under the Policy.
SECTION 1.6 Conflict with TIA. If any provision hereof limits,
qualifies or conflicts with a provision of the TIA that is required under the
TIA to be part of and govern this Indenture, the latter provision shall control.
If any provision of this Indenture modifies or excludes any provision of the TIA
that may be so modified or excluded, the latter provisions shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
ARTICLE II
THE NOTES
SECTION 2.1 Form. The Notes, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibit A, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Note set forth in Exhibit A are part of the terms of this Indenture.
SECTION 2.2 Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Trust by any of its Authorized Officers. The signature
of any such Authorized Officer on the Notes may be original or facsimile.
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Notes bearing the original or facsimile signature of individuals who
were at any time Authorized Officers of the Trust shall bind the Trust,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon receipt of the Note Policy and Trust
Order for authentication and delivery, authenticate and deliver the Notes for
original issue in an aggregate principal amount of $66,891,200. The Notes
outstanding at any time may not exceed such amount except as provided in Section
2.5.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $20,000 and
in integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears attached to such Note
a certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate attached to any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
SECTION 2.3 Temporary Notes. Pending the preparation of Definitive
Notes, the Trust may execute, and upon receipt of a Trust Order the Indenture
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the Definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Trust will cause Definitive Notes to
be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Trust to be
maintained as provided in Section 3.2, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Trust shall
execute and the Indenture Trustee shall authenticate and deliver in exchange
therefor a like principal amount of Definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.
SECTION 2.4 Registration; Registration of Transfer and Exchange. The
Trust shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Trust shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee shall be "Note Registrar" for the purpose of registering Notes
and transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Trust shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
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If a Person other than the Indenture Trustee is appointed by the Trust
as Note Registrar, the Trust will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof. The Indenture Trustee shall have the right to rely
conclusively upon a certificate executed on behalf of the Note Registrar by an
Authorized Officer thereof as to the names and addresses of the Holders of the
Notes and the principal amounts and number of such Notes.
Upon surrender for registration or transfer of any Note at the office
or agency of the Trust to be maintained as provided in Section 3.2, and if the
requirements of Section 8-401(1) of the UCC are met, the Trust shall execute or
cause the Indenture Trustee to authenticate one or more new Notes, in any
authorized denominations and for the same aggregate principal amount. A
Noteholder may also obtain from the Indenture Trustee, in the name of the
designated transferee or transferees, one or more new Notes in any authorized
denominations and for the same aggregate principal amount. Such requirements
shall not be deemed to create a duty in the Indenture Trustee to monitor the
compliance by the Trust with Section 8-401 of the UCC.
At the option of the Holder, Notes may be exchanged for other Notes in
any authorized denominations and for the same aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, and if the requirements of Section
8-401(1) of the UCC are met, the Trust shall execute and upon its request the
Indenture Trustee shall authenticate the Notes which the Noteholder making the
exchange is entitled to receive. Such requirements shall not be deemed to create
a duty in the Indenture Trustee to monitor the compliance by the Trust with
Section 8-401 of the UCC.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Trust, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be (i) duly endorsed by, or be accompanied by a written
instrument of transfer in the form attached to Exhibit A, duly executed by the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("Stamp") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the Note Registrar
may require.
The Notes may not be transferred, directly or indirectly, to any Person
that is (i) an employee benefit plan (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), which is subject
to the provisions of Title I of ERISA, (ii) a plan described in section 4975
(e)(1) of the Internal Revenue Code of 1986, as amended, or (iii) an entity
whose underlying assets are deemed to be assets of a plan described in (I) or
(ii) above
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by reason of such plan's investment in the entity (any such entity described in
clauses (i) through (iii) , a "Benefit Plan") unless the acquisition and holding
of the Notes by such Benefit Plan is covered by a Department of Labor Prohibited
Transactions Class Exemption ("PTCE"). By accepting and holding a Note, the
Holder thereof shall be deemed to have represented and warranted that either it
is not a Benefit Plan or its acquisition and holding of the Note is covered by a
PTCE.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Note Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.3 or 9.6 not involving any transfer.
Notwithstanding, the preceding provisions of this section, the Trust
shall not be required to make, and the Note Registrar shall not register,
transfers or exchanges of Notes selected for redemption for a period of 15 days
preceding the Distribution Date.
SECTION 2. If (i) any mutilated Note is surrendered to the Indenture
Trustee, or the Indenture Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, and (ii) there is delivered to the
Indenture Trustee and the Insurer (unless an Insurer Default shall have occurred
and be continuing) such security or indemnity as may be required by it to hold
the Trust, the Indenture Trustee and the Insurer harmless, then, in the absence
of notice to the Trust, the Note Registrar or the Indenture Trustee that such
Note has been acquired by a bona fide purchaser, and provided that the
requirements of Section 8-405 of the UCC are met, the Trust shall execute and
upon its request the Indenture Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a
replacement Note (such requirement shall not be deemed to create a duty in the
Indenture Trustee to monitor the compliance by the Trust with Section 8-405);
provided, however, that if any such destroyed, lost or stolen Note, but not a
mutilated Note, shall have become or within seven days shall be due and payable,
or shall have been called for redemption, the Trust may, instead of issuing a
replacement Note, direct the Indenture Trustee, in writing, to pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. If, after the delivery of such replacement Note
or payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in lieu of which
such replacement Note was issued presents for payment such original Note, the
Trust, the Indenture Trustee and the Insurer shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Trust or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Trust
may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other governmental
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charge that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Trust, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.6 Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Trust, the Indenture Trustee and any
agent of the Trust, the Indenture Trustee, the Insurer may treat the Person in
whose name any Note is registered (as of the Record Date) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any
on such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and none of the Trust, the Insurer, the Indenture Trustee nor any agent
of the Trust or the Indenture Trustee shall be affected by notice to the
contrary.
SECTION 2.7 Payment of Principal and Interest; Defaulted Interest. (a)
The Notes shall accrue interest as provided in the Form of Note set forth in
Exhibit A and such interest shall be payable on each Distribution Date as
specified therein. Any installment of interest or principal, if any, payable on
any Note which is punctually paid or duly provided for by the Trust on the
applicable Distribution Date shall be paid to the Person in whose name such Note
(or one or more Predecessor Notes) is registered on the Record Date, by check
mailed first-class, postage prepaid, to such Person's address as it appears on
the Note Register on such Record Date, except that, unless Definitive Notes have
been issued pursuant to Section 2.12, with respect to Notes registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.), payment will be made by wire transfer in immediately
available funds to the account designated by such nominee and except for the
final installment of principal payable with respect to such Note on a
Distribution Date or on the Final Scheduled Distribution Date (and except for
the Redemption Price for any Note called for redemption pursuant to Section
10.1(a)) which shall be payable as provided below. The funds represented by any
such checks returned undelivered shall be held in accordance with Section 3.3.
(b) The principal of the Notes shall be payable in installments on each
Distribution Date as provided in the Form of Note set forth in Exhibit A.
Notwithstanding the foregoing, and subject to Section 5.4, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing
and an Insurer Default shall have occurred and be continuing, if the Indenture
Trustee or the Holders of the Notes representing not less than a majority of the
Outstanding Amount of the Notes have declared the Notes to be immediately due
and payable in the manner provided in Section 5.2. Upon written notice from the
Trust, the Indenture Trustee
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shall notify the Person in whose name a Note is registered at the close of
business on the Record Date preceding the Distribution Date on which the Trust
expects that the final installment of principal of and interest on such Note
will be paid. Such notice shall be mailed or transmitted by facsimile prior to
such final Distribution Date and shall specify that such final installment will
be payable only upon presentation and surrender of such Note and shall specify
the place where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed to
Noteholders as provided in Section 10.2.
(c) If the Trust defaults in a payment of interest on the Notes, the
Trust shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate to the extent lawful. The
Trust may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Trust shall fix or cause to be fixed any such
special record date and payment date, and, at least 15 days before any such
special record date, the Trust shall mail to each Noteholder and the Indenture
Trustee a notice that states the special record date, the payment date and the
amount of defaulted interest to be paid.
(d) Promptly following the date on which all principal of and interest
on the Notes has been paid in full and the Notes have been surrendered to the
Indenture Trustee, the Indenture Trustee shall, upon written notice from the
Servicer of the amounts, if any, that the Insurer has paid in respect of the
Notes under the Note Policy or otherwise which has not been reimbursed to it,
deliver such surrendered Notes to the Insurer to the extent not previously
canceled or destroyed.
SECTION 2.8 Cancellation. Subject to Section 2.7(d), all Notes
surrendered for payment, registration of transfer, exchange or redemption shall,
if surrendered to any Person other than the Indenture Trustee, be delivered to
the Indenture Trustee and shall be promptly canceled by the Indenture Trustee.
Subject to Section 2.7(d), the Trust may at any time deliver to the Indenture
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Trust may have acquired in any manner whatsoever, and all
Notes so delivered shall be promptly canceled by the Indenture Trustee. No Notes
shall be authenticated in lieu of or in exchange for any Notes canceled as
provided in this Section, except as expressly permitted by this Indenture.
Subject to Section 2.7(d), all canceled Notes maybe held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time unless the Trust shall direct by a Trust Order that
they be destroyed or returned to it; provided that such Trust Order is timely
and the Notes have not been previously disposed of by the Indenture Trustee.
SECTION 2.9 Release of Collateral. The Trust Collateral Agent shall, on
or after the Termination Date, release any remaining portion of the Trust
Property from the lien created by this Indenture and deposit in the Collection
Account any funds then on deposit in any other Trust Account. The Trust
Collateral Agent shall release property from the lien created by this Indenture
pursuant to this Section 2.9 only upon receipt of a Trust Request by it and the
Indenture Trustee accompanied by an Officer's Certificate, an Opinion of Counsel
and (if
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required by the TIA) Independent Certificates in accordance with TIA ss.ss.
314(c) and 314(d)(1) meeting the applicable requirements of Section 11.1.
SECTION 2.10 Book-Entry Notes. The Notes, upon original issuance, will
be issued in the form of typewritten Notes representing the Book-Entry Notes, to
be delivered to The Depository Trust Company, the initial Clearing Agency, by,
or on behalf of, the Trust. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Note Owner will receive a Definitive Note representing such Note Owner's
interest in such Note, except as provided in Section 2.12. Unless and until
definitive, fully registered Notes (the "Definitive Notes") have been issued to
Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and interest on the
Notes and the giving of instructions or directions hereunder) as the
sole Holder of the Notes, and shall have no obligation to the Note
Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law
and agreements between such Note Owners and the Clearing Agency and/or
the Clearing Agency Participants. Unless and until Definitive Notes are
issued pursuant to Section 2.12, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such effect
from Note Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the
Indenture Trustee; and
(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of
reproduction and postage expenses associated with the distribution of
such reports, from the Indenture Trustee at the Corporate Trust Office.
SECTION 2.11 Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive
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Notes shall have been issued to Note Owners pursuant to Section 2.12, the
Indenture Trustee shall give all such notices and communications specified
herein to be given to Holders of the Notes to the Clearing Agency, and shall
have no obligation to the Note Owners.
SECTION 2.12 Definitive Notes. If (i) the Servicer advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Notes, and
the Servicer is unable to locate a qualified successor, (ii) the Servicer at its
option advises the Indenture Trustee in writing that it elects to terminate the
book-entry system through the Clearing Agency or (iii) after the occurrence of
an Event of Default, Note Owners representing beneficial interests aggregating
at least a majority of the Outstanding Amount of the Notes advise the Indenture
Trustee through the Clearing Agency in writing that the continuation of a book
entry system through the Clearing Agency is no longer in the best interests of
the Note Owners, then the Clearing Agency shall notify all Note Owners and the
Indenture Trustee of the occurrence of any such event and of the availability of
Definitive Notes to Note Owners requesting the same. Upon surrender to the
Indenture Trustee of the typewritten Note or Notes representing the Book-Entry
Notes by the Clearing Agency, accompanied by registration instructions, the
Trust shall execute and the Indenture Trustee shall authenticate the Definitive
Notes in accordance with the instructions of the Clearing Agency. None of the
Trust, the Note Registrar or the Indenture Trustee shall be liable for any delay
in delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Notes, the Indenture Trustee shall recognize the Holders of the Definitive Notes
as Noteholders.
ARTICLE III
COVENANTS
SECTION 3.1 Payment of Principal and Interest. The Trust will duly and
punctually pay the principal of and interest on the Notes in accordance with the
terms of the Notes and this Indenture. Without limiting the foregoing, the Trust
will cause to be distributed all amounts on deposit in the Note Distribution
Account on a Distribution Date deposited therein pursuant to the Sale and
Servicing Agreement for the benefit of the Noteholders. Amounts properly
withheld under the Code by any Person from a payment to any Noteholder of
interest and/or principal shall be considered as having been paid by the Trust
to such Noteholder for all purposes of this Indenture.
SECTION 3.2 Maintenance of Office or Agency. The Trust will maintain in
New York, an office or agency where Notes may be surrendered for registration,
transfer or exchange of the Notes, and where notices and demands to or upon the
Trust in respect of the Notes and this Indenture may be served. The Trust hereby
initially appoints the Indenture Trustee to serve as its agent for the foregoing
purposes. The Trust will give prompt written notice to the Indenture Trustee of
the location, and of any change in the location, of any such office or agency.
If at any time the Trust shall fail to maintain any such office or agency or
shall fail to furnish the Indenture Trustee with the address thereof, such
surrenders, notices and demands may be made
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or served at the Corporate Trust Office, and the Trust hereby appoints the
Indenture Trustee as its agent to receive all such surrenders, notices and
demands.
SECTION 3.3 Money for Payments to be Held in Trust. On or before each
Distribution Date and Redemption Date, the Trust shall deposit or cause to be
deposited in the Note Distribution Account from the Collection Account an
aggregate sum sufficient to pay the amounts then becoming due under the Notes,
such sum to be held in trust for the benefit of the Persons entitled thereto and
(unless the Note Paying Agent is the Indenture Trustee) shall promptly notify
the Indenture Trustee of its action or failure so to act.
The Trust will cause each Note Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee and the Insurer an
instrument in which such Note Paying Agent shall agree with the Indenture
Trustee (and if the Indenture Trustee acts as Note Paying Agent, it hereby so
agrees), subject to the provisions of this Section, that such Note Paying Agent
will:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee written notice of any default
by the Trust of which it has actual knowledge (or any other obligor
upon the Notes) in the making of any payment required to be made with
respect to the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Note Paying Agent;
(iv) immediately resign as a Note Paying Agent and forthwith
pay to the Indenture Trustee all sums held by it in trust for the
payment of Notes if at any time it ceases to meet the standards
required to be met by a Note Paying Agent at the time of its
appointment; and
(v) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Trust may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Trust
Order direct any Note Paying Agent to pay to the Indenture Trustee all sums held
in trust by such Note Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which the sums were held by such Note
Paying Agent; and upon such a payment by any Note Paying Agent to the Indenture
Trustee, such Note Paying Agent shall be released from all further liability
with respect to such money.
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Subject to applicable laws with respect to the escheat of funds, any
money held by the Indenture Trustee or any Note Paying Agent in trust for the
payment of any amount due with respect to any Note and remaining unclaimed for
two years after such amount has become due and payable shall be discharged from
such trust and be paid to the Trust on Trust Request, with the consent of the
Insurer (unless an Insurer Default shall have occurred and be continuing) and
shall be deposited by the Indenture Trustee in the Collection Account; and the
Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Trust for payment thereof (but only to the extent of the amounts so
paid to the Trust), and all liability of the Indenture Trustee or such Note
Paying Agent with respect to such trust money shall thereupon cease; provided,
however, that if such money or any portion thereof had been previously deposited
by the Insurer or the Trust Collateral Agent with the Indenture Trustee for the
payment of principal or interest on the Notes, to the extent any amounts are
owing to the Insurer, such amounts shall be paid promptly to the Insurer upon
receipt of a written request by the Insurer to such effect; and provided,
further, that the Indenture Trustee or such Note Paying Agent, before being
required to make any such repayment, shall at the expense of the Trust cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The City of New
York, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the Trust.
The Indenture Trustee shall also adopt and employ, at the expense of the Trust,
any other reasonable means of notification of such repayment (including, but not
limited to, mailing notice of such repayment to Holders whose Notes have been
called but have not been surrendered for redemption or whose right to or
interest in monies due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Note Paying Agent, at the last
address of record for each such Holder).
SECTION 3.4 Existence. Except as otherwise permitted by the provisions
of Section 3.10, the Trust will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware (unless
it becomes, or any successor Trust hereunder is or becomes, organized under the
laws of any other state or of the United States of America, in which case the
Trust will keep in full effect its existence, rights and franchises under the
laws of such other jurisdiction) 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 Indenture, the
Notes, the Collateral and each other instrument or agreement included in the
Trust Property.
SECTION 3.5 Protection of Trust Property. The Trust intends the
security interest Granted pursuant to this Indenture in favor of the Trust
Secured Parties to be prior to all other liens in respect of the Trust Property,
and the Trust shall take all actions necessary to obtain and maintain, in favor
of the Trust Collateral Agent, for the benefit of the Trust Secured Parties, a
first lien on and a first priority, perfected security interest in the Trust
Property. The Trust will from time to time prepare (or shall cause to be
prepared), execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
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(i) Grant more effectively all or any portion of the Trust
Property;
(ii) maintain or preserve the lien and security interest (and
the priority thereof) in favor of the Trust Collateral Agent for the
benefit of the Trust Secured Parties created by this Indenture or carry
out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Trust Property and the
rights of the Trust Collateral Agent in such Trust Property against the
claims of all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Trust Property when due.
The Trust hereby designates the Trust Collateral Agent its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Trust Collateral Agent pursuant to this
Section; provided that, such designation shall not be deemed to create a duty in
the Indenture Trustee or the Trust Collateral Agent to monitor the compliance of
the Trust with respect to its duties under this Section 3.5 or the adequacy of
any financing statement, continuation statement or other instrument prepared by
the Trust.
SECTION 3.6 Opinions as to Trust Property. (a) On the Closing Date, the
Trust shall furnish to the Indenture Trustee, the Trust Collateral Agent and the
Insurer an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording and filing of
this Indenture, any indentures supplemental hereto, and any other requisite
documents, and with respect to the execution and filing of any financing
statements and continuation statements, as are necessary to perfect and make
effective the first priority lien and security interest in favor of the Trust
Collateral Agent, for the benefit of the Trust Secured Parties, created by this
Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) Within 90 days after the beginning of each calendar year, beginning
with the first calendar year beginning more than six months after the Closing
Date, the Trust shall furnish to the Indenture Trustee, Trust Collateral Agent
and the Insurer, an Opinion of Counsel either stating that, in the opinion of
such counsel, such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as are necessary to
maintain the lien and security interest created by this Indenture and reciting
the details of such action or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security interest. Such
Opinion of Counsel shall also describe the recording, filing, re-recording and
refiling of this
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Indenture, any indentures supplemental hereto and any other requisite documents
and the execution and filing of any financing statements and continuation
statements that will, in the opinion of such counsel, be required to maintain
the lien and security interest of this Indenture.
SECTION 3.7 Performance of Obligations; Servicing of Receivables. (a)
The Trust will not take any action and will use its best efforts not to permit
any action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Property or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
ordered by any bankruptcy or other court or as expressly provided in this
Indenture, the Transaction Documents or such other instrument or agreement.
(b) The Trust may contract with other Persons acceptable to the Insurer
(so long as no Insurer Default shall have occurred and be continuing) to assist
it in performing its duties under this Indenture, and any performance of such
duties by a Person identified to the Indenture Trustee and the Insurer in an
Officer's Certificate of the Trust shall be deemed to be action taken by the
Trust. Initially, the Trust has contracted with the Servicer to assist the Trust
in performing its duties under this Indenture.
(c) The Trust will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Transaction
Documents and in the instruments and agreements included in the Trust Property,
including, but not limited, to preparing (or causing to prepared) and filing (or
causing to be filed) all UCC financing statements and continuation statements
required to be filed by the terms of this Indenture and the Sale and Servicing
Agreement in accordance with and within the time periods provided for herein and
therein. Except as otherwise expressly provided therein, the Trust shall not
waive, amend, modify, supplement or terminate any Transaction Document or any
provision thereof without the consent of the Indenture Trustee, the Insurer or
the Holders of at least a majority of the Outstanding Amount of the Notes.
(d) If a Responsible Officer of the Owner Trustee shall have actual
knowledge of the occurrence of a Servicer Termination Event under the Sale and
Servicing Agreement, the Trust shall promptly notify the Indenture Trustee, the
Trust Collateral Agent, the Insurer and the Rating Agencies thereof in
accordance with Section 11.4, and shall specify in such notice, the action, if
any, the Trust is taking in respect of such default. If a Servicer Termination
Event shall arise from the failure of the Servicer to perform any of its duties
or obligations under the Sale and Servicing Agreement with respect to the
Receivables, the Trust shall take all reasonable steps available to it to remedy
such failure.
(e) The Trust agrees that it will not waive timely performance or
observance by the Servicer or the Seller of their respective duties under the
Transaction Documents (x) without the prior consent of the Insurer (unless an
Insurer Default shall have occurred and be controlling) or (y) if the effect
thereof would adversely affect the Holders of the Notes.
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SECTION 3.8 Negative Covenants. So long as any Notes are Outstanding,
the Trust shall not:
(i) except as expressly permitted by this Indenture or the
Transaction Documents, sell, transfer, exchange or otherwise dispose of
any of the properties or assets of the Trust, including those included
in the Trust Property, unless directed to do so by the Controlling
Party;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Property; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien in favor of the Trust
Collateral Agent created by this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created
on or extend to or otherwise arise upon or burden the Trust Property or
any part thereof or any interest therein or the proceeds thereof (other
than tax liens, mechanics' liens and other liens that arise by
operation of law, in each case on a Financed Vehicle and arising solely
as a result of an action or omission of the related Obligor), (C)
permit the lien of this Indenture not to constitute a valid first
priority (other than with respect to any such tax, mechanics' or other
lien) security interest in the Trust Property or (D) amend, modify or
fail to comply with the provisions of the Transaction Documents without
the prior written consent of the Controlling Party.
SECTION 3.9 Annual Statement as to Compliance. The Trust will deliver
to the Indenture Trustee and the Insurer, within 90 days after the end of each
fiscal year of the Trust (commencing with the fiscal year ended December 31,
1997), and otherwise in compliance with the requirements of TIA ss.314(a)(4) an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that
(i) a review of the activities of the Trust during such year
and of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based
on such review, the Trust has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
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SECTION 3.10 Trust May Consolidate, Etc. Only on Certain Terms. (a) The
Trust shall not consolidate or merge with or into any other Person.
(a) The Trust shall not convey or transfer all or substantially all of
its properties or assets, including those included in the Trust Property, to any
Person.
SECTION 3.11 [Reserved].
SECTION 3.12 No Other Business. The Trust shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the Transaction
Documents and activities incidental thereto. After the Pre-Funding Period, the
Trust shall not fund the purchase of any Additional Receivables.
SECTION 3.13 No Borrowing. The Trust shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes, (ii) obligations owing from time to time
to the Insurer under the Insurance Agreement and (iii) any other Indebtedness
permitted by or arising under the Transaction Documents. The proceeds of the
Notes shall be used exclusively to fund the Trust's purchase of the Receivables
and the other assets specified in the Sale and Servicing Agreement, to fund the
Pre-Funding Account and the Spread Account and to pay the Trust's
organizational, transactional and start-up expenses.
SECTION 3.14 Servicer's Obligations. The Trust shall cause the Servicer
to comply with Sections 4.11, 4.12, 4.13 and 5.10 of the Sale and Servicing
Agreement.
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by the Sale and Servicing Agreement or this Indenture, the Trust
shall not make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuring another's payment
or performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person.
SECTION 3.16 Capital Expenditures. The Trust shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personally).
SECTION 3.17 Compliance with Laws. The Trust shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Trust to perform its obligations under the Notes, this Indenture or any
Transaction Document.
SECTION 3.18 Restricted Payments. The Trust shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the Trust
or otherwise with respect to any ownership or equity interest or
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security in or of the Trust or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Trust may make, or cause to be made, distributions
to the Servicer, the Owner Trustee, the Indenture Trustee and the
Certificateholders as permitted by, and to the extent funds are available for
such purpose under, the Sale and Servicing Agreement or Trust Agreement. The
Trust will not, directly or indirectly, make payments to or distributions from
the Collection Account except in accordance with this Indenture and the
Transaction Documents.
SECTION 3.19 Notice of Events of Default. Upon a Responsible Officer of
the Owner Trustee having actual knowledge thereof, the Trust agrees to give the
Indenture Trustee, the Insurer and the Rating Agencies prompt written notice of
each Event of Default hereunder and each default on the part of the Servicer or
the Seller of its obligations under the Sale and Servicing Agreement.
SECTION 3.20 Further Instruments and Acts. Upon request of the
Indenture Trustee or the Insurer, the Trust will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
SECTION 3.21 Amendments of Sale and Servicing Agreement and Trust
Agreement. The Trust shall not agree to any amendment to Section 13.1 of the
Sale and Servicing Agreement or Section 13.1 of the Trust Agreement to eliminate
the requirements thereunder that the Indenture Trustee or the Holders of the
Notes consent to amendments thereto as provided therein.
SECTION 3.22 Income Tax Characterization. For purposes of federal
income, state and local income and franchise and any other income taxes, the
Trust will treat the Notes as indebtedness of the Trust and hereby instructs the
Indenture Trustee to treat the Notes as indebtedness of the Trust for federal
and state tax reporting purposes.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12, 3.13, 3.20, 3.21 and 3.22, (v) the rights, obligations and
immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.7 and the obligations of the Indenture Trustee
under Section 4.2) and (vi) the rights of Noteholders as beneficiaries hereof
with respect to the property so deposited with the Indenture Trustee payable to
all or any of them, and the Indenture Trustee, on demand of and at the expense
of the Trust, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when
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(A) either
(1) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or stolen
and that have been replaced or paid as provided in Section 2.5
and (ii) Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Trust and thereafter repaid to the Trust or discharged from
such trust, as provided in Section 3.3) have been delivered to
the Indenture Trustee for cancellation and the Note Policy has
expired and been returned to the Insurer for cancellation; or
(2) all Notes not theretofore delivered to the
Indenture Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable on the
Final Scheduled Distribution Date, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Indenture Trustee for the giving of notice of
redemption by the Indenture Trustee in the name, and
at the expense, of the Trust,
and the Trust, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited
with the Trust Collateral Agent cash or direct obligations of
or obligations guaranteed by the United States of America
(which will mature prior to the date such amounts are
payable), in trust for such purpose, in an amount sufficient
to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Indenture Trustee for
cancellation when due on the Final Scheduled Distribution Date
or Redemption Date (if Notes shall have been called for
redemption pursuant to Section 10.1(a)), as the case may be;
(B) the Trust has paid or caused to be paid all Insurer Trust
Secured Obligations and all Trustee Trust Secured Obligations; and
(C) the Trust has delivered to the Indenture Trustee, the
Trust Collateral Agent and the Insurer an Officer's Certificate, an
Opinion of Counsel and if required by the TIA, the Indenture Trustee,
the Trust Collateral Agent or the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) an Independent
Certificate from a firm of certified public accountants, each meeting
the applicable requirements of Section 11.1(a) and each stating that
all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with.
Upon such satisfaction and discharge, the Indenture Trustee shall give
prompt written notice thereof to each Rating Agency.
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SECTION 4.2 Application of Trust Money. All monies deposited with the
Indenture Trustee pursuant to Section 4.1 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Note Paying Agent, as
the Indenture Trustee may determine, to the Holders of the particular Notes for
the payment or redemption of which such monies have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such monies need not be segregated from other funds except to the
extent required herein or in the Sale and Servicing Agreement or required by
law.
SECTION 4.3 Repayment of Monies Held by Note Paying Agent. In
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all monies then held by any Note Paying Agent other than the
Indenture Trustee under the provisions of this Indenture with respect to such
Notes shall, upon demand of the Trust, be paid to the Indenture Trustee to be
held and applied according to Section 3.3 and thereupon such Note Paying Agent
shall be released from all further liability with respect to such monies.
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default. "Event of Default", wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when
the same becomes due and payable, and such default shall continue for a
period of five days (solely for purposes of this clause, a payment on
the Notes funded by the Insurer or the Collateral Agent pursuant to the
Spread Account Agreement shall be deemed to be a payment made by the
Trust); or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable and such default shall continue for a period of five days
(solely for purposes of this clause, a payment on the Notes funded by
the Insurer or the Collateral Agent pursuant to the Spread Account
Agreement, shall be deemed to be a payment made by the Trust); or
(iii) so long as an Insurer Default shall not have occurred
and be continuing, an Insurance Agreement Indenture Cross Default shall
have occurred; provided, however, that the occurrence of an Insurance
Agreement Indenture Cross Default may not form the basis of an Event of
Default unless the Insurer shall, upon prior written notice to the
Rating Agencies, have delivered to the Trust and the Indenture Trustee,
and not rescinded, a written notice specifying that such Insurance
Agreement Indenture Cross Default constitutes an Event of Default under
this Indenture; or
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(iv) default in the observance or performance of any covenant
or agreement of the Trust made in this Indenture (other than a covenant
or agreement, a default in the observance or performance of which is
elsewhere in this Section specifically dealt with) or in any
certificate or other writing delivered in connection herewith, or any
representation or warranty of the Trust made in this Indenture or in
any certificate or other writing delivered pursuant hereto proving to
have been incorrect in any material respect as of the time when the
same shall have been made, and such default shall continue or not be
cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of 30 days after there
shall have been given, by registered or certified mail, to the Trust by
the Insurer or the Indenture Trustee or to the Trust, the Indenture
Trustee and the Insurer by the Holders of at least 25% of the
Outstanding Amount of the Notes, a written notice specifying such
default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; provided, however, so long as an Insurer Default shall not
have occurred and be continuing, the occurrence of any such event
described in this clause (iv) may not form the basis of an Event of
Default unless the Insurer shall, upon prior written notice to the
Rating Agencies, have delivered to the Trust and the Indenture Trustee,
and not rescinded, a written notice specifying that any such event
constitutes an Event of Default under this Indenture; or
(v) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Trust or any
substantial part of the Collateral 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 of the
Trust or for any substantial part of the Collateral, or ordering the
winding-up or liquidation of the Trust's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; provided, however, so long as an Insurer Default
shall not have occurred and be continuing, the occurrence of any such
event described in this clause (v) may not form the basis of an Event
of Default unless the Insurer shall, upon prior written notice to the
Rating Agencies, have delivered to the Trust and the Indenture Trustee,
and not rescinded, a written notice specifying that any such event
constitutes an Event of Default under this Indenture; or
(vi) the commencement by the Trust 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 the Trust to the
entry of an order for relief in an involuntary case under any such law,
or the consent by the Trust to the appointment or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Trust or for any substantial part of the
Collateral, or the making by the Trust of any general assignment for
the benefit of creditors, or the failure by the Trust generally to pay
its debts as such debts become due, or the taking of action by the
Trust in furtherance of any of the foregoing; provided, however, so
long as an Insurer Default shall not have occurred and be continuing,
the occurrence of any such event described in
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this clause (vi) may not form the basis of an Event of Default unless
the Insurer shall, upon prior written notice to the Rating Agencies,
have delivered to the Trust and the Indenture Trustee, and not
rescinded, a written notice specifying that any such event constitutes
an Event of Default under this Indenture.
The Trust shall deliver to the Indenture Trustee, the Owner Trustee,
the Insurer and each Rating Agency, within five days after the occurrence
thereof, written notice in the form of an Officer's Certificate of any event
which with the giving of notice and the lapse of time would become an Event of
Default under clause (iii), its status and what action the Trust is taking or
proposes to take with respect thereto.
SECTION 5.2 Rights Upon Event of Default. (a) If an Insurer Default
shall not have occurred and be continuing and an Event of Default shall have
occurred and be continuing, the Notes shall become immediately due and payable
at par, together with accrued interest thereon. If an Event of Default shall
have occurred and be continuing, the Controlling Party may exercise any of the
remedies specified in Section 5.4(a). In the event of any acceleration of any
Notes by operation of this Section 5.2, the Indenture Trustee shall continue to
be entitled to make claims under the Note Policy pursuant to the Sale and
Servicing Agreement for Scheduled Payments on the Notes. Payments under the Note
Policy following acceleration of any Notes shall be applied by the Indenture
Trustee:
FIRST: to Noteholders for amounts due and unpaid on
the Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable
on the Notes for interest; and
SECOND: to Noteholders for amounts due and unpaid on
the Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable
on the Notes for principal.
(b) In the event any Notes are accelerated due to an Event of Default,
the Insurer shall have the right (in addition to its obligation to pay Scheduled
Payments on the Notes in accordance with the Note Policy), but not the
obligation, to make payments under the Note Policy or otherwise of interest and
principal due on such Notes, in whole or in part, on any date or dates following
such acceleration as the Insurer, in its sole discretion, shall elect.
(c) If an Insurer Default shall have occurred and be continuing and an
Event of Default shall have occurred and be continuing, the Indenture Trustee in
its discretion may, or if so requested in writing by Holders holding Notes
representing not less than a majority of the Outstanding Amount of the Notes,
subject to Section 6.2(f), declare by written notice to the Trust that the Notes
shall become immediately due and payable at par, together with accrued interest
thereon.
(d) If an Insurer Default shall have occurred and be continuing, then
at any time after such declaration of acceleration of maturity has been made and
before a judgment or
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decree for payment of the money due has been obtained by the Indenture Trustee
as hereinafter in this Article V provided, the Holders of Notes representing a
majority of the Outstanding Amount of the Notes, by written notice to the Trust
and the Indenture Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Trust has paid or deposited with the Indenture Trustee
a sum sufficient to pay
(A) all payments of principal of and interest on all
Notes and all other amounts that would then be due hereunder
or upon such Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its
agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee. (a) The Trust covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and payable
(solely for purposes of this clause, a payment on the Notes funded by the
Insurer pursuant to the Note Policy or the Collateral Agent pursuant to the
Spread Account shall be deemed to be payment made by the Trust), and such
default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note when
the same becomes due and payable (solely for purposes of this clause, a payment
on the Notes funded by the Insurer pursuant to the Note Policy or the Collateral
Agent pursuant to the Spread Account shall be deemed to be payment made by the
Trust), and such default continues for a period of five days, the Trust will,
upon demand of the Indenture Trustee, pay to it, for the benefit of the Holders
of the Notes, the whole amount then due and payable on such Notes for principal
and interest, with interest upon the overdue principal, and, to the extent
payment at such rate of interest shall be legally enforceable, upon overdue
installments of interest, at the applicable Interest Rate and in addition
thereto such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its agents and counsel.
(b) Each Trust Secured Party hereby irrevocably and unconditionally
appoints the Controlling Party as the true and lawful attorney-in-fact of such
Trust Secured Party for so long as such Trust Secured Party is not the
Controlling Party, with full power of substitution, to execute, acknowledge and
deliver any notice, document, certificate, paper, pleading or instrument and to
do in the name of the Controlling Party as well as in the name, place and stead
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of such Trust Secured Party such acts, things and deeds for or on behalf of and
in the name of such Trust Secured Party under this Indenture (including
specifically under Section 5.4) and under the Transaction Documents which such
Trust Secured Party could or might do or which may be necessary, desirable or
convenient in such Controlling Party's sole discretion to effect the purposes
contemplated hereunder and under the Transaction Documents and, without
limitation, following the occurrence of an Event of Default, exercise full
right, power and authority to take, or defer from taking, any and all acts with
respect to the administration, maintenance or disposition of the Trust Property.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may in its discretion but with the consent of the Controlling Party and
shall, at the direction of the Controlling Party (except as provided in Section
5.3(d) below), proceed to protect and enforce its rights and the rights of the
Noteholders by such appropriate Proceedings as the Indenture Trustee or the
Controlling Party shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy or legal or equitable right vested in the
Indenture Trustee by this Indenture or by law.
(d) Notwithstanding anything to the contrary contained in this
Indenture (including, without limitation, Sections 5.4(a), 5.12, 5.13 and 5.17)
and regardless of whether an Insurer Default shall have occurred and be
continuing, if the Trust fails to perform its obligations under Section 10.1(b)
hereof when and as due, the Indenture Trustee may in its discretion (and without
the consent of the Controlling Party) proceed to protect and enforce its rights
and the rights of the Noteholders by such appropriate proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for specific performance of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy or legal or equitable right vested in the Indenture
Trustee by this Indenture or by law; provided that the Indenture Trustee shall
only be entitled to take any such actions without the consent of the Controlling
Party to the extent such actions (x) are taken only to enforce the Trust's
obligations to redeem the principal amount of Notes and (y) are taken only
against the portion of the Collateral, if any, consisting of the Pre-Funding
Account, any investments therein and any proceeds thereof.
(e) In case there shall be pending, relative to the Trust or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Property, proceedings under Title 11 of the United States Code or any
other applicable Federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Trust or its property or such other obligor or Person,
or in case of any other comparable judicial proceedings relative to the Trust or
other obligor upon the Notes, or to the creditors or property of the Trust or
such other obligor, the Indenture Trustee, irrespective of whether the principal
of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
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(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Indenture Trustee (including any
claim for reasonable compensation to the Indenture Trustee and each
predecessor Indenture Trustee, and their respective agents, attorneys
and counsel, and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee, except as a result of negligence, bad
faith or willful misconduct) and of the Noteholders allowed in such
proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or person performing similar functions in any such
proceedings;
(iii) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee or the Holders of Notes allowed in any
judicial proceedings relative to the Trust, its creditors and its
property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(f) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar person.
(g) All rights of action and of asserting claims under this Indenture,
the Spread Account Agreement or under any of the Notes, may be enforced by the
Indenture Trustee without the possession of any of the Notes or the production
thereof in any trial or other proceedings relative thereto, and any such action
or proceedings instituted by the Indenture Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment, subject to
the payment of the expenses, disbursements and compensation of the
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Indenture Trustee, each predecessor Indenture Trustee and their respective
agents and attorneys, shall be for the ratable benefit of the Holders of the
Notes.
(h) In any proceedings brought by the Indenture Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture or
the Spread Account Agreement), the Indenture Trustee shall be held to represent
all the Holders of the Notes, and it shall not be necessary to make any
Noteholder a party to any such proceedings.
SECTION 5.4 Remedies. (a) If an Event of Default shall have occurred
and be continuing, the Controlling Party may do one or more of the following
(subject to Section 5.5):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Trust and any other obligor upon such Notes monies adjudged
due;
(ii) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Trust
Property;
(iii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce the rights
and remedies of the Trust Secured Parties; and
(iv) direct the Trust Collateral Agent in writing to sell the
Trust Property or any portion thereof or rights or interest therein, at
one or more public or private sales called and conducted in any manner
permitted by law; provided, however, that
(A) if the Insurer is the Controlling Party, the
Insurer may not sell or otherwise liquidate the Trust Property
following an Insurance Agreement Indenture Cross Default
unless
(I) such Insurance Agreement Indenture Cross
Default arises from a claim being made on the Note
Policy or from the insolvency of the Trust or the
Seller, or
(II) the proceeds of such sale or
liquidation distributable to the Noteholders are
sufficient to discharge in full all amounts then due
and unpaid upon such Notes for principal and
interest; or
(B) if the Indenture Trustee is the Controlling
Party, the Indenture Trustee may not sell or otherwise
liquidate the Trust Property following an Event of Default
unless
(I) such Event of Default is of the type
described in Section 5.01(i) or (ii), or
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(II) either
(x) the Holders of 100% of the
Outstanding Amount of the Notes consent
thereto,
(y) the proceeds of such sale or
liquidation distributable to the Noteholders
are sufficient to discharge in full all
amounts then due and unpaid upon such Notes
for principal and interest, or
(z) the Indenture Trustee
determines that the Trust Property will not
continue to provide sufficient funds for the
payment of principal of and interest on the
Notes as they would have become due if the
Notes had not been declared due and payable,
and the Indenture Trustee provides prior
written notice to the Rating Agencies and
obtains the consent of Holders of 66-2/3% of
the Outstanding Amount of the Notes.
In determining such sufficiency or insufficiency with respect to clause
(y) and (z), the Indenture Trustee may, but need not, obtain and rely
conclusively upon an opinion of an Independent investment banking or accounting
firm of national reputation as to the feasibility of such proposed action and as
to the sufficiency of the Trust Property for such purpose.
SECTION 5.5 Optional Preservation of the Receivables. If the Indenture
Trustee is the Controlling Party and if the Notes have been declared to be due
and payable under Section 5.2 following an Event of Default and such declaration
and its consequences have not been rescinded and annulled, the Indenture Trustee
may, but need not, elect to direct the Trust Collateral Agent to maintain
possession of the Trust Property. It is the desire of the parties hereto and the
Noteholders that there be at all times sufficient funds for the payment of
principal of and interest on the Notes, and the Indenture Trustee shall take
such desire into account when determining whether or not to direct the Trust
Collateral Agent to maintain possession of the Trust Property. In determining
whether to direct the Trust Collateral Agent to maintain possession of the Trust
Property, the Indenture Trustee may, but need not, obtain and rely conclusively
upon an opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Property for such purpose which opinion shall be at the
expense of the Trust.
SECTION 5.6 Priorities.
(a) Following (1) the acceleration of the Notes pursuant to Section 5.2
or (2) if an Insurer Default shall have occurred and be continuing, the
occurrence of an Event of Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iii),
5.1(v) or 5.1(vi) of the Indenture or (3) the receipt of Insolvency Proceeds
pursuant to Section 11.1(b) of the Sale and Servicing Agreement, the
Distribution Amount, including any money or property collected pursuant to
Section 5.4 of the Indenture and any such Insolvency Proceeds, shall be applied
by the Trust Collateral Agent on the related Distribution Date in the following
order of priority:
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FIRST: amounts due and owing and required to be distributed to
the Servicer, the Owner Trustee, the Indenture Trustee, the
Collateral Agent and the Trust Collateral Agent, respectively,
pursuant to priorities (i) and (ii) of Section 5.7(b) of the
Sale and Servicing Agreement and to the Indenture Trustee and
Trust Collateral Agent pursuant to Section 6.7 hereof, and not
previously distributed, in the order of such priorities and
without preference or priority of any kind within such
priorities;
SECOND: to Noteholders for amounts due and unpaid on the Notes
for interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes
for interest;
THIRD: to Noteholders for amounts due and unpaid on the Notes
for principal, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes
for principal;
FOURTH: to the Insurer, to the extent of any amounts owing to
the Insurer under the Insurance Agreement and not paid;
FIFTH: to the Collateral Agent to be applied as provided in
the Spread Account Agreement;
SIXTH: to the Certificateholders, any remaining Available
Funds;
provided that any amounts collected from the Pre-Funding Account shall be paid,
first, for amounts due and unpaid on the Notes for principal and interest, if
any, for distribution to Noteholders in accordance with Section 10.1(b) and,
second, in accordance with priorities FIRST through SIXTH above.
(b) The Indenture Trustee may fix a record date and payment date for
any payment to Noteholders pursuant to this Section. At least 15 days before
such record date the Trust shall mail to each Noteholder and the Indenture
Trustee a notice that states the record date, the payment date and the amount to
be paid.
SECTION 5.7 Limitation of Suits. No Holder of any Note shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
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(ii) the Holders of not less than 25% of the Outstanding
Amount of the Notes have made written request to the Indenture Trustee
to institute such proceeding in respect of such Event of Default in its
own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee indemnity reasonably satisfactory to it against the costs,
expenses (including legal fees and expenses) and liabilities to be
incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute
such proceedings;
(v) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the
Holders of a majority of the Outstanding Amount of the Notes; and
(vi) an Insurer Default shall have occurred and be continuing;
it being understood and intended that no Holders of Notes shall have any right
in any manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders of
Notes or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.8 Unconditional Rights of Noteholders To Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.
SECTION 5.9 Restoration of Rights and Remedies. If the Controlling
Party or any Noteholder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, then and in every such case the Trust, the Indenture
Trustee and the Noteholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Indenture Trustee and
the Noteholders shall continue as though no such proceeding had been instituted.
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SECTION 5.10 Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Controlling Party or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11 Delay or Omission Not a Waiver. No delay or omission of
the Controlling Party or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
SECTION 5.12 Control by Noteholders. If the Indenture Trustee is the
Controlling Party, the Holders of a majority of the Outstanding Amount of the
Notes shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Indenture Trustee with respect to
the Notes or exercising any trust or power conferred on the Indenture Trustee;
provided that
(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
(ii) subject to the express terms of Section 5.4, any
direction to the Indenture Trustee to sell or liquidate the Trust
Property shall be by the Holders of Notes representing not less than
100% of the Outstanding Amount of the Notes;
(iii) the Noteholders shall provide indemnity satisfactory to
the Indenture Trustee against any and all loss, liability or expense
incurred by it in connection with its performance of its duties under
this Section 5.12;
(iv) if the conditions set forth in Section 5.5 have been
satisfied and the Indenture Trustee elects to retain the Trust Property
pursuant to such Section, then any direction to the Indenture Trustee
by Holders of Notes representing less than 100% of the Outstanding
Amount of the Notes to sell or liquidate the Trust Property shall be of
no force and effect; and
(v) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction;
provided, however, that, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
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SECTION 5.13 Waiver of Past Defaults. If an Insurer Default shall have
occurred and be continuing, prior to the declaration of the acceleration of the
maturity of the Notes as provided in Section 5.4, the Holders of Notes of not
less than a majority of the Outstanding Amount of the Notes may waive any past
Default or Event of Default and its consequences except a Default (a) in payment
of principal of or interest on any of the Notes or (b) in respect of a covenant
or provision hereof which cannot be modified or amended without the consent of
the Holder of each Note. In the case of any such waiver, the Trust, the
Indenture Trustee and the Holders of the Notes shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.14 Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.15 Waiver of Stay or Extension Laws. The Trust covenants (to
the extent that it may lawfully do so) that it will not at anytime insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Trust (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 5.16 Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be
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impaired by the recovery of any judgment by the Indenture Trustee against the
Trust or by the levy of any execution under such judgment upon any portion of
the Trust Property or upon any of the assets of the Trust.
SECTION 5.17 Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Servicer's expense, the Trust agrees to take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Seller and the Servicer, as applicable, of each of their obligations to
the Trust under or in connection with the Sale and Servicing Agreement in
accordance with the terms thereof, and to exercise any and all rights, remedies,
powers and privileges lawfully available to the Trust under or in connection
with the Sale and Servicing Agreement to the extent and in the manner directed
by the Indenture Trustee, including the transmission of notices of default on
the part of the Seller or the Servicer thereunder and the institution of legal
or administrative actions or proceedings to compel or secure performance by the
Seller or the Servicer of each of their obligations under the Sale and Servicing
Agreement.
(b) If the Indenture Trustee is a Controlling Party and if an Event of
Default has occurred and is continuing, the Indenture Trustee may, and, at the
written direction of the Holders of 66-2/3% of the Outstanding Amount of the
Notes shall, exercise all rights, remedies, powers, privileges and claims of the
Trust against the Seller or the Servicer under or in connection with the Sale
and Servicing Agreement, including the right or power to take any action to
compel or secure performance or observance by the Seller or the Servicer of each
of their obligations to the Trust thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Sale and Servicing
Agreement, and any right of the Trust to take such action shall be suspended.
SECTION 5.18 Subrogation. The Trust Collateral Agent shall (i) receive
as attorney-in-fact of each Noteholder any Note Policy Claim Amount from the
Insurer and (ii) deposit the same in the Note Distribution Account for
distribution to Noteholders. Any and all Note Policy Claim Amounts disbursed by
the Indenture Trustee from claims made under the Note Policy shall not be
considered payment by the Trust or from the Spread Account with respect to such
Notes, and shall not discharge the obligations of the Trust with respect
thereto. The Insurer shall, to the extent it makes any payment with respect to
the Notes, become subrogated to the rights of the recipient of such payments to
the extent of such payments. Subject to and conditioned upon any payment with
respect to the Notes by or on behalf of the Insurer, the Indenture Trustee shall
assign to the Insurer all rights to the payment of interest or principal with
respect to the Notes which are then due for payment to the extent of all
payments made by the Insurer, and the Insurer may exercise any option, vote
right, power or the like with respect to the Notes to the extent that it has
made payment pursuant to the Note Policy. To evidence such subrogation, the Note
Registrar shall note the Insurer's rights as subrogee upon the register of
Noteholders upon receipt from the Insurer of proof of payment by the Insurer of
any Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount. The foregoing subrogation shall in all cases be subject to
the rights of the Noteholders to receive all Scheduled Payments in respect of
the Notes.
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SECTION 5.19 Preference Claims.
(a) In the event that the Indenture Trustee has received a certified
copy of an order of the appropriate court that any Scheduled Payment (as defined
in the Note Policy) paid on a Note has been avoided in whole or in part as a
preference payment under applicable bankruptcy law, the Indenture Trustee shall
so notify the Insurer, shall comply with the provisions of the Note Policy to
obtain payment by the Insurer of such avoided payment, and shall, at the time it
provides notice to the Insurer, notify Holders of the Notes by mail that, in the
event that any Noteholder's payment is so recoverable, such Noteholder will be
entitled to payment pursuant to the terms of the Note Policy. The Indenture
Trustee shall furnish to the Insurer at its written request, the requested
records it holds in its possession evidencing the payments of principal of and
interest on Notes, if any, which have been made by the Indenture Trustee and
subsequently recovered from Noteholders, and the dates on which such payments
were made. Pursuant to the terms of the Note Policy, the Insurer will make such
payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order (as defined in
the Note Policy) and not to the Indenture Trustee or any Noteholder directly
(unless a Noteholder has previously paid such payment to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy, in which case the
Insurer will make such payment to the Indenture Trustee for distribution to such
Noteholder upon proof of such payment reasonably satisfactory to the Insurer).
(b) The Indenture Trustee shall promptly notify the Insurer of any
proceeding or the institution of any action (of which the Indenture Trustee has
actual knowledge) seeking the avoidance as a preferential transfer under
applicable bankruptcy, insolvency, receivership, rehabilitation or similar law
(a "Preference Claim") of any distribution made with respect to the Notes. Each
Holder, by its purchase of Notes, and the Indenture Trustee hereby agree that so
long as an Insurer Default shall not have occurred and be continuing, the
Insurer may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim including,
without limitation, (i) the direction of any appeal of any order relating to any
Preference Claim and (ii) the posting of any surety, supersede as or performance
bond pending any such appeal at the expense of the Insurer, but subject to
reimbursement as provided in the Insurance Agreement. In addition, and without
limitation of the foregoing, as set forth in Section 5.18(c), the Insurer shall
be subrogated to, and each Noteholder and the Indenture Trustee hereby delegate
and assign, to the fullest extent permitted by law, the rights of the Indenture
Trustee and each Noteholder in the conduct of any proceeding with respect to a
Preference Claim, including, without limitation, all rights of any party to an
adversary proceeding action with respect to any court order issued in connection
with any such Preference Claim.
ARTICLE VI
THE INDENTURE TRUSTEE AND THE TRUST COLLATERAL AGENT
SECTION 6.1 Duties of Indenture Trustee. (a) If an Event of Default has
occurred and is continuing, of which a Responsible Officer of the Indenture
Trustee and the Trust
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Collateral Agent, as the case may be, has actual knowledge, then the Indenture
Trustee or the Trust Collateral Agent, as the case may be, shall exercise the
rights and powers vested in it by this Indenture and the Transaction Documents
and use the same degree of care and skill in its exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of an above-mentioned Event of
Default:
(i) each of the Indenture Trustee and the Trust Collateral
Agent undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Indenture
Trustee and the Trust Collateral Agent, respectively; and
(ii) in the absence of bad faith on its part, each of the
Indenture Trustee and the Trust Collateral Agent may conclusively rely,
as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the
Indenture Trustee or the Trust Collateral Agent, as the case may be and
conforming to the requirements of this Indenture; however, the
Indenture Trustee and the Trust Collateral Agent shall examine the
certificates and opinions to determine whether or not they conform on
their face to the requirements of this Indenture.
(c) Each of the Indenture Trustee and the Trust Collateral Agent may
not be relieved from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) each of the Indenture Trustee and the Trust Collateral
Agent shall not be liable for any error of judgment made in good faith
by a Responsible Officer unless it is proved that the Indenture Trustee
or the Trust Collateral Agent was negligent in ascertaining the
pertinent facts; and
(iii) each of the Indenture Trustee and the Trust Collateral
Agent shall not be liable with respect to any action it takes or omits
to take in good faith in accordance with a direction received by it
pursuant to Section 5.12.
(d) The Indenture Trustee and the Trust Collateral Agent shall not be
liable for interest on any money received by it except as the Indenture Trustee
may agree in writing with the Trust.
(e) Money held in trust by the Indenture Trustee or the Trust
Collateral Agent need not be segregated from other funds except to the extent
required by law or the terms of this Indenture or the Sale and Servicing
Agreement.
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(f) No provision of this Indenture shall require the Indenture Trustee
or the Trust Collateral Agent 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 it shall have reasonable grounds to
believe that repayment of such funds or indemnity reasonably satisfactory to it
against such risk or liability is not reasonably assured to it.
(g) Every provision of this Indenture relating to the conductor
affecting the liability of or affording protection to the Indenture Trustee or
the Trust Collateral Agent shall be subject to the provisions of this Section
and to the provisions of the TIA.
(h) The Indenture Trustee or the Trust Collateral Agent shall, upon two
Business Day's prior written notice to the Indenture Trustee or the Trust
Collateral Agent, as the case may be, permit any representative of the Insurer,
during the Indenture Trustee's or the Trust Collateral Agent, as the case may
be, normal business hours, to examine all books of account, records, reports and
other papers of the Indenture Trustee or the Trust Collateral Agent, as the case
may be, relating to the Notes, to make copies and extracts therefrom and to
discuss the Indenture Trustee's or the Trust Collateral Agent's affairs and
actions, as such affairs and actions relate to the Indenture Trustee's or the
Trust Collateral Agent's duties with respect to the Notes, with the Indenture
Trustee's or the Trust Collateral Agent's officers and employees responsible for
carrying out the Indenture Trustee's or the Trust Collateral Agent's duties with
respect to the Notes at the sole cost and expense of the Trust.
(i) The Indenture Trustee shall, and hereby agrees that it will, hold
the Note Policy in trust, and will hold any proceeds of any claim on the Note
Policy in trust solely for the use and benefit of the Noteholders.
(j) Without limiting the generality of this Section 6.1, the Indenture
Trustee shall have no duty (i) to see to any recording, filing or depositing of
this Indenture or any agreement referred to herein or any financing statement
evidencing a security interest in the Financed Vehicles, or to see to the
maintenance of any such recording or filing or depositing or to any recording,
refiling or redepositing of any thereof, (ii) to see to any insurance of the
Financed Vehicles or Obligors or to effect or maintain any such insurance, (iii)
to see to the payment or discharge of any tax, assessment or other governmental
charge or any Lien or encumbrance of any kind owing with respect to, assessed or
levied against any part of the Trust, (iv) to confirm or verify the contents of
any reports or certificates delivered to the Indenture Trustee pursuant to this
Indenture or the Sale and Servicing Agreement believed by the Indenture Trustee
to be genuine and to have been signed or presented by the proper party or
parties, or (v) to inspect the Financed Vehicles at any time or ascertain or
inquire as to the performance of observance of any of the Trust's, the Seller's
or the Servicer's representations, warranties or covenants or the Servicer's
duties and obligations as Servicer and as custodian of the Receivable Files
under the Sale and Servicing Agreement.
(k) In no event shall Harris Trust and Savings Bank, in any of its
capacities hereunder, be deemed to have assumed any duties of the Owner Trustee
under the Delaware Business Trust Statute, common law, or the Trust Agreement.
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SECTION 6.2 Rights of Indenture Trustee and the Trust Collateral Agent.
(a) The Indenture Trustee and the Trust Collateral Agent may rely conclusively
on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Indenture Trustee and the Trust Collateral
Agent need not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee or the Trust Collateral Agent acts or
refrains from acting, it may require an Officer's Certificate or an Opinion of
Counsel. The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officer's Certificate or Opinion
of Counsel.
(c) The Indenture Trustee or the Trust Collateral Agent may execute any
of the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys or a custodian or nominee, and the
Indenture Trustee or the Trust Collateral Agent shall not be responsible for any
misconduct or negligence on the part of, or for the supervision of, NAFI,
including in its capacity as Servicer, or any other such agent, attorney,
custodian or nominee appointed with due care by it hereunder.
(d) The Indenture Trustee or the Trust Collateral Agent shall not be
liable for any action it takes or omits to take in good faith which it believes
to be authorized or within its rights or powers; provided, however, that the
Indenture Trustee's or the Trust Collateral Agent's conduct does not constitute
willful misconduct, negligence or bad faith.
(e) The Indenture Trustee and the Trust Collateral Agent may consult
with counsel, and the advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(f) The Indenture Trustee and the Trust Collateral Agent shall be under
no obligation to institute, conduct, defend any litigation or take any action
under this Indenture or in relation to this Indenture, at the request, order or
direction of any of the Holders of Notes or the Controlling Party, pursuant to
the provisions of this Indenture, unless such Holders of Notes or the
Controlling Party shall have offered to the Indenture Trustee and the Trust
Collateral Agent reasonable security or indemnity against the costs, expenses
and liabilities that may be incurred therein or thereby; provided, however that
the Indenture Trustee and the Trust Collateral Agent shall, upon the occurrence
of an Event of Default (that has not been cured), exercise the rights and powers
vested in it by this Indenture and the Transaction Documents and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.
(g) The Indenture Trustee and the Trust Collateral Agent shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by the Insurer (so long as no Insurer Default
shall have occurred and be continuing) or (if an Insurer Default shall have
occurred and be continuing)
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by the Holders of Notes evidencing not less than 25% of the Outstanding Amount
thereof; provided, however, that if the payment within a reasonable time to the
Indenture Trustee and the Trust Collateral Agent of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Indenture Trustee or the Trust Collateral Agent, not
reasonably assured to the Indenture Trustee or the Trust Collateral Agent by the
security afforded to it by the terms of this Indenture or the Sale and Servicing
Agreement, the Indenture Trustee or the Trust Collateral Agent may require
indemnity reasonably satisfactory to it against such cost, expense (including
legal fees and expenses) or liability as a condition to such proceeding; the
reasonable expense of every such examination shall be paid by the Person making
such request, or, if paid by the Indenture Trustee or the Trust Collateral
Agent, shall be reimbursed by the Person making such request upon demand.
SECTION 6.3 Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Trust or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Note Paying Agent,
Note Registrar, co-registrar or co-paying agent may do the same with like
rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.4 Indenture Trustee's Disclaimer. Each of the Indenture
Trustee and the Trust Collateral Agent shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture, the Trust
Property or the Notes, it shall not be accountable for the Trust's use of the
proceeds from the Notes, and it shall not be responsible for any statement of
the Trust in the Indenture or in any document issued in connection with the sale
of the Notes or in the Notes other than the Indenture Trustee's certificate of
authentication.
SECTION 6.5 Notice of Defaults. If an Event of Default occurs and is
continuing and if it is either actually known by, or written notice of the
existence thereof has been delivered to, a Responsible Officer of the Indenture
Trustee, the Indenture Trustee shall mail to each Noteholder notice of the
Default within 90 days after such knowledge or notice occurs. Except in the case
of a Default in payment of principal of or interest on any Note (including
payments pursuant to the mandatory redemption provisions of such Note), the
Indenture Trustee may withhold the notice if and so long as a Responsible
Officer in good faith determines that withholding the notice is in the interests
of Noteholders.
SECTION 6.6 Reports by Indenture Trustee to Holders. Upon written
request, the Note Paying Agent or the Servicer shall on behalf of the Trust
deliver to each Noteholder such information as may be reasonably required to
enable such Holder to prepare its Federal and state income tax returns required
by law.
SECTION 6.7 Compensation and Indemnity. (a) Pursuant to Section 5.7(b)
of the Sale and Servicing Agreement and subject to Section 6.18 herein, the
Trust shall, or shall cause the Servicer to, pay to the Indenture Trustee and
the Trust Collateral Agent from time to time compensation for its services. The
Indenture Trustee's and the Trust Collateral Agent's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Trust
shall or shall cause the Servicer to reimburse the Indenture Trustee and the
Trust
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Collateral Agent for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's and the Trust Collateral
Agent's agents, counsel, accountants and experts. The Trust shall or shall cause
the Servicer to indemnify the Indenture Trustee, the Trust Collateral Agent and
their respective officers, directors, employees and agents against any and all
loss, liability or expense (including attorneys' fees and expenses) incurred by
each of them in connection with the acceptance or the administration of this
trust and the performance of its duties hereunder. The Indenture Trustee or the
Trust Collateral Agent shall notify the Trust and the Servicer promptly of any
claim for which it may seek indemnity. Failure by the Indenture Trustee or the
Trust Collateral Agent to so notify the Trust and the Servicer shall not relieve
the Trust of its obligations hereunder or the Servicer of its obligations under
Article XII of the Sale and Servicing Agreement. The Trust shall or shall cause
the Servicer to defend the claim, the Indenture Trustee or the Trust Collateral
Agent may have separate counsel and the Trust shall or shall cause the Servicer
to pay the fees and expenses of such counsel. Neither the Trust nor the Servicer
need reimburse any expense or indemnify against any loss, liability or expense
incurred by the Indenture Trustee or the Trust Collateral Agent through the
Indenture Trustee's or the Trust Collateral Agent's own willful misconduct,
negligence or bad faith.
(b) The Trust's payment obligations to the Indenture Trustee pursuant
to this Section shall survive the discharge of this Indenture or the earlier
resignation or removal of the Indenture Trustee or the Trust Collateral Agent.
When the Indenture Trustee incurs expenses after the occurrence of a Default
specified in Section 5.1(iv) or (v) with respect to the Trust, the expenses are
intended to constitute expenses of administration under Title 11 of the United
States Code or any other applicable Federal or state bankruptcy, insolvency or
similar law. Notwithstanding anything else set forth in this Indenture or the
Transaction Documents, the Indenture Trustee agrees that the obligations of the
Trust (but not the Servicer) to the Indenture Trustee hereunder and under the
Transaction Documents shall be recourse to the Trust Property only and
specifically shall not be recourse to the assets of the Trust or any
Securityholder. In addition, the Indenture Trustee agrees that its recourse to
the Trust, the Trust Property, the Seller and amounts held pursuant of the
Spread Account Agreement shall be limited to the right to receive the
distributions referred to in Section 5.7(b) of the Sale and Servicing Agreement
or Section 3.03 of the Spread Account Agreement.
SECTION 6.8 Replacement of Indenture Trustee. The Indenture Trustee may
resign at any time by so notifying the Trust and the Insurer. The Trust may and,
at the request of the Insurer (unless an Insurer Default shall have occurred and
be continuing) shall, remove the Indenture Trustee, if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Indenture Trustee in an involuntary case or proceeding under
federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, shall have entered a decree or order
granting
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relief or appointing a receiver, liquidator, assignee, custodian,
trustee, conservator, sequestrator (or similar official) for the
Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or ordering the winding-up or liquidation of the
Indenture Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws,
as now or hereafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law is commenced with respect
to the Indenture Trustee and such case is not dismissed within 60 days;
(iv) the Indenture Trustee commences a voluntary case under
any federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian,
trustee, conservator, sequestrator (or other similar official) for the
Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or makes any assignment for the benefit of
creditors or fails generally to pay its debts as such debts become due
or takes any corporate action in furtherance of any of the foregoing;
(v) the Indenture Trustee otherwise becomes incapable of
acting; or
(vi) the rating assigned to the long-term unsecured debt
obligations of the Indenture Trustee by the Rating Agencies shall be
lowered below the rating of "BBB", "Baa3" or equivalent rating or be
withdrawn by either of the Rating Agencies.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Trust
shall promptly appoint a successor Indenture Trustee acceptable to the Insurer
(so long as an Insurer Default shall not have occurred and be continuing). If
the Trust fails to appoint such a successor Indenture Trustee, the Insurer may
appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Trust. Thereupon the
resignation or removal of the retiring Indenture Trustee the Insurer (provided
that no Insurer Default shall have occurred and be continuing) shall become
effective, and the successor Indenture Trustee shall have all the rights, powers
and duties of the retiring Indenture Trustee under this Indenture subject to
satisfaction of the Rating Agency Condition. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Trust or the Holders of a majority in Outstanding Amount
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
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If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Any resignation or removal of the Indenture Trustee and appointment of
a successor Indenture Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to Section 6.8 and payment of all fees and expenses
owed to the outgoing Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Trust's and the Servicer's obligations under Section 6.7 shall
continue for the benefit of the retiring Indenture Trustee.
SECTION 6.9 Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust may at the time be located, the Indenture Trustee
with the consent of the Insurer (so long as an Insurer Default shall not have
occurred and be continuing) shall have the power and may execute and deliver all
instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Trust, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trust as the Indenture Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 6.11 and no notice
to Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
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(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed the Indenture Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder, including acts
or omissions of predecessor or successor trustees; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, dissolve, become insolvent, become incapable of acting,
resign or be removed, all of its estates, properties, rights, remedies and
trusts shall invest in and be exercised by the Indenture Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
SECTION 6.11 Eligibility: Disqualification. The Indenture Trustee shall
at all times satisfy the requirements of TIA ss.310(a). The Indenture Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition and it shall have a long
term debt rating of Baa3 or better by the Rating Agencies. The Indenture Trustee
shall provide copies of such reports to the Insurer upon request. The Indenture
Trustee shall comply with TIA ss.310(b), including the optional provision
permitted by the second sentence of TIA ss.310(b)(9); provided, however, that
there shall be excluded from the operation
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of TIA ss.310(b)(1) any indenture or indentures under which other securities of
the Trust are outstanding if the requirements for such exclusion set forth in
TIA ss.310(b)(1) are met.
SECTION 6.12 Preferential Collection of Claims Against Trust. The
Indenture Trustee shall comply with TIA ss.311(a), excluding any creditor
relationship listed in TIA ss.311(b). A Indenture Trustee who has resigned or
been removed shall be subject to TIA ss.311(a) to the extent indicated.
SECTION 6.13 Appointment and Powers. Subject to the terms and
conditions hereof, each of the Trust Secured Parties hereby appoints Harris
Trust and Savings Bank as the Trust Collateral Agent with respect to the
Collateral, and Harris Trust and Savings Bank hereby accepts such appointment
and agrees to act as Trust Collateral Agent with respect to the Indenture
Collateral for the Trust Secured Parties, to maintain custody and possession of
such Indenture Collateral (except as otherwise provided hereunder) and to
perform the other duties of the Trust Collateral Agent in accordance with the
provisions of this Indenture and the other Transaction Documents. Each Trust
Secured Party hereby authorizes the Trust Collateral Agent to take such action
on its behalf, and to exercise such rights, remedies, powers and privileges
hereunder, as the Controlling Party may direct and as are specifically
authorized to be exercised by the Trust Collateral Agent by the terms hereof,
together with such actions, rights, remedies, powers and privileges as are
reasonably incidental thereto. The Trust Collateral Agent shall act upon and in
compliance with the written instructions of the Controlling Party delivered
pursuant to this Indenture promptly following receipt of such written
instructions; provided that the Trust Collateral Agent shall not act in
accordance with any instructions (i) which are not authorized by, or in
violation of the provisions of, this Indenture or (ii) for which the Trust
Collateral Agent has not received reasonable indemnity. Receipt of such
instructions shall not be a condition to the exercise by the Trust Collateral
Agent of its express duties hereunder, except where this Indenture provides that
the Trust Collateral Agent is permitted to act only following and in accordance
with such instructions.
SECTION 6.14 Performance of Duties. The Trust Collateral Agent shall
have no duties or responsibilities except those expressly set forth in this
Indenture and the other Transaction Documents to which the Trust Collateral
Agent is a party or as directed by the Controlling Party in accordance with this
Indenture. The Trust Collateral Agent shall not be required to take any
discretionary actions hereunder except at the written direction and with
indemnification from the Controlling Party. The Trust Collateral Agent shall,
and hereby agrees that it will, perform all of the duties and obligations
required of it under the Sale and Servicing Agreement.
SECTION 6.15 Limitation on Liability. Neither the Trust Collateral
Agent nor any of its directors, officers, employees and agents shall be liable
for any action taken or omitted to be taken by it or them hereunder, or in
connection herewith, except that the Trust Collateral Agent shall be liable for
its negligence, bad faith or willful misconduct; nor shall the Trust Collateral
Agent be responsible for the validity, effectiveness, value, sufficiency or
enforceability against the Trust of this Indenture or any of the Indenture
Collateral (or any part thereof). Notwithstanding any term or provision of this
Indenture, the Trust Collateral Agent shall incur
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no liability to the Trust or the Trust Secured Parties for any action taken or
omitted by the Trust Collateral Agent in connection with the Indenture
Collateral, except for the negligence, bad faith or willful misconduct on the
part of the Trust Collateral Agent, and, further, shall incur no liability to
the Trust Secured Parties except for negligence, bad faith or willful misconduct
in carrying out its duties to the Trust Secured Parties. Subject to Section
6.16, the Trust Collateral Agent shall be protected and shall incur no liability
to any such party in conclusively relying upon the accuracy, acting in reliance
upon the contents, and assuming the genuineness of any notice, demand,
certificate, signature, instrument or other document reasonably believed by the
Trust Collateral Agent to be genuine and to have been duly executed by the
appropriate signatory, and (absent actual knowledge to the contrary) the Trust
Collateral Agent shall not be required to make any independent investigation
with respect thereto. The Trust Collateral Agent shall at all times be free
independently to establish to its reasonable satisfaction, but shall have no
duty to independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Transaction Documents. The Trust Collateral Agent may consult
with counsel, and shall not be liable for any action taken or omitted to be
taken by it hereunder in good faith and in accordance with the advice of such
counsel. The Trust Collateral Agent shall not be under any obligation to
exercise any of the remedial rights, obligations or powers vested in it by this
Indenture or to follow any direction from the Controlling Party unless it shall
have received security or indemnity satisfactory to the Trust Collateral Agent
against the costs, expenses and liabilities which might be incurred by it.
SECTION 6.16 Reliance Upon Documents. In the absence of negligence, bad
faith or willful misconduct on its part, the Trust Collateral Agent shall be
entitled to rely conclusively on any communication, instrument, paper or other
document reasonably believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons and shall have no liability in
acting, or omitting to act, where such action or omission to act is in
reasonable reliance upon any statement or opinion contained in any such document
or instrument.
SECTION 6.17 Successor Trust Collateral Agent.
(a) Merger. Any Person into which the Trust Collateral Agent may be
converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its trust business and assets as a whole or substantially as a
whole, or any Person resulting from any such conversion, merger, consolidation,
sale or transfer to which the Trust Collateral Agent is a party, shall (provided
it is otherwise qualified to serve as the Trust Collateral Agent hereunder) be
and become a successor Trust Collateral Agent hereunder and be vested with all
of the title to and interest in the Indenture Collateral and all of the trusts,
powers, discretions, immunities, privileges and other matters as was its
predecessor without the execution or filing of any instrument or any further
act, deed or conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding, except to the extent, if any, that any
such action is necessary to perfect, or continue the perfection of, the security
interest of the Trust Secured Parties in the Indenture Collateral; provided that
any such successor shall also be the successor Indenture Trustee under Section
6.9.
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(b) Resignation. The Trust Collateral Agent and any successor Trust
Collateral Agent may resign at any time by so notifying the Trust and the
Insurer; provided that the Trust Collateral Agent shall not so resign unless it
shall also resign as Indenture Trustee hereunder.
(c) Removal. Absent a Financial Security Default (as defined in the
Master Spread Account Agreement), the Trust Collateral Agent may be removed by
the Controlling Party at any time (and should be removed at any time that the
Indenture Trustee has been removed), with or without cause, by an instrument or
concurrent instruments in writing delivered to the Trust Collateral Agent, the
other Trust Secured Party and the Trust. A temporary successor may be removed at
any time to allow a successor Trust Collateral Agent to be appointed pursuant to
subsection (d) below. Any removal pursuant to the provisions of this subsection
(c) shall take effect only upon the date which is the latest of (i) the
effective date of the appointment of a successor Trust Collateral Agent and the
acceptance in writing by such successor Trust Collateral Agent of such
appointment and of its obligation to perform its duties hereunder in accordance
with the provisions hereof, and (ii) receipt by the Controlling Party of an
Opinion of Counsel to the effect described in Section 3.6.
(d) Acceptance by Successor. The Controlling Party shall have the sole
right to appoint each successor Trust Collateral Agent. Every temporary or
permanent successor Trust Collateral Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to the Indenture Trustee, each
Trust Secured Party and the Trust an instrument in writing accepting such
appointment hereunder and the relevant predecessor shall execute, acknowledge
and deliver such other documents and instruments as will effectuate the delivery
of all Indenture Collateral to the successor Trust Collateral Agent, whereupon
such successor, without any further act, deed or conveyance, shall become fully
vested with all the estates, properties, rights, powers, duties and obligations
of its predecessor. Such predecessor shall, nevertheless, on the written request
of either Trust Secured Party or the Trust, execute and deliver an instrument
transferring to such successor all the estates, properties, rights and powers of
such predecessor hereunder. In the event that any instrument in writing from the
Trust or a Trust Secured Party is reasonably required by a successor Trust
Collateral Agent to more fully and certainly vest in such successor the estates,
properties, rights, powers, duties and obligations vested or intended to be
vested hereunder in the Trust Collateral Agent, any and all such written
instruments shall, at the request of the temporary or permanent successor Trust
Collateral Agent, be forthwith executed, acknowledged and delivered by the
Indenture Trustee or the Trust, as the case may be. The designation of any
successor Trust Collateral Agent and the instrument or instruments removing any
Trust Collateral Agent and appointing a successor hereunder, together with all
other instruments provided for herein, shall be maintained with the records
relating to the Indenture Collateral and, to the extent required by applicable
law, filed or recorded by the successor Trust Collateral Agent in each place
where such filing or recording is necessary to effect the transfer of the
Indenture Collateral to the successor Trust Collateral Agent or to protect or
continue the perfection of the security interests granted hereunder.
SECTION 6.18 Compensation. The Trust Collateral Agent shall not be
entitled to any compensation for the performance of its duties hereunder other
than the compensation it is
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entitled to receive in its capacity as Indenture Trustee. Upon termination of
the Indenture Trustee, the Trust Collateral Agent's duties hereunder shall also
terminate.
SECTION 6.19 Representations and Warranties of the Indenture Trustee
and the Trust Collateral Agent. Each of the Trust Collateral Agent and the
Indenture Trustee represents and warrants to the Trust and to each Trust Secured
Party as follows:
(a) Due Organization. The Indenture Trustee and the Trust Collateral
Agent is a New York banking corporation, duly organized, validly existing and in
good standing under the laws of New York and is duly authorized and licensed
under applicable law to conduct its business as presently conducted.
(b) Corporate Power. The Indenture Trustee and the Trust Collateral
Agent has all requisite right, power and authority to execute and deliver this
Indenture and to perform all of its duties as the Indenture Trustee or Trust
Collateral Agent, as the case may be, hereunder.
(c) Due Authorization. The execution and delivery by the Trust
Collateral Agent and the Indenture Trustee of this Indenture and the other
Transaction Documents to which it is a party, and the performance by the Trust
Collateral Agent and the Indenture Trustee of its duties hereunder and
thereunder, have been duly authorized by all necessary corporate proceedings,
are required for the valid execution and delivery by the Trust Collateral Agent
or the Indenture Trustee, or the performance by the Trust Collateral Agent or
the Indenture Trustee, of this Indenture and such other Transaction Documents.
(d) Valid and Binding Indenture. Each of the Indenture Trustee and the
Trust Collateral Agent has duly executed and delivered this Indenture and each
other Transaction Document to which it is a party, and each of this Indenture
and each such other Transaction Document constitutes the legal, valid and
binding obligation of the Indenture Trustee and the Trust Collateral Agent,
enforceable against the Indenture Trustee and the Trust Collateral Agent in
accordance with its terms, except as (i) such enforceability may be limited by
bankruptcy, insolvency, reorganization and similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
SECTION 6.20 Waiver of Setoffs. The Indenture Trustee and the Trust
Collateral Agent hereby expressly waives any and all rights of setoff that the
Indenture Trustee or the Trust Collateral Agent may otherwise at any time have
under applicable law with respect to any Account and agrees that amounts in the
Accounts shall at all times be held and applied solely in accordance with the
provisions hereof.
SECTION 6.21 Control by the Controlling Party. The Indenture Trustee
and the Trust Collateral Agent shall comply with notices and instructions given
by the Trust only if accompanied by the written consent of the Controlling
Party, except that if any Event of Default shall have occurred and be
continuing, the Indenture Trustee and the Trust Collateral Agent shall act upon
and comply with notices and instructions given by the Controlling Party alone in
the place and stead of the Trust.
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SECTION 6.22 Compensation. The Trust Collateral Agent shall not be
entitled to any compensation for the performance of its duties hereunder other
than the compensation it is entitled to receive in its capacity as Indenture
Trustee. Upon termination of the Indenture Trustee, the Trust Collateral Agent's
duties hereunder shall also terminate.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 Trust To Furnish To Indenture Trustee Names and Addresses
of Noteholders. The Trust will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Holders as of such Record Date, (b) at such other times as the Indenture Trustee
may request in writing, within 30 days after receipt by the Trust of any such
request, a list of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; provided, however, that so long as the
Indenture Trustee is the Note Registrar, no such list shall be required to be
furnished. The Indenture Trustee or, if the Indenture Trustee is not the Note
Registrar, the Trust shall furnish to the Insurer in writing upon their written
request and at such other times as the Insurer may request a copy of the list.
SECTION 7.2 Preservation of Information; Communications to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders contained in the most recent
list furnished to the Indenture Trustee as provided in Section 7.1 and the names
and addresses of Holders received by the Indenture Trustee in its capacity as
Note Registrar. The Indenture Trustee may destroy any list furnished to it as
provided in such Section 7.1 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss.312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Trust, the Indenture Trustee and the Note Registrar shall have
the protection of TIA ss.312(c).
SECTION 7.3 Reports by Trust. (a) The Trust shall:
(i) file with the Indenture Trustee, within 15 days after the
Trust is required to file the same with the Commission, copies of the
annual reports and copies of the information, documents and other
reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe)
which the Trust may be required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by
the Commission such additional information, documents and reports with
respect to compliance by the Trust
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with the conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
ss.313(c)) such summaries of any information, documents and reports
required to be filed by the Trust pursuant to clauses (i) and (ii) of
this Section 7.3(a) as may be required by rules and regulations
prescribed from time to time by the Commission.
(b) Unless the Trust otherwise determines, the fiscal year of the Trust
shall end on December 31 of each year.
SECTION 7.4 Reports by Indenture Trustee. If required by TIA
ss.313(a),within 60 days after each August 31, beginning with August 31, 1997,
the Indenture Trustee shall mail to each Noteholder as required by TIA ss.313(c)
a brief report dated as of such date that complies with TIA ss.313(a). The
Indenture Trustee also shall comply with TIA ss.313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Indenture Trustee with the Commission and each stock exchange,
if any, on which the Notes are listed. The Trust shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 Collection of Money. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Trust Collateral Agent pursuant to this Indenture and the Sale
and Servicing Agreement. The Indenture Trustee shall apply all such money
received by it, or cause the Trust Collateral Agent to apply all money received
by it as provided in this Indenture and the Sale and Servicing Agreement. Except
as otherwise expressly provided in this Indenture or in the Sale and Servicing
Agreement, if any default occurs in the making of any payment or performance
under any agreement or instrument that is part of the Trust Property, the
Indenture Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article V.
SECTION 8.2 Release of Collateral. (a) Subject to the payment of its
fees and expenses pursuant to Section 6.7, the Trust Collateral Agent may, and
when required by the Trust and the provisions of this Indenture shall, execute
instruments to release property from the lien of this Indenture, in a manner and
under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Trust Collateral
Agent as
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provided in this Article VIII shall be bound to ascertain the Trust Collateral
Agent's authority, inquire into the satisfaction of any conditions precedent or
see to the application of any monies.
(b) The Trust Collateral Agent shall, at such time as there are no
Notes outstanding and all sums due the Indenture Trustee pursuant to Section 6.7
have been paid, release any remaining portion of the Trust Property that secured
the Notes from the lien of this Indenture and release to the Trust or any other
Person entitled thereto any funds then on deposit in the Accounts. The Indenture
Trustee shall release property from the lien of this Indenture pursuant to this
Section 8.2(b) only upon receipt of a Trust Request accompanied by an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA) Independent
Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1) meeting the
applicable requirements of Section 11.1.
SECTION 8.3 Opinion of Counsel. The Trust Collateral Agent shall
receive at least seven days' notice when requested by the Trust to take any
action pursuant to Section 8.2(a), accompanied by copies of any instruments
involved, and the Indenture Trustee shall also require as a condition to such
action, an Opinion of Counsel in form and substance satisfactory to each of the
Insurer and the Indenture Trustee, stating the legal effect of any such action,
outlining the steps required to complete the same, and concluding that all
conditions precedent to the taking of such action have been complied with and
such action will not materially and adversely impair the security for the Notes
or the rights of the Noteholders in contravention of the provisions of this
Indenture; provided, however, that such Opinion of Counsel shall not be required
to express an opinion as to the fair value of the Trust Property. Counsel
rendering any such opinion may rely, without independent investigation, on the
accuracy and validity of any certificate or other instrument delivered to the
Indenture Trustee in connection with any such action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders. (a)
Without the consent of the Holders of any Notes but with the consent of the
Insurer (unless an Insurer Default shall have occurred and be continuing), as
evidenced to the Indenture Trustee, the Trust and the Indenture Trustee, when
authorized by a Trust Order, at any time and from time to time, may enter into
one or more indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as in force at the date of the execution
thereof), in form satisfactory to the Indenture Trustee, for any of the
following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trust Collateral Agent any property subject
or required to be subjected to the lien of this Indenture, or to
subject to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Trust, and the
assumption by any such successor of the covenants of the Trust herein
and in the Notes contained;
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(iii) to add to the covenants of the Trust, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Trust;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Trust Collateral Agent;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided that such action shall not adversely affect the
interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Trust and the Indenture Trustee, when authorized by a Trust
Order, may, also without the consent of any of the Holders of the Notes but with
prior notice to the Rating Agencies by the Trust, as evidenced to the Indenture
Trustee, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; provided, however, that
such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any Noteholder.
SECTION 9.2 Supplemental Indentures with Consent of Noteholders. The
Trust and the Indenture Trustee, when authorized by a Trust Order, also may,
with prior notice to the Rating Agencies, with the consent of the Insurer
(unless an Insurer Default shall have occurred and be continuing) and with the
consent of the Holders of not less than a majority of the outstanding Amount of
the Notes, by Act of such Holders delivered to the Trust and the Indenture
Trustee, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; provided, however,
that, subject to the express rights of the Insurer under the
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Transaction Documents, no such supplemental indenture shall, without the consent
of the Holder of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provision of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Property to
payment of principal of or interest on the Notes, or change any place
of payment where, or the coin or currency in which, any Note or the
interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any
such amount due on the Notes on or after the respective due dates
thereof (or, in the case of redemption, on or after the Redemption
Date);
(iii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(v) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Indenture Trustee to direct the Trust to
sell or liquidate the Trust Property pursuant to Section 5.4;
(vi) modify any provision of this Section except to increase
any percentage specified herein or to provide that certain additional
provisions of this Indenture or the Transaction Documents cannot be
modified or waived without the consent of the Holder of each
Outstanding Note affected thereby;
(vii) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Distribution Date
(including the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(viii) permit the creation of any lien ranking prior to or on
a parity with the lien of this Indenture with respect to any part of
the Trust Property or, except as otherwise permitted or contemplated
herein or in any of the Transaction Documents, terminate the lien of
this Indenture on any property at any time subject hereto or deprive
the Holder of any Note of the security provided by the lien of this
Indenture.
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The Indenture Trustee may determine whether or not any Notes would be
adversely affected by any supplemental indenture upon receipt of an Opinion of
Counsel to that effect and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Indenture Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Trust and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 9.3 Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel (and, if requested, an Officer's Certificate) stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Indenture Trustee may, but shall not be obligated to, enter into
any such supplemental indenture that affects the Indenture Trustee's own rights,
duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Indenture Trustee, the Trust and the Holders of the Notes shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.5 Conformity With Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Trust or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the
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Indenture Trustee and the Trust, to any such supplemental indenture may be
prepared and executed by the Trust and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1 Redemption. (a) The Notes are subject to redemption in
whole, but not in part, at the direction of the Seller pursuant to Section
11.1(a) of the Sale and Servicing Agreement, on any Distribution Date on which
the Servicer or Seller exercises its option to purchase the Trust Property
pursuant to said Section 11.1(a), for a purchase price equal to the Redemption
Price. The Servicer or the Trust shall furnish the Insurer and each Rating
Agency notice of such redemption. If the Notes are to be redeemed pursuant to
this Section 10.1(a), the Servicer or the Trust shall furnish notice of such
election to the Indenture Trustee not later than 35 days prior to the Redemption
Date and the Trust shall deposit with the Indenture Trustee in the Note
Distribution Account the Redemption Price of the Notes within Five Business Days
prior to the Redemption Date whereupon all such Notes shall be due and payable
on the Redemption Date upon the furnishing of a notice complying with Section
10.2.
(b) In the event that on the Distribution Date on which the Pre-Funding
Period ends (or on the Distribution Date on or immediately following the last
day of the Pre-Funding Period, if the Pre-Funding Period does not end on a
Distribution Date), any Pre-Funded Amount remains on deposit in the Pre-Funding
Account after giving effect to the purchase of all Additional Receivables,
including any such purchase on such Redemption Date, the Notes will be redeemed
in part and paid sequentially in an aggregate principal amount equal to the
Prepayment Amount.
(c) In the event that the assets of the Trust are sold pursuant to
Section 9.2 of the Trust Agreement, all amounts on deposit in the Note
Distribution Account shall be paid to the Noteholders up to the Outstanding
Amount of the Notes and all accrued and unpaid interest thereon. If amounts are
to be paid to Noteholders pursuant to this Section 10.1(c), the Servicer or the
Trust shall, to the extent practicable, furnish written notice of such event to
the Indenture Trustee not later than 45 days prior to the Redemption Date
whereupon all such amounts shall be payable on the Redemption Date.
SECTION 10.2 Form of Redemption Notice. (a) Notice of redemption
supplied to the Indenture Trustee by the Servicer under Section 10.1(a) shall be
given by the Indenture Trustee by facsimile or by first-class mail, postage
prepaid, transmitted or mailed prior to the applicable Redemption Date to each
Holder of Notes or record, as of the close of business on the date which is 5
days prior to the applicable Redemption Date, at such Holder's address appearing
in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
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(ii) the Redemption Price;
(iii) that the Record Date otherwise applicable to such
Redemption Date is not applicable and that payments shall be made only
upon presentation and surrender of such Notes and the place where such
Notes are to be surrendered for payment of the Redemption Price (which
shall be the office or agency of the Trust to be maintained as provided
in Section 3.2); and
(iv) that interest on the Notes shall cease to accrue on the
Redemption Date.
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Trust. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.1(b) is not required to
be given to Noteholders.
SECTION 10.3 Notes Payable on Redemption Date. The Notes to be redeemed
shall, following notice of redemption as required by Section 10.2 (in the case
of redemption pursuant to Section 10.1(a) or (c)), on the Redemption Date become
due and payable at the Redemption Price and (unless the Trust shall default in
the payment of the Redemption Price) no interest shall accrue on the Redemption
Price for any period after the date to which accrued interest is calculated for
purposes of calculating the Redemption Price.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Trust to the Indenture Trustee or the Trust
Collateral Agent to take any action under any provision of this Indenture, the
Trust shall furnish to the Indenture Trustee or the Trust Collateral Agent, as
the case may be, and to the Insurer (i) an Officer's Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
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(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other
property or securities with the Trust Collateral Agent that is
to be made the basis for the release of any property or securities
subject to the lien of this Indenture, the Trust shall, in addition to
any obligation imposed in Section 11.1(a) or elsewhere in this
Indenture, furnish to the Trust Collateral Agent and the Insurer an
Officer's Certificate certifying or stating the opinion of each person
signing such certificate as to the fair value (within 90 days of such
deposit) to the Trust of the Collateral or other property or
securities to be so deposited. Such certificate or opinion of fair
value shall satisfy the requirements of Section 314 of the TIA, as
amended.
(ii) Whenever the Trust is required to furnish to the Trust
Collateral Agent and the Insurer an Officer's Certificate
certifying or stating the opinion of any signer thereof as to the
matters described in clause (i) above, the Trust shall also deliver to
the Trust Collateral Agent and the Insurer an Independent Certificate
as to the same matters, if the fair value to the Trust of the
securities to be so deposited and of all other such securities made
the basis of any such withdrawal or release since the commencement of
the then-current fiscal year of the Trust, as set forth in the
certificates delivered pursuant to clause (i) above and this clause
(ii), is 10% or more of the Outstanding Amount of the Notes; provided,
that such a certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the Trust as set
forth in the related Officer's Certificate is less than $25,000 or
less than 1% percent of the Outstanding Amount of the Notes.
(iii) Other than with respect to the release of any Purchased
Receivables or Liquidated Receivables, whenever any property or
securities are to be released from the lien of this Indenture, the
Trust shall also furnish to the Trust Collateral Agent and the Insurer
an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days
of such release) of the property or securities proposed to be released
and stating that in the opinion of such
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person the proposed release will not impair the security under this
Indenture in contravention of the provisions hereof.
(iv) Whenever the Trust is required to furnish to the
Indenture Trustee and the Insurer an Officer's Certificate
certifying or stating the opinion of any signer thereof as to the
matters described in clause (iii) above, the Trust shall also furnish
to the Trust Collateral Agent and the Insurer an Independent
Certificate as to the same matters if the fair value of the property
or securities and of all other property other than Purchased
Receivables and Defaulted Receivables, or securities released from the
lien of this Indenture since the commencement of the then current
calendar year, as set forth in the certificates required by clause
(iii) above and this clause (iv), equals 10% or more of the
Outstanding Amount of the Notes; provided, that such certificate need
not be furnished in the case of any release of property or securities
if the fair value thereof as set forth in the related Officer's
Certificate is less than $25,000 or less than 1 percent of the then
Outstanding Amount of the Notes.
(v) Notwithstanding Section 2.9 or any other provision of this
Section, the Trust may (A) collect, liquidate, sell or otherwise
dispose of Receivables as and to the extent permitted or required by
the Transaction Documents and (B) make cash payments out of the
Accounts as and to the extent permitted or required by the Transaction
Documents.
SECTION 11.2 Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Trust may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his or her certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Seller or the Trust, stating that the information with respect to
such factual matters is in the possession of the Servicer, the Seller or the
Trust, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Trust
shall deliver any document as a condition of the granting of such application,
or as evidence of the Trust's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Trust to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to conclusively rely upon the
truth and accuracy of any statement or opinion contained in any such document as
provided in Article VI.
SECTION 11.3 Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Indenture Trustee, and,
where it is hereby expressly required, to the Trust. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.1) conclusive in favor of the Indenture Trustee and
the Trust, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any customary manner of the Indenture
Trustee.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Trust in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.4 Notices, etc. to Indenture Trustee, Trust and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to or filed with:
(a) The Indenture Trustee by any Noteholder or by the Trust shall be
sufficient for every purpose hereunder if personally delivered, delivered by
overnight courier or mailed first-class and shall be deemed to have been duly
given upon receipt to the Indenture Trustee at its Corporate Trust Office, or
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(b) The Trust by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if personally delivered, delivered by
facsimile or overnight courier or mailed first class, and shall deemed to have
been duly given upon receipt to the Trust addressed to: National Auto Finance
1997-1 Trust, in care of Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, DE 19890-0001 Attention: Corporate Trust
Administration, or at any other address previously furnished in writing to the
Indenture Trustee by Trust. The Trust shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee.
(c) The Insurer by the Trust or the Indenture Trustee shall be
sufficient for any purpose hereunder if in writing and mailed by first-class
mail personally delivered or telexed or telecopied to the recipient as follows:
To the Insurer: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: National Auto Finance 1997-1 Trust,
6.35% Automobile Receivables-Backed Notes
Telex No.: (212) 688-3101
Confirmation: (212) 826-3518
Telecopy Nos.: (212) 339-3518 or
(212) 339-3529
(In each case in which notice or other communication to the Insurer refers to an
Event of Default, a claim on the Note Policy or with respect to which failure on
the part of the Insurer to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication should also be
sent to the attention of the General Counsel and the Head--Financial Guaranty
Group "URGENT MATERIAL ENCLOSED.")
Notices required to be given to the Rating Agencies by the Trust, the
Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered, delivered by overnight courier or first class or via facsimile to (i)
in the case of Moody's, at the following address: Moody's Investors Service,
Inc., Attn: ABS Monitoring Department, 99 Church Street, New York, New York
10004, Fax No: (212) 533-0355 and (ii) in the case of S&P, at the following
address: Standard & Poor's Ratings Group, 26 Broadway (15th Floor), New York,
New York 10004, Attention: Asset Backed Surveillance Department, Fax No: (212)
412-0224; or as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
SECTION 11.5 Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor
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any defect in any notice so mailed to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
SECTION 11.6 Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Trust
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Note Paying Agent to such
Holder, that is different from the methods provided for in this Indenture for
such payments or notices, provided that such methods are reasonable and
consented to by the Indenture Trustee (which consent shall not be unreasonably
withheld). The Trust will furnish to the Indenture Trustee a copy of each such
agreement and the Indenture Trustee will cause payments to be made and notices
to be given in accordance with such agreements.
SECTION 11.7 Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.8 Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.9 Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Trust shall bind its successors and assigns,
whether so expressed
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<PAGE> 71
or not. All agreements of the Indenture Trustee in this Indenture shall bind its
successors. All agreements of the Trust Collateral Agent in this Indenture shall
bind its successors.
SECTION 11.10 Separability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11 Benefits of Indenture. The Insurer and its successors and
assigns shall be a third-party beneficiary to the provisions of this Indenture,
and shall be entitled to rely upon and directly to enforce such provisions of
this Indenture so long as no Insurer Default shall have occurred and be
continuing. Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, and the Noteholders, and any other party secured hereunder, and any
other person with an Ownership interest in any part of the Trust Property, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
The Insurer may disclaim any of its rights and powers under this Indenture (in
which case the Indenture Trustee may exercise such right or power hereunder),
but not its duties and obligations under the Note Policy, upon delivery of a
written notice to the Indenture Trustee.
SECTION 11.12 Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date an which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13 GOVERNING LAW. THIS INDENTURE 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 11.14 Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15 Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Trust and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Trust or any other counsel reasonably acceptable to
the Indenture Trustee and the Insurer) to the effect that such recording is
necessary either for the protection of the Noteholders or any other person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee or the Trust Collateral Agent under this Indenture or the
Collateral Agent under the Spread Account Agreement.
SECTION 11.16 Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Trust, the Seller, the
Servicer, the Owner Trustee, the Trust
65
<PAGE> 72
Collateral Agent or the Indenture Trustee on the Notes or under this Indenture
or any certificate or other writing delivered in connection herewith or
therewith, against (i) the Seller, the Servicer, the Trust Collateral Agent, the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Trust or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Seller, the
Servicer, the Trust Collateral Agent, the Indenture Trustee or the Owner Trustee
in its individual capacity, any holder of a beneficial interest in the Trust,
the Seller, the Trust Collateral Agent, the Servicer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Seller, the Servicer, the
Trust Collateral Agent, the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee, the Trust Collateral Agent and the
Owner Trustee have no such obligations in their individual capacity) and except
that any such owner or beneficiary shall be fully liable, to the extent provided
by applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity. For
all purposes of this Indenture, in the performance of any duties or obligations
of the Trust 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.
SECTION 11.17 No Petition. The Indenture Trustee and the Trust
Collateral Agent, by entering into this Indenture, and each Noteholder, by
accepting a Note, hereby covenant and agree that they will not at any time
institute against the Seller, or the Trust, or join in any institution the
Seller, or the Trust of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under any United States Federal
or state bankruptcy or similar law in connection with any obligations relating
to the Notes, this Indenture or any of the Transaction Documents.
SECTION 11.18 Inspection. The Trust agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee or of the
Insurer, during the Trust's normal business hours, to examine all the books of
account, records, reports, and other papers of the Trust, to make copies and
extracts therefrom, to cause such books to be audited by independent certified
public accountants, and to discuss the Trust's affairs, finances and accounts
with the Trust's officers, employees, and independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Indenture Trustee shall and shall cause its representatives to
hold in confidence all such information except to the extent disclosure may be
required by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Indenture Trustee may reasonably
determine that such disclosure is consistent with its Obligations hereunder.
SECTION 11.19 Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as Owner
Trustee of the Trust under the Trust Agreement, in the exercise of the powers
and authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Trust is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Trust, (c) nothing herein
66
<PAGE> 73
contained shall be construed as creating any liability on Wilmington Trust
Company individually or personally, to perform any covenant either expressed or
implied contained herein, all such liability, if any, being expressly waived by
the parties to this Agreement and by any person claiming by, through or under
them and (d) under no circumstances shall Wilmington Trust Company be personally
liable for the payment of any indebtedness or expenses of the Trust or be liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaking by the Trust under this Agreement or any related
documents.
67
<PAGE> 74
IN WITNESS WHEREOF, the Trust, the Indenture Trustee and the Trust
Collateral Agent have caused this Indenture to be duly executed by their
respective officers, hereunto duly authorized, all as of the day and year first
above written.
NATIONAL AUTO FINANCE 1997-1 TRUST
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee,
By:
-------------------------------------------
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, not in its
individual capacity but solely as
Indenture Trustee and Trust Collateral
Agent,
By:
-------------------------------------------
Name:
Title:
68
<PAGE> 75
EXHIBIT A
FORM OF NOTE
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE FOR NOTES IN DEFINITIVE FORM,
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS NOTE
IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
BY ACCEPTANCE OF THIS NOTE, THE HOLDER AGREES TO TREAT THIS NOTE AS
INDEBTEDNESS FOR FEDERAL INCOME TAX PURPOSES.
69
<PAGE> 76
Note Rate: Denomination:
$
First Distribution Date: Aggregate Principal Balance of
Note: $
CUSIP No.:
Final Scheduled Distribution Date: Note No.:
1
70
<PAGE> 77
National Auto Finance 1997-1 Trust
% AUTOMOBILE RECEIVABLES-BACKED NOTE,
SERIES 1997-1
evidencing indebtedness of the trust, the property of which includes a pool of
motor vehicle retail installment sale contracts, formed by the National
Financial Auto Funding Trust (the "Seller"). This Note is one of a duly
authorized issue of Notes designated as National Auto Finance 1997-1 Trust %
Automobile Receivables-Backed Notes of the Series specified hereon (herein
called the "Notes").
Except as provided in the Agreement referred to below, this Note does not
represent an obligation of or interest in the Seller, National Auto Finance
Company, Inc. (the "Servicer") or Harris Trust and Savings Bank or any of their
affiliates. Neither this Note nor the underlying Receivables are guaranteed by
any governmental agency or instrumentality. THIS NOTE IS NOT A DEPOSIT AND IS
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION .
This certifies that CEDE & CO. is the registered owner of the aggregate
principal balance evidenced by this Note, secured by the Trust Property, which
includes a pool (the "Pool") of motor vehicle installment sale contracts and
notes (the "Receivables") and the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Insurer"). The Trust Property was created pursuant to an Indenture (the
"Indenture"), dated as of June 29, 1997, among National Auto Finance 1997-1
Trust and Harris Trust and Savings Bank, not in its individual capacity but
solely as trust collateral agent (the "Trust Collateral Agent") and indenture
trustee (the "Indenture Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereinafter. Capitalized terms used but not
defined herein have the meanings assigned to them in the Indenture. This Note is
issued under and is subject to the terms, provisions and conditions of the
Indenture, to which Indenture, as amended from time to time, the Holder of this
Note by virtue of the acceptance hereof assents and by which such Holder is
bound. In the event of a conflict between the terms of this Note and the
Indenture, the Indenture shall control.
Pursuant to the terms of the Sale and Servicing Agreement, the Trust
Collateral Agent shall distribute on the 21st day of each month or, if such 21st
day is not a Business Day, the Business Day immediately following (the
"Distribution Date"), commencing on the first Distribution Date specified above,
to the Person in whose name this Note is registered at the close of business on
the last day of the preceding calendar month of such distribution (the "Record
Date"), an amount equal to the Noteholders' Distributable Amount required to be
distributed to Holders of Notes on such Distribution Date.
Pursuant to the Note Policy, the Insurer has unconditionally and
irrevocably guaranteed the full and complete payment of the Scheduled Payments
(as defined in the Note Policy) with respect to each Distribution Date.
<PAGE> 78
Distributions on this Note on each Distribution Date shall be applied
first to accrued and unpaid interest due on this Note and then to unpaid
principal.
Distributions on this Note will be made by the Trust Collateral Agent
in immediately available funds (by wire transfer or otherwise) for the account
of the Person entitled thereto if such Person holds Notes evidencing an
aggregate denomination of at least $1,000,000 and has so notified the Trust
Collateral Agent, or, if such Person does not hold Notes having such aggregate
denomination or holds such aggregate denomination but has not so notified the
Trust Collateral Agent, by check mailed to the address of the Person entitled
thereto, as such name and address shall appear on the Note Register.
Notwithstanding the above, the final distribution on this Note will be made
after due notice by the Trust Collateral Agent of the pendency of such
distribution and only upon presentation and surrender of this Note at the office
or agency appointed by the Trust Collateral Agent for that purpose in Chicago,
Illinois.
As provided in the Sale and Servicing Agreement, withdrawals from the
Distribution Account shall be made by the Trust Collateral Agent from time to
time for purposes other than distributions to Noteholders, such purposes
including payment to the Servicer of the Servicing Fee, reimbursement to the
Servicer of certain expenses incurred by it, payment to the Trust Collateral
Agent of its fees and expenses and payment to the Insurer of the premiums and
other amounts owed to it under an Insurance and Indemnity Agreement among
National Auto Finance 1997-1 Trust, the Seller, National Auto Finance Company,
Inc. and the Insurer.
The Sale and Servicing Agreement permits, with certain exceptions
therein provided, the amendment of the Sale and Servicing Agreement and the
modification of the rights and obligations of the Seller, the Servicer and the
Trust Collateral Agent and the rights of the Noteholders under the Agreement at
any time by the Seller, the Servicer and the Trust Collateral Agent, with the
written consent of the Insurer (unless an Insurer Default has occurred and is
continuing), and the consent of the Holders of Notes pursuant to Section 13.1 of
the Sale and Servicing Agreement. Any such consent by the Holder of this Note
shall be conclusive and binding on such Holder and upon all future Holders of
this Note and of any Note issued upon the transfer hereof or in exchange
therefor or in lieu hereof whether or not notation of such consent is made upon
the Note. The Sale and Servicing Agreement, also permits the amendment thereof
in certain circumstances without the consent of the Holders of any of the Notes
but with the written consent of the Insurer (unless a Insurer Default has
occurred and is continuing).
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable in the Note Register upon
surrender of this Note for registration of transfer at the offices or agencies
appointed by the Indenture Trustee in Chicago, Illinois, duly endorsed by, or
accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Notes of authorized denominations evidencing the same
aggregate outstanding principal balance will be issued to the designated
transferee or transferees.
The Notes are issuable only as registered Notes without coupons in
denominations specified in the Indenture. As provided in the Indenture and
subject to certain limitations therein set forth, Notes are exchangeable for new
Notes of authorized denominations evidencing the same aggregate Percentage
Interests, as requested by the Holder surrendering the same.
2
<PAGE> 79
No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Issuer, the Seller, the Servicer and the Indenture Trustee
and any agent of the the Issuer, the Seller, the Servicer or the Indenture
Trustee may treat the Person in whose name this Note is registered as the owner
hereof for all purposes, and neither the Issuer, the Seller, the Servicer, the
Indenture Trustee, the Trust Collateral Agent, nor any such agent shall be
affected by notice to the contrary.
No transfer of any Note or interest therein shall be made to
any transferee or purchaser who is, or who is purchasing such Note or interest
therein directly or indirectly on behalf of (i) an employee benefit plan or
other retirement arrangement, individual retirement account or keogh plan
subject to either Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or Section 4975 of the Code (each, a "Plan"), or (ii)
an entity whose assets are deemed to include Plan assets as a result of a Plan's
investment in such entity under Department of Labor Regulation Section
2510.3-101. Any prospective transferee shall be deemed to represent that it is
not purchasing directly or indirectly on behalf of a Plan or Plan Entity and the
Seller and Servicer shall be entitled to rely thereon.
It is the intent of the Issuer and the Noteholders that, for
federal, state and local income and franchise tax purposes, the Notes will be
evidence of indebtedness of the Issuer secured by the Trust Property. The Issuer
and the Noteholder, by the acceptance of this Note, agree to treat this Note for
federal, state and local income and franchise tax purposes as indebtedness of
the Issuer secured by the Trust Property.
Notwithstanding anything contained herein to the contrary (i)
the Indenture and the Sale and Servicing Agreement have been executed by Harris
Trust and Savings Bank not in its individual capacity but solely as Indenture
Trustee and Trust Collateral Agent, respectively, and in no event shall Harris
Trust and Savings Bank have any liability for the representations, warranties,
covenants, agreements or other obligations of the the Issuer or the Seller
thereunder or in any of the Notes, notices or agreements delivered pursuant
thereto, as to all of which recourse shall be had solely to the assets provided
for therein, and (ii) under no circumstances shall Harris Trust and Savings Bank
be personally liable for the payment of any indebtedness or expenses arising in
connection with the Indenture, the Sale and Servicing Agreement or the Notes or
otherwise. Notwithstanding the foregoing, the Trust Collateral Agent shall
remain and be liable for any breach of its duties and obligations under the Sale
and Servicing Agreement.
This Note does not purport to summarize the Indenture or the
Sale and Servicing Agreement and reference is made to the Indenture and the Sale
and Servicing Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby. Copies of the
Indenture, the Sale and Servicing Agreement and all amendments thereto will be
provided to any Noteholder free of charge upon a written request to the
Indenture Trustee, at its principal corporate trust office, 311 West Monroe
Street, Chicago, Illinois 60606, Attention: Indenture Trust Administration.
3
<PAGE> 80
Unless the certificate of authentication herein has been
executed by or on behalf of the Indenture Trustee, by manual signature, this
Note shall not be entitled to any benefit under the Indenture, or be valid for
any purpose.
4
<PAGE> 81
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed
under its official seal.
NATIONAL AUTO FINANCE 1997-1 TRUST
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
By:
-------------------------------
Authorized Officer
This is one of the Notes referred to in the within mentioned Indenture.
Dated: HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
By:
-------------------------------
Authorized Signatory
5
<PAGE> 82
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________________________________ the within Note
(name and address of assignee)
and all rights thereunder, and hereby irrevocably constitutes and appoints,
attorney, to transfer said Note on the books kept for registration thereof, with
full power of substitution in the premises.
Dated:______________ ____________________________(*) Signature Guaranteed:
(*) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
6
<PAGE> 1
EXHIBIT 4.2
TRUST AGREEMENT
between
NATIONAL FINANCIAL AUTO FUNDING TRUST
and
WILMINGTON TRUST COMPANY
Owner Trustee
Dated as of July 21, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I Definitions.........................................................1
SECTION 1.1. Capitalized Terms.............................................1
SECTION 1.2. Other Definitional Provisions.................................3
SECTION 1.3. Action by or Consent of Noteholders and Certificateholders....4
SECTION 1.4. Material Adverse Effect.......................................4
ARTICLE II Organization.......................................................5
SECTION 2.1. Name..........................................................5
SECTION 2.2. Office........................................................5
SECTION 2.3. Purposes and Powers...........................................5
SECTION 2.4. Appointment of Owner Trustee..................................5
SECTION 2.5. Initial Capital Contribution of Trust Estate..................5
SECTION 2.6. Declaration of Trust..........................................5
SECTION 2.7. Liability.....................................................6
SECTION 2.8. Title to Trust Property.......................................6
SECTION 2.9. Situs of Trust................................................6
SECTION 2.10. Representations and Warranties of the Depositor..............7
SECTION 2.11. Federal Income Tax Allocations...............................8
SECTION 2.12. Covenants of the Depositor...................................8
SECTION 2.13. Covenants of the Certificateholders..........................9
ARTICLE III Certificates and Transfer of Interests...........................10
SECTION 3.1. Initial Ownership............................................10
SECTION 3.2. The Certificates.............................................10
SECTION 3.3. Authentication of Certificates...............................10
SECTION 3.4. Registration of Transfer and Exchange of Certificates........10
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates............13
SECTION 3.6. Persons Deemed Certificateholders............................13
SECTION 3.7. Access to List of Certificateholders' Names and Addresses....13
SECTION 3.8. Maintenance of Office or Agency..............................14
SECTION 3.9. ERISA Restrictions...........................................14
ii
<PAGE> 3
SECTION 3.10. Securities Matters..........................................14
ARTICLE IV Voting Rights and Other Actions...................................14
SECTION 4.1. Prior Notice to Holders with Respect to Certain Matters......14
SECTION 4.2. Action by Certificateholders with Respect to
Certain Matters .............................................15
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy......15
SECTION 4.4. Restrictions on Certificateholders' Power....................15
SECTION 4.5. Majority Control.............................................16
SECTION 4.6. Rights of Insurer............................................16
ARTICLE V Certain Duties.....................................................17
SECTION 5.1. Accounting and Records to the Noteholders,
Certificateholders, the Internal Revenue Service and
Others.......................................................17
SECTION 5.2. Signature on Returns; Tax Matters Partner....................17
SECTION 5.3. Underwriting Agreement.......................................17
ARTICLE VI Authority and Duties of Owner Trustee.............................17
SECTION 6.1. General Authority............................................17
SECTION 6.2. General Duties...............................................18
SECTION 6.3. Action upon Instruction......................................18
SECTION 6.4. No Duties Except as Specified in this Agreement or
in Instructions..............................................19
SECTION 6.5. No Action Except under Specified Documents or Instructions...19
SECTION 6.6. Restrictions.................................................20
ARTICLE VII Concerning the Owner Trustee.....................................20
SECTION 7.1. Acceptance of Trusts and Duties..............................20
SECTION 7.2. Furnishing of Documents......................................21
SECTION 7.3. Representations and Warranties...............................21
SECTION 7.4. Reliance; Advice of Counsel..................................22
SECTION 7.5. Not Acting in Individual Capacity............................22
SECTION 7.6. Owner Trustee Not Liable for Certificates or Receivables.....22
SECTION 7.7. Owner Trustee May Own Certificates and Notes.................23
SECTION 7.8. Payments from Owner Trust Estate.............................23
SECTION 7.9. Doing Business in Other Jurisdictions........................23
ARTICLE VIII Compensation of Owner Trustee...................................24
SECTION 8.1. Owner Trustee's Fees and Expenses............................24
iii
<PAGE> 4
SECTION 8.2. Indemnification..............................................24
SECTION 8.3. Payments to the Owner Trustee................................24
ARTICLE IX Termination of Trust Agreement....................................24
SECTION 9.1. Termination of Trust Agreement...............................25
ARTICLE X Successor Owner Trustees and Additional Owner Trustees.............26
SECTION 10.1. Eligibility Requirements for Owner Trustee..................26
SECTION 10.2. Resignation or Removal of Owner Trustee.....................26
SECTION 10.3. Successor Owner Trustee.....................................27
SECTION 10.4. Merger or Consolidation of Owner Trustee....................28
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee...............28
ARTICLE XI Miscellaneous.....................................................29
SECTION 11.1. Supplements and Amendments..................................29
SECTION 11.2. No Legal Title to Owner Trust Estate in Certificateholders..30
SECTION 11.3. Limitations on Rights of Others.............................30
SECTION 11.4. Notices.....................................................30
SECTION 11.5. Severability................................................31
SECTION 11.6. Separate Counterparts.......................................31
SECTION 11.7. Assignments; Insurer........................................31
SECTION 11.8. No Petition.................................................31
SECTION 11.9. No Recourse.................................................32
SECTION 11.10. Headings...................................................32
SECTION 11.11. GOVERNING LAW..............................................32
SECTION 11.12. Servicer...................................................32
Exhibit A Form of Certificate
Exhibit B Form of Certificate of Trust
Exhibit C Form of Purchaser Representation Letter
Exhibit D Form of Transferee Representation Letter
iv
<PAGE> 5
TRUST AGREEMENT dated as of July 21, 1997 between NATIONAL FINANCIAL
AUTO FUNDING TRUST, a Delaware business trust (the "Depositor"), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as Owner Trustee.
ARTICLE I
Definitions
SECTION 1.1. Capitalized Terms. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Affiliate" shall mean with respect to any specified Person, a
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, or owns, directly or
indirectly, 50% or more of, the Person specified.
"Agreement" shall mean this Trust Agreement, as the same may
be amended and supplemented from time to time.
"Basic Documents" shall mean this Agreement, the Certificate
of Trust, the Sale and Servicing Agreement, the Spread Account Agreement, the
Insurance Agreement, the Indenture and the other documents and certificates
delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in
Section 3.9.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of
the Delaware Code, 12 Del. Code ss.. 3801 et. seq. as the same may be
amended from time to time.
"Certificate" means a trust certificate evidencing the
beneficial ownership interest of a Certificateholder in the Trust, substantially
in the form of Exhibit A attached hereto.
"Certificate of Trust" shall mean the Certificate of Trust in
the form of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of
the Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean
the register mentioned and the registrar appointed pursuant to Section 3.4.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, or at such other address as the Owner
Trustee may designate by notice to the Certificateholders and the Depositor, or
the principal corporate trust office of any successor
1
<PAGE> 6
Owner Trustee (the address of which the successor owner trustee will notify the
Certificateholders and the Depositor).
"Definitive Certificates" shall mean Certificates issued in
certificated, fully registered form.
"Depositor" shall mean National Financial Auto Funding Trust
in its capacity as Depositor hereunder.
"Depositor Trust Agreement" shall mean the First Amended and
Restated Trust Agreement, dated as of December 8, 1994, between National Auto
Finance Company, Inc. and The Chase Manhattan Bank (Delaware), as trustee, as
the same may be amended and supplemented from time to time.
"Distribution Account" shall mean the account designated as
such as established and maintained pursuant to the Sale and Servicing Agreement.
"ERISA" shall have the meaning assigned to such term in
Section 3.9.
"Expenses" shall have the meaning assigned to such term in
Section 8.2.
"Holder" or "Certificateholder" shall mean the Person in whose
name a Certificate is registered on the Certificate Register.
"Indemnified Parties" shall have the meaning assigned to such
term in Section 8.2.
"Indenture" shall mean the Indenture dated as of June 29,
1997, between the Issuer and Harris Trust and Savings Bank, as Trust Collateral
Agent and Indenture Trustee, as the same may be amended and supplemented from
time to time in accordance with the terms thereof.
"Indenture Trustee" shall mean, initially Harris Trust and
Savings Bank, in its capacity as indenture trustee, including its successors in
interest, until and unless a successor Person shall have become the Indenture
Trustee pursuant to the Sale and Servicing Agreement and thereafter "Indenture
Trustee" shall mean such successor Person.
"Insurer" shall mean Financial Security Assurance Inc., or its
successor in interest.
"Instructing Party" shall have the meaning assigned to such
term in Section 6.3.
"Owner Trust Estate" shall mean all right, title and interest
of the Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from time
to time in the Trust Accounts and all other property of the Trust from time to
time, including any rights of the Owner Trustee and the Trust pursuant to the
Sale and Servicing Agreement and the Spread Account Agreement.
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"Owner Trustee" shall mean Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as owner
trustee under this Agreement, and any successor Owner Trustee hereunder.
"Record Date" shall mean with respect to any Distribution
Date, the close of business on the last Business Day immediately preceding such
Distribution Date.
"Sale and Servicing Agreement" shall mean the Sale and
Servicing Agreement among the Trust, National Financial Auto Funding Trust, as
Seller, National Auto Finance Company, Inc., as Servicer and the Trust
Collateral Agent, dated as of June 29, 1997, as the same may be amended and
supplemented from time to time.
"Secretary of State" shall mean the Secretary of State of the
State of Delaware.
"Security Majority" means a majority by principal amount of
the Noteholders so long as the Notes are outstanding and a majority by principal
amount of the Certificateholders thereafter.
"Spread Account" shall mean the Series Spread Account
established and maintained pursuant to the Spread Account Agreement.
"Spread Account Agreement" shall mean the Spread Account
Agreement, dated as of July 23, 1997, among National Financial Auto Funding
Trust, the Insurer, and Harris Trust and Savings Bank, as Trust Collateral Agent
and as Collateral Agent, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Treasury Regulations" shall mean regulations, including
proposed or temporary regulations, promulgated under the Code. References herein
to specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Accounts" shall have the meaning ascribed thereto in
the Sale and Servicing Agreement.
"Trust Collateral Agent" shall mean, initially, Harris Trust
and Savings Bank, in its capacity as collateral agent, including its successors
in interest, until and unless a successor Person shall have become the Trust
Collateral Agent pursuant to the Sale and Servicing Agreement, and thereafter
"Trust Collateral Agent" shall mean such successor Person.
SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined
have the meanings assigned to them in the Sale and Servicing Agreement
or, if not defined therein, in the Spread Account Agreement or in the
Indenture.
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(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 as in effect on the date of this Agreement or any
such certificate or other document, as applicable. 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; Section and Exhibit references contained in this Agreement
are references to Sections 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 terms and to the
masculine as well as to the feminine and neuter genders of such terms.
SECTION 1.3. Action by or Consent of Noteholders and
Certificateholders. Whenever any provision of this Agreement refers to action to
be taken, or consented to, by Noteholders or Certificateholders, such provision
shall be deemed to refer to the Certificateholder or Noteholder, as the case may
be, of record as of the Record Date immediately preceding the date on which such
action is to be taken, or consent given, by Noteholders or Certificateholders.
Solely for the purposes of any action to be taken, or consented to, by
Noteholders, any Note registered in the name of the Seller or any Affiliate
thereof shall be deemed not to be outstanding; provided, however, that, solely
for the purpose of determining whether the Indenture Trustee or the Trust
Collateral Agent is entitled to rely upon any such action or consent, only Notes
which the Owner Trustee, the Indenture Trustee or the Trust Collateral Agent,
respectively, knows to be so owned shall be so disregarded.
SECTION 1.4. Material Adverse Effect. Whenever a determination is to be
made under this Agreement as to whether a given event, action, course of conduct
or set of facts or circumstances could or would have a material adverse effect
on the Noteholders or Certificateholders (or any similar or analogous
determination), such determination shall be made without taking into account the
funds available from claims under the Policy.
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ARTICLE II
Organization
SECTION 2.1. Name. There is hereby formed a trust to be known as
"National Auto Finance 1997-1 Trust", in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.2. Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address as the
Owner Trustee may designate by written notice to the Certificateholders and the
Depositor.
SECTION 2.3. Purposes and Powers. (a) The purpose of the Trust is, and
the Trust shall have the power and authority, to engage in the following
activities: (i) to issue the Notes pursuant to the Indenture and the
Certificates pursuant to this Agreement, and to sell the Notes; (ii) with the
proceeds of the sale of the Notes, to fund the Pre-Funding Account, the
Pre-Funding Period Reserve Account and the Spread Account and to pay the
organizational, start-up and transactional expenses of the Trust and to pay the
balance to the Depositor pursuant to the Sale and Servicing Agreement; (iii) to
assign, grant, transfer, pledge, mortgage and convey the Owner Trust Estate
(other than the Distribution Account) to the Trust Collateral Agent pursuant to
the Indenture for the benefit of the Insurer and the Indenture Trustee on behalf
of the Noteholders and to hold, manage and distribute to the Certificateholders
and the Depositor pursuant to the terms of the Sale and Servicing Agreement any
portion of the Owner Trust Estate released from the Lien of, and remitted to the
Trust pursuant to, the Indenture; (iv) to enter into and perform its obligations
under the Basic Documents to which it is a party; (v) to engage in those
activities, including entering into agreements, that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or connected
therewith; and (vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation of the
Owner Trust Estate and the making of distributions to the Certificateholders and
the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities.
The Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this Agreement
or the Basic Documents.
SECTION 2.4. Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.5. Initial Capital Contribution of Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Distribution Account. The Depositor shall pay
organizational expenses of the Trust as they may arise.
SECTION 2.6. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the
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use and benefit of the Certificateholders, subject to the obligations of the
Trust under the Basic Documents. It is the intention of the parties hereto that
the Trust constitute a business trust under the Business Trust Statute and that
this Agreement constitute the governing instrument of such business trust. It is
the intention of the parties hereto that, solely for income tax purposes, the
Trust shall be treated as a branch; provided, however, that in the event
Certificates are owned by more than one Certificateholder, it is the intention
of the parties hereto that, solely for income and franchise tax purposes, the
Trust shall then be treated as a partnership and that, unless otherwise required
by appropriate tax authorities, only after such time the Trust will file or
cause to be filed annual or other necessary returns, reports and other forms
consistent with the characterization of the Trust as a partnership for such tax
purposes. Effective as of the date hereof, the Owner Trustee shall have all
rights, powers and duties set forth herein and to the extent not inconsistent
herewith, in the Business Trust Statute with respect to accomplishing the
purposes of the Trust. The Owner Trustee shall file the Certificate of Trust
with the Secretary of State.
SECTION 2.7. Liability. (a) The Depositor shall pay organizational
expenses of the Trust as they may arise or shall, upon the request of the Owner
Trustee, promptly reimburse the Owner Trustee for any such expenses paid by the
Owner Trustee.
(b) No Holder, other than to the extent set forth in clause
(a), shall have any personal liability for any liability or obligation
of the Trust.
SECTION 2.8. Title to Trust Property. (a) Legal title to all the Owner
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in which
case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
(b) The Holders shall not have legal title to any part of the
Trust Property. The Holders shall be entitled to receive distributions
with respect to their undivided ownership interest therein only in
accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title or interest by any Certificateholder of
its ownership interest in the Owner Trust Estate shall operate to
terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to
any part of the Trust Property.
SECTION 2.9. Situs of Trust. The Trust will be located and administered
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
New York. Payments will be received by the Trust only in Delaware or New York
and payments will be made by the Trust only from Delaware or New York. The Trust
shall not have any employees in any state other than Delaware; provided,
however, that nothing herein shall restrict or prohibit the Owner Trustee, the
Servicer or any agent of the Trust from having employees within or without the
State of Delaware. The only office of the Trust will be at the Corporate Trust
Office in Delaware.
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SECTION 2.10. Representations and Warranties of the Depositor. The
Depositor makes the following representations and warranties on which the Owner
Trustee relies in accepting the Owner Trust Estate in trust and issuing the
Certificates and upon which the Insurer relies in issuing the Note Policy.
(a) Organization and Good Standing. The Depositor is duly
organized and validly existing as a Delaware business trust with 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 is proposed to be conducted pursuant to this Agreement and the
Basic Documents.
(b) Due Qualification. It is duly qualified to do business and
in good standing, and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of its
property, the conduct of its business and the performance of its
obligations under this Agreement and the Basic Documents requires such
qualification.
(c) Power and Authority. The Depositor has the trust 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 Trust
and the Depositor has duly authorized such sale and assignment and
deposit to the Trust by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly
authorized by the Depositor by all necessary trust action.
(d) No Consent Required. To the best knowledge of the
Depositor, no consent, license, approval or authorization or
registration or declaration with, any Person or with any governmental
authority, bureau or agency is required in connection with the
execution, delivery or performance of this Agreement and the Basic
Documents, except for such as have been obtained, effected or made.
(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 organizational documents of the Depositor, or any
material indenture, agreement or other instrument to which the
Depositor is a party or by which it is bound; nor 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); nor violate any law or,
to the best of the Depositor's knowledge, any order, rule or regulation
applicable 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 its knowledge threatened against it before any court,
regulatory body, administrative agency or other tribunal or
governmental instrumentality having
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jurisdiction over it or its properties (A) asserting the invalidity of
this Agreement or any of the Basic Documents, (B) seeking to prevent
the issuance of the Certificates or the Notes or the consummation of
any of the transactions contemplated by this Agreement or any of the
Basic Documents, (C) seeking any determination or ruling that might
materially and adversely affect its performance of its obligations
under, or the validity or enforceability of, this Agreement or any of
the Basic Documents, or (D) seeking to adversely affect the federal
income tax or other federal, state or local tax attributes of the
Certificates.
SECTION 2.11. Federal Income Tax Allocations. In the event that the
Trust is treated as a partnership for Federal income tax purposes, net income
(to the extent of available net income) and net losses of the Trust for any
month as determined for Federal income tax purposes (and each item of income,
gain, loss, credit and deduction entering into the computation thereof) shall be
allocated among the Certificateholders as of the first Record Date following the
end of such month, in proportion to their percentage ownership of the
Certificate on such date. The Depositor is authorized to modify the allocations
in this paragraph if necessary or appropriate, in its sole discretion, for the
allocations to fairly reflect the economic income, gain or loss to the
Certificateholders, or as otherwise required by the Code.
SECTION 2.12. Covenants of the Depositor. The Depositor agrees and
covenants for the benefit of each Certificateholder, the Insurer and the Owner
Trustee, during the term of this Agreement, and to the fullest extent permitted
by applicable law, that:
(a) it shall not create, incur or suffer to exist any
indebtedness or engage in any business, except, in each case, as
permitted by the Depositor Trust Agreement and the Basic Documents;
(b) it shall not, for any reason, institute proceedings for
the Trust to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Trust,
or file a petition seeking or consenting to reorganization or relief
under any applicable federal or state law relating to the bankruptcy of
the Trust, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Trust or a substantial part of the property of the Trust or cause or
permit the Trust to make any assignment for the benefit of creditors,
or admit in writing the inability of the Trust to pay its debts
generally as they become due, or declare or effect a moratorium on the
debt of the Trust or take any action in furtherance of any such action;
(c) it shall obtain from each counterparty to each Basic
Document to which it or the Trust is a party and each other agreement
entered into on or after the date hereof to which it or the Trust is a
party, an agreement by each such counterparty that prior to the
occurrence of the event specified in Section 9.1(e) such counterparty
shall not institute against, or join any other Person in instituting
against, it or the Trust, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other
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similar proceedings under the laws of the United States or any state of
the United States; and
(d) it shall not, for any reason, withdraw or attempt to
withdraw from this Agreement, dissolve, institute proceedings for it to
be adjudicated a bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against it, or file a petition
seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of it or a substantial part of its
property, or make any assignment for the benefit of creditors, or admit
in writing its inability to pay its debts generally as they become due,
or declare or effect a moratorium on its debt or take any action in
furtherance of any such action.
SECTION 2.13. Covenants of the Certificateholders. Each
Certificateholder agrees:
(a) to be bound by the terms and conditions of the
Certificates and of this Agreement, including any supplements or
amendments hereto and to perform the obligations of a Certificateholder
as set forth therein or herein, in all respects as if it were a
signatory hereto. This undertaking is made for the benefit of the
Trust, the Owner Trustee, the Insurer and all other Certificateholders
present and future;
(b) to hereby appoint the Depositor as such
Certificateholder's agent and attorney-in-fact to sign any federal
income tax information return filed on behalf of the Trust, if any, and
agree that, if requested by the Trust, it will sign such federal income
tax information return in its capacity as holder of an interest in the
Trust. Each Certificateholder also hereby agrees that in its tax
returns it will not take any position inconsistent with those taken in
any tax returns that may be filed by the Trust;
(c) if such Certificateholder is other than an individual or
other entity holding its Certificate through a broker who reports
securities sales on Form 1099-B, to notify the Owner Trustee of any
transfer by it of a Certificate in a taxable sale or exchange, within
30 days of the date of the transfer;
(d) until the completion of the events specified in Section
9.1(e), not to, for any reason, institute proceedings for the Trust or
the Depositor to be adjudicated a bankrupt or insolvent, or consent to
the institution of bankruptcy or insolvency proceedings against the
Trust, or file a petition seeking or consenting to reorganization or
relief under any applicable federal or state law relating to
bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Trust or a substantial part of its property, or cause or permit the
Trust to make any assignment for the benefit of its creditors, or admit
in writing its inability to pay its debts generally as they become due,
or declare or effect a moratorium on its debt or take any action in
furtherance of any such action; and
(e) that there shall not be more than 98 other holders of
Certificates.
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ARTICLE III
Certificates and Transfer of Interests
SECTION 3.1. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the sale of the
Certificates by the Depositor, the Depositor, as the sole Certificateholder,
shall be the sole beneficiary of the Trust.
SECTION 3.2. The Certificates shall be executed on behalf of the Trust
by manual or facsimile signature of an authorized officer of the Owner Trustee.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be validly issued and entitled to the benefit of this
Agreement, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the authentication and delivery of such
Certificates or did not hold such offices at the date of authentication and
delivery of such Certificates. A transferee of a Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder, upon due registration of such
Certificate in such transferee's name pursuant to Section 3.4.
SECTION 3.3. Authentication of Certificates. Concurrently with the
initial sale of the Receivables to the Trust pursuant to the Sale and Servicing
Agreement, the Owner Trustee shall cause the Certificates to be executed on
behalf of the Trust, authenticated and delivered to or upon the written order of
the Depositor, signed by its chairman of the board, its president or any vice
president, its treasurer or any assistant treasurer without further corporate
action by the Depositor. No Certificate shall entitle its holder to any benefit
under this Agreement, or shall be valid for any purpose, unless there shall
appear on such Certificate a certificate of authentication substantially in the
form set forth in Exhibit A, executed by the Owner Trustee, by manual signature;
such authentication shall constitute conclusive evidence that such Certificate
shall have been duly authenticated and delivered hereunder. All Certificates
shall be dated the date of their authentication.
SECTION 3.4. Registration of Transfer and Exchange of Certificates. The
Certificate Registrar shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 3.8, a Certificate Register in which, subject to
such reasonable regulations as it may prescribe, the Owner Trustee shall provide
for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. The Owner Trustee shall be the initial
Certificate Registrar.
The Certificates have not been registered under the Securities Act of
1933, as amended (the "Securities Act") or any state securities law. The
Certificate Registrar shall not register the transfer of any Certificate unless
such resale or transfer is pursuant to an effective registration statement under
the Securities Act or is to the Seller or unless it shall have received (i) a
representation letter substantially in the form of Exhibit C hereto or (ii) such
other representations (or an Opinion of Counsel) satisfactory to the Owner
Trustee to the effect that such resale or transfer is made (A) in a transaction
exempt from the registration requirements of
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the Securities Act and applicable state securities laws, or (B) to a person who
the transferor of the Certificate reasonably believes is a qualified
institutional buyer (within the meaning of Rule 144A under the Securities Act)
that is aware that such resale or other transfer is being made in reliance upon
Rule 144A. Until the earlier of (i) such time as the Certificates shall be
registered pursuant to a registration statement filed under the Securities Act
and (ii) the date two years from the later of the date of the original
authentication and delivery of the Certificates and the date any Certificate was
acquired from the Seller or any affiliate of the Seller, the Certificates shall
bear a legend as follows:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE IN
RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS SUCH RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 3.4 OF THE
OWNER TRUST AGREEMENT PERTAINING TO THE NATIONAL AUTO FINANCE 1997-1 TRUST (THE
"AGREEMENT") AND (B) IS MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, (iii)
TO THE SELLER OR (iv) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT THAT IS AWARE THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A AND (C) UPON THE SATISFACTION OF CERTAIN OTHER
REQUIREMENTS SPECIFIED IN THE AGREEMENT. NEITHER THE SELLER, THE SERVICER, THE
TRUST NOR THE OWNER TRUSTEE IS OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
The Certificate Registrar shall provide the Trust Collateral Agent with
a list of the names and addresses of the Certificateholders on the Closing Date
in the form which such information is provided to the Certificate Registrar by
the Depositor. Upon any transfers of Certificates, the Certificate Registrar
shall notify the Trust Collateral Agent of the name and address of the
transferee in writing, by facsimile, on the day of such transfer.
Upon surrender for registration of transfer of any Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like class percentage ownership
interest in the Trust dated the date of authentication by the Owner Trustee or
any authenticating agent. At the option of a Holder, Certificates may be
exchanged for other Certificates of the same class of a like percentage
ownership interest in the Trust upon surrender of the Certificates to be
exchanged at the office or agency maintained pursuant to Section 3.8.
Every Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Owner Trustee and
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the Certificate Registrar duly executed by the Certificateholder or his attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate Registrar,
which requirements include membership or participation in the Securities
Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Certificate Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Exchange Act. Each
Certificate surrendered for registration of transfer or exchange shall be
canceled and subsequently disposed of by the Owner Trustee in accordance with
its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
Notwithstanding the preceding provisions of this Section, the Owner
Trustee shall be required to make, and the Certificate Registrar shall not be
required to register, transfers and exchanges of Certificates for a period of 15
days preceding the due date for any payment with respect to the Certificate.
The Seller shall not sell, transfer, assign, convey or pledge any
Certificate at any time subsequent to the Closing Date to any Person that is an
Affiliate of the Seller, unless, prior to such sale, transfer, assignment,
conveyance or pledge, the Seller delivers to Financial Security an Opinion of
Counsel substantially similar in form and substance to the Opinion of Counsel
delivered on the Closing Date as to non-consolidation of the assets and
liabilities of (x) the Seller and NAFI or (y) the Seller and any such Person
that is an Affiliate of the Seller (other than NAFI), of which a copy shall be
delivered to each Rating Agency.
In furtherance of and not in limitation of the foregoing, each
Certificateholder, by acceptance of its Certificate, specifically acknowledges
that is has no right to or interest in any monies at any time held pursuant to
the Spread Account Agreement or prior to the release of such monies pursuant to
Section 5.7(b) of the Sale and Servicing Agreement or Section 3.03 of the Spread
Account Agreement, such monies being held in trust for the benefit of the
Noteholders and the Insurer. Notwithstanding the foregoing, in the event that it
is ever determined that the monies held in the Spread Account constitute a
pledge of collateral, then the provisions of the Sale and Servicing Agreement
and the Spread Account Agreement shall be considered to constitute a security
agreement and the Seller and the Certificateholders hereby grant to the
Collateral Agent for the benefit of the Indenture Trustee on behalf of the
Noteholders and the Insurer a first priority perfected security interest in such
amounts, to be applied as set forth in Section 3.03 of the Spread Account
Agreement. In addition, each Certificateholder, be acceptance of its
Certificate, hereby appoints the Depositor as its agent to pledge a first
priority perfected security interest in the Spread Account, and any amounts held
therein from time to time, to the Collateral Agent for the benefit of the
Indenture Trustee and the Insurer pursuant to the Spread Account Agreement and
agrees to execute and deliver such instruments of conveyance, assignment, grant,
confirmation, etc. as well as any financing statements, in each
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case the Insurer shall consider reasonably necessary in order to perfect the
Collateral Agent's Security Interest in the Collateral (as such terms are
defined in the Spread Account Agreement).
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate shall be surrendered to the Certificate Registrar, or
if the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar, the Owner Trustee and (unless an Insurer Default
shall have occurred and be continuing) the Insurer, such security or indemnity
as may be required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
class, and percentage ownership interest in the Trust. In connection with the
issuance of any new Certificate under this Section, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
SECTION 3.6. Persons Deemed Certificateholders. Every Person by virtue
of becoming a Certificateholder in accordance with this Agreement and the rules
and regulations of the Certificate Registrar shall be deemed to be bound by the
terms of this Agreement. Prior to due presentation of a Certificate for
registration of transfer, the Owner Trustee, the Certificate Registrar and the
Insurer and any agent of the Owner Trustee, the Certificate Registrar and the
Insurer, may treat the Person in whose name any Certificate shall be registered
in the Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to the Sale and Servicing Agreement and for all
other purposes whatsoever, and none of the Owner Trustee, the Certificate
Registrar or the Insurer nor any agent of the Owner Trustee, the Certificate
Registrar or the Insurer shall be bound by any notice to the contrary.
SECTION 3.7. Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Servicer, the
Depositor or (unless an Insurer Default shall have occurred and be continuing)
the Insurer, within 15 days after receipt by the Owner Trustee of a request
therefor from such Person in writing, a list, of the names and addresses of the
Certificateholders as of the most recent Record Date. If three or more Holders
of Certificates or one or more Holders of Certificates evidencing not less than
25% of the percentage ownership interest in the Trust apply in writing to the
Owner Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates and such application is accompanied by
a copy of the communication that such applicants propose to transmit, then the
Owner Trustee shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to the
current list of Certificateholders. Each Holder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Depositor,
the Servicer, the Owner Trustee or the Insurer or any agent thereof accountable
by
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reason of the disclosure of its name and address, regardless of the source from
which such information was derived.
SECTION 3.8. Maintenance of Office or Agency. The Owner Trustee shall
maintain in Wilmington, Delaware, an office or offices or agency or agencies
where Certificates may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Owner Trustee in respect of the
Certificates and the Basic Documents may be served. The Owner Trustee initially
designates its Corporate Trust Office for such purposes. The Owner Trustee shall
give prompt written notice to the Depositor, the Certificateholders and the
Insurer of any change in the location of the Certificate Register or any such
office or agency.
SECTION 3.9. ERISA Restrictions. The Certificates may not be acquired
by or for the account of (i) an employee benefit plan (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a plan
described in Section 4975(e)(1) of the Internal Revenue Code of 1985, as
amended, or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding its beneficial ownership interest in its Certificate, the
Holder thereof shall be deemed to have represented and warranted that it is not
a Benefit Plan.
SECTION 3.10. Securities Matters. Notwithstanding anything contained
herein to the contrary, the Owner Trustee shall not be responsible for
ascertaining whether any transfer complies with the registration provisions or
exemptions from the Securities Act of 1933, as amended, the Securities Act of
1934, as amended, applicable state securities law or the Investment Company Act;
provided, however, that if a certificate is specifically required to be
delivered to the Owner Trustee by a purchaser or transferee of a Certificate,
the Owner Trustee shall be under a duty to examine the same to determine whether
it conforms to the requirements of this Trust Agreement and shall promptly
notify the party delivering the same if such certificate does not so conform.
ARTICLE IV
Voting Rights and Other Actions
SECTION 4.1. Prior Notice to Holders with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take action
unless at least 10 days before the taking of such action, the Owner Trustee
shall have notified the Certificateholders in writing of the proposed action and
the Certificateholders shall not have notified the Owner Trustee in writing
prior to the 10th day after such notice is given that such Certificateholders
have withheld consent or provided alternative direction:
(a) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed
under the Business Trust Statute or unless such amendment would not
materially and adversely affect the interests of the Holders);
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(b) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is required;
(c) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is not required
and such amendment materially adversely affects the interest of the
Certificateholders; or
(d) except pursuant to Section 13.1(b) of the Sale and
Servicing Agreement, the amendment, change or modification of the Sale
and Servicing Agreement, except to cure any ambiguity or defect or to
amend or supplement any provision in a manner that would not materially
adversely affect the interests of the Certificateholders.
The Owner Trustee shall notify the Certificateholders in writing of any
appointment of a successor Note Registrar, Trust Collateral Agent or Certificate
Registrar within five Business Days thereof.
SECTION 4.2. Action by Certificateholders with Respect to Certain
Matters. The Owner Trustee shall not have the power, except upon the direction
of the Insurer or, in the event that an Insurer Default shall have occurred and
be continuing, the Security Majority in accordance with the Basic Documents, to
(a) remove the Servicer under the Sale and Servicing Agreement or (b) except as
expressly provided in the Basic Documents, sell the Receivables after the
termination of the Indenture. The Owner Trustee shall take the actions referred
to in the preceding sentence only upon written instructions signed by the
Insurer or the Securityholders, as the case may be, and the furnishing of
indemnification satisfactory to the Owner Trustee by the Certificateholders.
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy.
Until the Notes have been paid in full, the Owner Trustee shall not have the
power to, and shall not, commence any proceeding or other actions contemplated
by Section 2.12(d) relating to the Trust without the prior written consent of
the Insurer (unless an Insurer Default shall have occurred and be continuing) or
the Security Majority upon an Insurer Default. After the Notes have been paid in
full, all amounts due to the Insurer under the Insurance Agreement have been
paid in full, the Term of the Policy has expired and the Trust Collateral Agent
has surrendered the Policy to the Insurer, the Owner Trustee shall not have the
power to, and shall not, commence any proceeding or other actions contemplated
by Section 212(d) relating to the Trust without the prior written consent of all
of the Certificateholders and the delivery to the Owner Trustee by each such
Certificateholder of written certification that such Certificateholder
reasonably believes that the Trust is insolvent.
SECTION 4.4. Restrictions on Certificateholders' Power. (a) The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Basic
Documents or would be contrary to Section 2.3 or otherwise contrary to law nor
shall the Owner Trustee be obligated to follow any such direction, if given.
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(b) No Certificateholder (other than the Depositor as sole
Certificateholder) shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or under or with respect to this
Agreement or any Basic Document, unless the Certificateholders are the
Instructing Party pursuant to Section 6.3 and unless a
Certificateholder previously shall have given to the Owner Trustee a
written notice of default and of the continuance thereof, as provided
in this Agreement, and also unless Certificateholders evidencing not
less than 25% of the percentage ownership interest in the Trust shall
have made written request upon the Owner Trustee to institute such
action, suit or proceeding in its own name as Owner Trustee under this
Agreement and shall have offered to the Owner Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities
to be incurred therein or thereby, and the Owner Trustee, for 30 days
after its receipt of such notice, request, and offer of indemnity,
shall have neglected or refused to institute any such action, suit, or
proceeding, and during such 30-day period no request or waiver
inconsistent with such written request has been given to the Owner
Trustee pursuant to and in compliance with this Section or Section 6.3;
it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Owner
Trustee, that no one or more Holders of Certificates shall have any
right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb, or
prejudice the rights of the Holders of any other of the Certificates,
or to obtain or seek to obtain priority over or preference to any other
such Holder, or to enforce any right under this Agreement, except in
the manner provided in this Agreement and for the equal, ratable, and
common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section 4.4, each and every
Certificateholder and the Owner Trustee shall be entitled to such
relief as can be given either at law or in equity.
SECTION 4.5. Majority Control. No Certificateholder shall have any
right to vote or in any manner otherwise control the operation and management of
the Trust except as expressly provided in this Agreement. Except as expressly
provided herein, any action that may be taken by the Certificateholders under
this Agreement may be taken by the Holders of Certificates evidencing not less
than a majority of the percentage ownership interest in the Trust. Except as
expressly provided herein, any written notice of the Certificateholders
delivered pursuant to this Agreement shall be effective if signed by
Certificateholders evidencing not less than a majority of the percentage
ownership interest in the Trust at the time of the delivery of such notice.
SECTION 4.6. Rights of Insurer. Notwithstanding anything to the
contrary in the Basic Documents, without the prior written consent of the
Insurer or if an Insurer Default shall have occurred and be continuing, the
Security Majority, the Owner Trustee shall not (i) remove the Servicer, the
Backup Servicer, or any Sub-Servicer, (ii) initiate any claim, suit or
proceeding by the Trust or compromise any claim, suit or proceeding brought by
or against the Trust, other than with respect to the enforcement of any
Receivable or any rights of the Trust thereunder, (iii) authorize the merger or
consolidation of the Trust with or into any other business trust or other entity
(other than in accordance with Section 3.10 of the Indenture), (iv) amend the
Certificate of Trust or (v) amend this Agreement in accordance with Section 11.1
of this Agreement.
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ARTICLE V
Certain Duties
SECTION 5.1. Accounting and Records to the Noteholders,
Certificateholders, the Internal Revenue Service and Others. Subject to Sections
12.1(b)(iii) and 12.1(c) of the Sale and Servicing Agreement, the Depositor
shall (a) maintain (or cause to be maintained) the books of the Trust on a
calendar year basis on the accrual method of accounting, including, without
limitation, the allocations of net income under Section 2.11, (b) deliver (or
cause to be delivered) to each Certificateholder, as may be required by the Code
and applicable Treasury Regulations, such information as may be required
(including Schedule K-1, if applicable) to enable each Certificateholder to
prepare its Federal and state income tax returns, (c) file or cause to be filed,
if necessary, such tax returns relating to the Trust (including a partnership
information return, Form 1065), and direct the Owner Trustee or the Servicer, as
the case may be, to make such elections as may from time to time be required or
appropriate under any applicable state or Federal statute or rule or regulation
thereunder so as to maintain the Trust's characterization as a branch, or if
applicable, as a partnership, for Federal income tax purposes and (d) collect or
cause to be collected any withholding tax as described in and in accordance with
Section 5.9(c) of the Sale and Serving Agreement with respect to income or
distributions to Certificateholders and the appropriate forms relating thereto.
The Owner Trustee or the Servicer, as the case may be, shall make all elections
pursuant to this Section as directed in writing by the Depositor. The Owner
Trustee shall sign all tax information returns, if any, filed pursuant to this
Section 5.1 and any other returns as may be required by law, and in doing so
shall rely entirely upon, and shall have no liability for information provided
by, or calculations provided by, the Depositor or the Servicer. The Owner
Trustee shall elect under Section 1278 of the Code to include in income
currently any market discount that accrues with respect to the Receivables. The
Owner Trustee shall not make the election provided under Section 754 of the
Code.
SECTION 5.2. Signature on Returns; Tax Matters Partner. (a)
Notwithstanding the provisions of Section 5.1 and in the event that the Trust is
characterized as a partnership, the Owner Trustee shall sign on behalf of the
Trust the tax returns of the Trust, unless applicable law requires a
Certificateholder to sign such documents, in which case such documents shall be
signed by the Depositor.
(b) In the event that the Trust is characterized as a
partnership, the Depositor shall be the "tax matters partner" of the
Trust pursuant to the Code.
SECTION 5.3. Underwriting Agreement. The Servicer is hereby authorized
to execute and deliver the Underwriting Agreement with respect to the Notes.
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.1. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is named
as a party and each
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certificate or other document attached as an exhibit to or contemplated by the
Basic Documents to which the Trust is named as a party and any amendment
thereto, in each case, in such form as the Depositor shall approve as evidenced
conclusively by the Owner Trustee's execution thereof, and on behalf of the
Trust, to direct the Indenture Trustee to authenticate and deliver the Notes in
the aggregate principal amount of $66,891,200. In addition to the foregoing, the
Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust pursuant to the Basic Documents. The Owner Trustee is
further authorized from time to time to take such action as the Instructing
Party recommends with respect to the Basic Documents so long as such activities
are consistent with the terms of the Basic Documents.
SECTION 6.2. General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and to administer the Trust in the interest of the
Holders, subject to the Basic Documents and in accordance with the provisions of
this Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed
to have discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Servicer has agreed in the Sale and Servicing
Agreement to perform any act or to discharge any duty of the Trust or the Owner
Trustee hereunder or under any Basic Document, and the Owner Trustee shall not
be liable for the default or failure of the Servicer to carry out its
obligations under the Sale and Servicing Agreement.
SECTION 6.3. Action upon Instruction. (a) Subject to Article IV and the
terms of the Spread Account Agreement, the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or the Certificateholders (if
an Insurer Default shall have occurred and be continuing) (the "Instructing
Party") shall have the exclusive right to direct the actions of the Owner
Trustee in the management of the Trust, so long as such instructions are not
inconsistent with the express terms set forth herein or in any Basic Document.
The Instructing Party shall not instruct the Owner Trustee in a manner
inconsistent with this Agreement or the Basic Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such
action is likely to result in liability on the part of the Owner
Trustee or is contrary to the terms hereof or of any Basic Document or
is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of
this Agreement or any Basic Document, the Owner Trustee shall promptly
give notice (in such form as shall be appropriate under the
circumstances) to the Instructing Party requesting instruction as to
the course of action to be adopted, and to the extent the Owner Trustee
acts in good faith in accordance with any written instruction of the
Instructing Party received, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not
have received appropriate instruction within ten days of such notice
(or within such shorter period of time as reasonably may be specified
in such notice or may be necessary under the circumstances) it may, but
shall be under no duty to, take or refrain
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from taking such action, not inconsistent with this Agreement or the
Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such
action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Basic Document or
any such provision is ambiguous as to its application, or is, or
appears to be, in conflict with any other applicable provision, or in
the event that this Agreement permits any determination by the Owner
Trustee or is silent or is incomplete as to the course of action that
the Owner Trustee is required to take with respect to a particular set
of facts, the Owner Trustee may give notice (in such form as shall be
appropriate under the circumstances) to the Instructing Party
requesting instruction and, to the extent that the Owner Trustee acts
or refrains from acting in good faith in accordance with any such
instruction received, the Owner Trustee shall not be liable, on account
of such action or inaction, to any Person. If the Owner Trustee shall
not have received appropriate instruction within 10 days of such notice
(or within such shorter period of time as reasonably may be specified
in such notice or may be necessary under the circumstances) it may, but
shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall
deem to be in the best interests of the Certificateholders, and shall
have no liability to any Person for such action or inaction.
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.3; and no implied duties or obligations
shall be read into this Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any Basic Document. The Owner Trustee nevertheless
agrees that it will, at its own cost and expense, promptly take all action as
may be necessary to discharge any Liens on any part of the Owner Trust Estate
that result from actions by, or claims against, the Owner Trustee (solely in its
individual capacity) and that are not related to the ownership or the
administration of the Owner Trust Estate.
SECTION 6.5. No Action Except under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Basic Documents
and (iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.3.
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SECTION 6.6. Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section 2.3
or (b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation or a publicly traded partnership for
Federal income tax purposes. The Certificateholders shall not direct the Owner
Trustee to take action that would violate the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.1. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all monies actually received by it constituting
part of the Owner Trust Estate upon the terms of the Basic Documents and this
Agreement. The Owner Trustee shall not be answerable or accountable hereunder or
under any Basic Document under any circumstances, except (i) for its own willful
misconduct, bad faith or negligence, (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.3 expressly made by the Owner
Trustee in its individual capacity, (iii) for liabilities arising from the
failure of the Owner Trustee to perform obligations expressly undertaken by it
in the last sentence of Section 6.4 hereof, (iv) for any investments issued by
the Owner Trustee or any branch or affiliate thereof in its commercial capacity
or (v) for taxes, fees or other charges on, based on or measured by, any fees,
commissions or compensation received by the Owner Trustee. In particular, but
not by way of limitation (and subject to the exceptions set forth in the
preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment made by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the
instructions of the Instructing Party, the Depositor, the Servicer or
any Certificateholder;
(c) no provision of this Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur
any financial liability in the performance of any of its rights or
powers hereunder or under any Basic Document if the Owner Trustee shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably
assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Basic
Documents, including the principal of and interest on the Notes;
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(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or for the form, character,
genuineness, sufficiency, value or validity of any of the Owner Trust
Estate or for or in respect of the validity or sufficiency of the Basic
Documents, other than the certificate of authentication on the
Certificates, and the Owner Trustee shall in no event assume or incur
any liability, duty or obligation to the Depositor, the Insurer,
Trustee, Trust Collateral Agent, the Collateral Agent, any Noteholder
or to any Certificateholder, other than as expressly provided for
herein and in the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Depositor, the Insurer, the Trustee, the Trust
Collateral Agent or the Servicer under any of the Basic Documents or
otherwise and the Owner Trustee shall have no obligation or liability
to perform the obligations under this Agreement or the Basic Documents
that are required to be performed by the Depositor under this
Agreement, by the Trustee under the Indenture or the Trust Collateral
Agent or the Servicer under the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any Basic Document, at
the request, order or direction of the Instructing Party or any of the
Certificateholders, unless such Instructing Party or Certificateholders
have offered to the Owner Trustee security or indemnity satisfactory to
it against the costs, expenses and liabilities that may be incurred by
the Owner Trustee therein or thereby. The right of the Owner Trustee to
perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee
shall not be answerable for other than its negligence, bad faith or
willful misconduct in the performance of any such act.
SECTION 7.2. Furnishing of Documents. The Owner Trustee shall furnish
to the Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents.
SECTION 7.3. Representations and Warranties. The Owner Trustee hereby
represents and warrants, in its individual capacity, to the Depositor, the
Holders and the Insurer (which shall have relied on such representations and
warranties in issuing the Policies), that:
(a) It is a Delaware banking corporation, duly organized and
validly existing in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement
will be executed and
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delivered by one of its officers who is duly authorized to execute and
deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any federal or Delaware state law, governmental rule or
regulation governing the banking or trust powers of the Owner Trustee
or any judgment or order binding on it, or constitute any default under
its charter documents or by-laws or any indenture, mortgage, contract,
agreement or instrument to which it is a party or by which any of its
properties may be bound.
SECTION 7.4. Reliance; Advice of Counsel. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper believed by it to be genuine and believed by it to be signed
by the proper party or parties. The Owner Trustee may accept a certified copy of
a resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect. As to any fact or matter the
method of the determination of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on a certificate, signed by the
president or any vice president or by the treasurer, secretary or other
authorized officers of the relevant party, as to such fact or matter, and such
certificate shall constitute full protection to the Owner Trustee for any action
taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this
Agreement or the Basic Documents, the Owner Trustee (i) may act
directly or through its agents or attorneys pursuant to agreements
entered into with any of them, and the Owner Trustee shall not be
liable for the conduct or misconduct of such agents or attorneys if
such agents or attorneys shall have been selected by the Owner Trustee
with reasonable care, and (ii) may consult with counsel, accountants
and other skilled persons to be selected with reasonable care and
employed by it. The Owner Trustee shall not be liable for anything
done, suffered or omitted in good faith by it in accordance with the
written opinion or advice of any such counsel, accountants or other
such persons and according to such opinion not contrary to this
Agreement or any Basic Document.
SECTION 7.5. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Certificates or Receivables.
The recitals contained herein and in the Certificates (other than the signature
and countersignature of the Owner Trustee on the Certificates) shall be taken as
the statements of the Depositor and the
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Owner Trustee assumes no responsibility for the correctness thereof. The Owner
Trustee makes no representations as to the validity or sufficiency of this
Agreement, of any Basic Document or of the Certificates (other than the
signature and countersignature of the Owner Trustee on the Certificates) or the
Notes, or of any Receivable or related documents. The Owner Trustee shall at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Receivable, or the perfection and priority of
any security interest created by any Receivable in any Financed Vehicle or the
maintenance of any such perfection and priority, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments to
be distributed to Certificateholders under this Agreement or the Noteholders
under the Indenture, including, without limitation: the existence, condition and
ownership of any Financed Vehicle; the existence and enforceability of any
insurance thereon; the existence and contents of any Receivable on any computer
or other record thereof; the validity of the assignment of any Receivable to the
Trust or of any intervening assignment; the completeness of any Receivable; the
performance or enforcement of any Receivable; the compliance by the Depositor,
the Servicer or any other Person with any warranty or representation made under
any Basic Document or in any related document or the accuracy of any such
warranty or representation or any action of the Trustee or the Servicer or any
subservicer taken in the name of the Owner Trustee.
SECTION 7.7. Owner Trustee May Own Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledge
of Certificates or Notes and may deal with the Depositor, the Trustee and the
Servicer in banking transactions with the same rights as it would have if it
were not Owner Trustee.
SECTION 7.8. Payments from Owner Trust Estate. All payments to be made
by the Owner Trustee under this Agreement or any of the Basic Documents to which
the Trust or the Owner Trustee is a party shall be made only from the income and
proceeds of the Owner Trust Estate and only to the extent that the Owner Trust
shall have received income or proceeds from the Owner Trust Estate to make such
payments in accordance with the terms hereof. Wilmington Trust Company, or any
successor thereto, in its individual capacity, shall not be liable for any
amounts payable under this Agreement or any of the Basic Documents to which the
Trust or the Owner Trustee is a party.
SECTION 7.9. Doing Business in Other Jurisdictions. Notwithstanding
anything contained to the contrary, neither Wilmington Trust Company or any
successor thereto, nor the Owner Trustee shall be required to take any action in
any jurisdiction other than in the State of Delaware if the taking of such
action will, even after the appointment of a co-trustee or separate trustee in
accordance with Section 10.5 hereof, (i) require the consent or approval or
authorization or order of or the giving of notice to, or the registration with
or the taking of any other action in respect of, any state or other governmental
authority or agency of any jurisdiction other than the State of Delaware; (ii)
result in any fee, tax or other governmental charge under the laws of the State
of Delaware becoming payable by Wilmington Trust Company (or any successor
thereto); or (iii) subject Wilmington Trust Company (or any successor thereto)
to personal jurisdiction in any jurisdiction other than the State of Delaware
for causes of action arising from acts unrelated to the consummation of the
transactions by Wilmington Trust
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Company (or any successor thereto) or the Owner Trustee, as the case may be,
contemplated hereby.
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.1. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Depositor and the
Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the
Depositor for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection with the
exercise and performance of its rights and its duties hereunder and under the
Basic Documents.
SECTION 8.2. Indemnification. The Depositor shall be liable as primary
obligor for, and shall indemnify the Owner Trustee (in its individual and trust
capacities) and its officers, directors, successors, assigns, agents and
servants (collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reasonable
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may (in its trust or individual capacities) at any time be
imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement, the
Basic Documents, the Owner Trust Estate, the administration of the Owner Trust
Estate or the action or inaction of the Owner Trustee hereunder, except only
that the Depositor shall not be liable for or required to indemnify the Owner
Trustee from and against Expenses arising or resulting from any of the matters
described in the third sentence of Section 7.1. The indemnities contained in
this Section and the rights under Section 8.1 shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Depositor which approval shall not be
unreasonably withheld.
SECTION 8.3. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
SECTION 8.4. Non-recourse Obligations. Notwithstanding anything in this
Agreement or any Basic Document, the Owner Trustee agrees in its individual
capacity and in its capacity as Owner Trustee for the Trust that all obligations
of the Trust to the Owner Trustee individually or as Owner Trustee for the Trust
shall be recourse to the Owner Trust Estate only and specifically shall not be
recourse to the assets of any Certificateholder.
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ARTICLE IX
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement. (a) This Agreement and the
Trust shall terminate and be of no further force or effect upon the latest of
(i) the maturity or other liquidation of the last Receivable (including the
purchase by the Servicer at its option of the corpus of the Trust as described
in Section 11.1 of the Sale and Servicing Agreement) and the subsequent
distribution of amounts in respect of such Receivables as provided in the Basic
Documents or (ii) the payment to Certificateholders of all amounts required to
be paid to them pursuant to this Agreement and the payment to the Insurer of all
amounts payable or reimbursable to it pursuant to the Sale and Servicing
Agreement; provided, however, that the rights to indemnification under Section
8.2 and the rights under Section 8.1 shall survive the termination of the Trust.
The Servicer shall promptly notify the Owner Trustee and the Insurer of any
prospective termination pursuant to this Section 9.1. The bankruptcy,
liquidation, dissolution, death or incapacity of any Certificateholder shall not
(x) operate to terminate this Agreement or the Trust, nor (y) entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or Owner Trust Estate nor (z) otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) Except as provided in clause (a), neither the Depositor
nor any other Certificateholder shall be entitled to revoke or
terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Certificateholders shall surrender
their Certificates to the Trust Collateral Agent for payment of the
final distribution and cancellation, shall be given by the Owner
Trustee by letter to Certificateholders mailed within five Business
Days of receipt of notice of such termination from the Servicer given
pursuant to Section 11.1(c) of the Sale and Servicing Agreement,
stating (i) the Distribution Date upon or with respect to which final
payment of the Certificates shall be made upon presentation and
surrender of the Certificates at the office of the Trust Collateral
Agent therein designated, (ii) the amount of any such final payment,
(iii) that the Record Date otherwise applicable to such Distribution
Date is not applicable, payments being made only upon presentation and
surrender of the Certificates at the office of the Trust Collateral
Agent therein specified and (iv) interest will cease to accrue on the
Certificates. The Owner Trustee shall give such notice to the
Certificate Registrar (if other than the Owner Trustee) and the Trust
Collateral Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the
Certificates, the Trust Collateral Agent shall cause to be distributed
to Certificateholders amounts distributable on such Distribution Date
pursuant to Section 5.7 of the Sale and Servicing Agreement.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their
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Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies shall be distributed, subject to
applicable escheat laws, by the Owner Trustee to the Depositor and Holders shall
look solely to the Depositor for payment.
(d) Any funds remaining in the Trust after funds for final
distribution have been distributed or set aside for distribution shall
be distributed by the Owner Trustee to the Depositor.
(e) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by
filing a certificate of cancellation with the Secretary of State in
accordance with the provisions of Section 3810 of the Business Trust
Statute.
(f) Written notice of the termination of this Agreement and
the Trust shall be given to each Rating Agency by the Owner Trustee.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation (i) satisfying the provisions of
Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authorities; (iv) having (or having a parent which has) a rating of at least
Baa3 by Moody's and A-1 by Standard & Poors; and (v) acceptable to the Insurer
in its sole discretion, so long as an Insurer Default shall not have occurred
and be continuing. If such corporation shall publish reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time the Owner Trustee shall cease to be eligible
in accordance with the provisions of this Section, the Owner Trustee shall
resign immediately in the manner and with the effect specified in Section 10.2.
SECTION 10.2. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Depositor (or in the event that the
Depositor is not the sole Certificateholder, the Holders of Certificates
evidencing not less than a majority of the percentage ownership interest in the
Trust), the Insurer and the Servicer. Upon receiving such notice of resignation,
the Depositor shall promptly appoint a successor Owner Trustee, meeting the
qualifications set forth in Section 10.1 herein, by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Owner Trustee and one copy to the successor Owner Trustee, provided that the
Depositor shall have received written confirmation from each of the Rating
Agencies that the proposed appointment will not result in an increased capital
charge to the Insurer by either of the Rating Agencies. If no successor Owner
Trustee shall have been so appointed and have accepted
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appointment within 30 days after the giving of such notice of resignation, the
resigning Owner Trustee or the Insurer may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Depositor, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor with the consent of the Insurer (so long as an
Insurer Default shall not have occurred and be continuing) may remove the Owner
Trustee. If the Depositor shall remove the Owner Trustee under the authority of
the immediately preceding sentence, the Depositor shall promptly appoint a
successor Owner Trustee, meeting the qualifications set forth in Section 10.1
herein, by written instrument, in duplicate, one copy of which instrument shall
be delivered to the outgoing Owner Trustee so removed, one copy to the Insurer
and one copy to the successor Owner Trustee and payment of all fees owed to the
outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Depositor shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.3. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Depositor, the Servicer, the Insurer and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner Trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties and obligations of
its predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Agreement; and the Depositor and the predecessor
Owner Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties and
obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Servicer shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Trustee, the Noteholders and the Rating
Agencies. If the Servicer shall fail to mail such
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notice within 10 days after acceptance of appointment by the successor Owner
Trustee, the successor Owner Trustee shall cause such notice to be mailed at the
expense of the Servicer.
SECTION 10.4. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or consolidation
to the Rating Agencies.
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Servicer and the Owner Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Owner Trustee and the Insurer to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
Owner Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Servicer and
the Owner Trustee may consider necessary or desirable. If the Servicer shall not
have joined in such appointment within 15 days after the receipt by it of a
request so to do, the Owner Trustee subject, unless an Insurer Default shall
have occurred and be continuing, to the approval of the Insurer (which approval
shall not be unreasonably withheld) shall have the power to make such
appointment. No co-trustee or separate trustee under this Agreement shall be
required to meet the terms of eligibility as a successor trustee pursuant to
Section 10.1 and no notice of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee
is not authorized to act separately without the Owner Trustee joining
in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed,
the Owner Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Owner Trustee;
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(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Servicer and the Owner Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Servicer and the Insurer.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI
Miscellaneous
SECTION 11.1. Supplements and Amendments. (a) This Agreement may be
amended by the Depositor and the Owner Trustee, with the prior written consent
of the Insurer (so long as an Insurer Default shall not have occurred and be
continuing) and with prior written notice to the Rating Agencies, without the
consent of any of the Noteholders or, in the event that the Depositor is not the
sole Certificateholder, the Certificateholders, (i) to cure any ambiguity or
defect or (ii) to correct, supplement or modify any provisions in this
Agreement; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel which may be based upon a certificate of the Servicer,
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
(b) This Agreement may also be amended from time to time, with
the prior written consent of the Insurer (so long as an Insurer Default
shall not have occurred and be continuing) by the Depositor and the
Owner Trustee, with prior written notice to the Rating Agencies, to the
extent such amendment materially and adversely affects the interests of
the Noteholders, with the consent of the Noteholders evidencing not
less than a majority of the Outstanding Amount of the Notes and, the
consent of the Certificateholders evidencing not less than a majority
of the percentage ownership interest in the Trust (which consent of any
Holder of a Certificate or Note given pursuant
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to this Section or pursuant to any other provision of this Agreement
shall be conclusive and binding on such Holder and on all future
Holders of such Certificate or Note and of any Certificate or Note
issued upon the transfer thereof or in exchange thereof or in lieu
thereof whether or not notation of such consent is made upon the
Certificate or Note) 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, subject to the
express rights of the Insurer under the Basic Documents, 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
Certificates, the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all the outstanding
Notes and Holders of all 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 Trustee and each of the
Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Trustee pursuant to this Section to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe. Promptly after the execution of
any amendment to the Certificate of Trust, the Owner Trustee shall cause the
filing of such amendment with the Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner 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 that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 11.2. Limitations on Rights of Others. Except for Section 2.7,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Certificateholders, the Servicer and, to the extent
expressly provided herein, the Insurer, the 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 11.3. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt personally
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delivered, delivered by overnight courier or mailed first class mail or
certified mail, in each case return receipt requested, and shall be deemed to
have been duly given upon receipt, if to the Owner Trustee, addressed to the
Corporate Trust Office; if to the Depositor, addressed to National Financial
Auto Funding Trust, One Park Place, Suite 200, 621 N.W. 53rd Street, Boca Raton,
Florida 33487; if to the holder of the Insurer, addressed to Insurer, Financial
Security Assurance Inc., 350 Park Avenue, New York, NY 10022, Attention:
Surveillance Department, Re: National Auto Finance 1997-1 Trust, 6.35%
Automobile Receivables-Backed Notes, Telex No.: (212) 688-3101, Confirmation:
(212) 826-0100, Telecopy Nos.: (212) 339-3518, (212) 339-3529 (in each case in
which notice or other communication to the Insurer refers to an Event of
Default, a claim on the Note Policy or with respect to which failure on the part
of Financial Security to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication should also be
sent to the attention of the General Counsel and the Head-Financial Guaranty
Group "URGENT MATERIAL ENCLOSED"); or, as to each party, at such other address
as shall be designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid,
at the address of such Holder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
SECTION 11.4. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.5. 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 11.6. Assignments; Insurer. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. This Agreement shall also inure to the benefit
of the Insurer for so long as an Insurer Default shall not have occurred and be
continuing. Without limiting the generality of the foregoing, all covenants and
agreements in this Agreement which confer rights upon the Insurer shall be for
the benefit of and run directly to the Insurer, and the Insurer shall be
entitled to rely on and enforce such covenants, subject, however, to the
limitations on such rights provided in this Agreement and the Basic Documents.
The Insurer may disclaim any of its rights and powers under this Agreement (but
not its duties and obligations under the Policies) upon delivery of a written
notice to the Owner Trustee.
SECTION 11.7. No Petition. The Owner Trustee (not in its individual
capacity but solely as Owner Trustee), by entering into this Agreement, each
Certificateholder, by accepting a
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Certificate, and the Trustee and each Noteholder by accepting the benefits of
this Agreement, hereby covenants and agrees that they will not at any time
institute against the Depositor, or join in any institution against the
Depositor of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Certificates, the Notes, this Agreement or any of the Basic Documents.
SECTION 11.8. No Recourse. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Servicer, the Depositor, the Owner Trustee, the Trustee, the
Insurer or any Affiliate thereof and no recourse may be had against such parties
or their assets, except as may be expressly set forth or contemplated in this
Agreement, the Certificates or the Basic Documents.
SECTION 11.9. 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 11.10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, 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 11.11. Servicer. The Servicer is authorized to prepare, or
cause to be prepared, execute and deliver on behalf of the Trust all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Trust or Owner Trustee to prepare, file or deliver pursuant
to the Basic Documents. Upon written request, the Owner Trustee shall execute
and deliver to the Servicer a limited power of attorney appointing the Servicer
the Trust's agent and attorney-in-fact to prepare, or cause to be prepared,
execute and deliver all such documents, reports, filings, instruments,
certificates and opinions.
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IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized as of
the day and year first above written.
WILMINGTON TRUST COMPANY,
Owner Trustee,
By:_________________________________
Name:
Title:
NATIONAL FINANCIAL AUTO FUNDING TRUST,
Depositor,
By:_________________________________
Name: Keith B. Stein
Title: Secretary
Acknowledged and Agreed:
NATIONAL AUTO FINANCE COMPANY, INC.,
Servicer,
By:____________________________
Name: Keith B. Stein
Title: Treasurer
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EXHIBIT A
FORM OF CERTIFICATE
NUMBER
1
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE IN
RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS SUCH RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 3.4 OF THE
OWNER TRUST AGREEMENT PERTAINING TO THE NATIONAL AUTO FINANCE 1997-1 TRUST (THE
"AGREEMENT") AND (B) IS MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, (iii)
TO THE SELLER OR (iv) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT THAT IS AWARE THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A AND (C) UPON THE SATISFACTION OF CERTAIN OTHER
REQUIREMENTS SPECIFIED IN THE AGREEMENT. NEITHER THE SELLER, THE SERVICER, THE
TRUST NOR THE OWNER TRUSTEE IS OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
TRUST CERTIFICATE
evidencing a beneficial ownership interest in certain distributions of the
Trust, as defined below, the property of which includes a pool of retail
installment sale contracts secured by new or used automobiles, vans or light
duty trucks and sold to the Trust by National Financial Auto Funding Trust.
(This Certificate does not represent an interest in or obligation of National
Financial Auto Funding Trust or any of its Affiliates, except to the extent
described below.)
THIS CERTIFIES THAT National Financial Auto Funding Trust is the
registered owner of a nonassessable, fully-paid, beneficial ownership interest
in certain distributions of National
<PAGE> 39
Auto Finance 1997-1 Trust (the "Trust") formed by National Financial Auto
Funding Trust, a Delaware business trust (the "Depositor").
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within mentioned
Trust Agreement.
WILMINGTON TRUST COMPANY not in its individual capacity but solely as Owner
Trustee
by ________________________________ Authenticating Agent
by ________________________________
The Trust was created pursuant to a Trust Agreement dated as of July ,
1997 (the "Trust Agreement"), between the Depositor and Wilmington Trust
Company, as owner trustee (the "Owner Trustee"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates designated
as "Trust Certificates" (herein called the "Certificates"). This Certificate is
issued under and is subject to the terms, provisions and conditions of the Trust
Agreement, to which Trust Agreement the holder of this Certificate by virtue of
the acceptance hereof assents and by which such holder is bound. The property of
the Trust includes a pool of retail installment sale contracts secured by new
and used automobiles, vans or light duty trucks (the "Receivables"), all monies
due thereunder on or after Initial Cutoff Date, security interests in the
vehicles financed thereby, certain bank accounts and the proceeds thereof,
proceeds from claims on certain insurance policies and certain other rights
under the Trust Agreement and the Sale and Servicing Agreement, all right, to
and interest of the Depositor in and to the Purchase and Contribution Agreement
dated as of June 29, 1997 between National Auto Finance Company, Inc. and
National Financial Auto Funding Trust and all proceeds of the foregoing.
Under the Trust Agreement, there will be distributed on the 21st day of
each month or, if such 21st day is not a Business Day, the next Business Day
(the "Distribution Date"), commencing on July 21, 1997, to the Person in whose
name this Certificate is registered at the close of business on the Business Day
preceding such Distribution Date (the "Record Date") such Certificateholder's
fractional undivided interest in the amount to be distributed to
Certificateholders on such Distribution Date.
The holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate are subordinated to the
rights of the Noteholders as described in the Sale and Servicing Agreement, the
Indenture and the Trust Agreement, as applicable.
<PAGE> 40
The holder of this Certificate, by acceptance of this Certificate,
specifically acknowledges that it has no right to or interest in any monies at
any time held pursuant to the Spread Account Agreement or prior to the release
of such monies pursuant to Section 5.7(b) of the Sale and Servicing Agreement,
such monies being held in trust for the benefit of the Noteholders and the
Insurer. Notwithstanding the foregoing, in the event that it is ever determined
that the monies held in the Spread Account constitute a pledge of collateral,
then the provisions of the Sale and Servicing Agreement and the Spread Account
Agreement shall be considered to constitute a security agreement and the holder
of this Certificate hereby grants to the Trust Collateral Agent for the benefit
of the Trustee and the Insurer a first priority perfected security interest in
such amounts, to be applied as set forth in Section 3.03 of the Spread Account
Agreement. In addition, each Certificateholder, by acceptance of its
Certificate, hereby appoints the Seller as its agent to pledge a first priority
perfected security interest in the Spread Account, and any amounts held therein
from time to time to the Collateral Agent for the benefit of the Trustee and the
Insurer pursuant to the Spread Account Agreement and agrees to execute and
deliver such instruments of conveyance, assignment, grant, confirmation, etc.,
as well as any financing statements, in each case as the Insurer shall consider
reasonably necessary in order to perfect the Trust Collateral Agent's security
interest in the Collateral.
It is the intent of the Depositor, the Servicer, and the
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a branch. In the event that the Certificates are held more than one
Holder, it is the intent of the Depositor, the Servicer, and the
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a partnership and the Certificateholders will be treated as partners
in that partnership. The Depositor and any other Certificateholders, by
acceptance of a Certificate, agree to treat, and to take no action inconsistent
with the treatment of, the Certificates for such tax purposes as partnership
interests in the Trust. Each Certificateholder, by its acceptance of a
Certificate, covenants and agrees that such Certificateholder will not at any
time institute against the Trust or the Depositor, or join in any institution
against the Trust or the Depositor of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Certificates, the Notes, the Trust Agreement or
any of the Basic Documents.
Distributions on this Certificate will be made as provided in the Sale
and Servicing Agreement by the Trust Collateral Agent by wire transfer or check
mailed to the Certificateholder of record in the Certificate Register without
the presentation or surrender of this Certificate or the making of any notation
hereon. Except as otherwise provided in the Trust Agreement and notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for the purpose by the Owner Trustee in the Corporate Trust Office.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE> 41
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Certificate shall not entitle the holder hereof to any benefit under the
Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, 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.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Certificate to be duly executed.
NATIONAL AUTO FINANCE 1997-1 TRUST
By: WILMINGTON TRUST COMPANY not in its
individual capacity but solely as
Owner Trustee
Dated: By: __________________________________
By: __________________________________
Name:
Title:
<PAGE> 42
(Reverse of Certificate)
The Certificates do not represent an obligation of, or an interest in,
the Depositor, the Servicer, the Owner Trustee or any Affiliates of any of them
and no recourse may be had against such parties or their assets, except as may
be expressly set forth or contemplated herein or in the Trust Agreement, the
Indenture or the Basic Documents. In addition, this Certificate is not
guaranteed by any governmental agency or instrumentality and is limited in right
of payment to certain collections with respect to the Receivables, as more
specifically set forth herein and in the Sale and Servicing Agreement. A copy of
each of the Sale and Servicing Agreement and the Trust Agreement may be examined
during normal business hours at the principal office of the Depositor, and at
such other places, if any, designated by the Depositor, by any Certificateholder
upon written request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Owner Trustee with the prior written consent
of Financial Security Assurance Inc. (the "Insurer") so long as no Insurer
Default has occurred and is continuing, and with the consent of the holders of
the Notes and the Certificates evidencing not less than a majority of the
outstanding Notes and the percentage ownership interest of the Trust. Any such
consent by the holder of this Certificate shall be conclusive and binding on
such holder and on all future holders of this Certificate and of any Certificate
issued upon the transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent is made upon this Certificate. The Trust
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the holders of any of the Certificates (other than the
Depositor or the Insurer).
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Owner Trustee in the Corporate Trust Office, accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
evidencing the same percentage ownership interest in the Trust will be issued to
the designated transferee. The initial Certificate Registrar appointed under the
Trust Agreement is Wilmington Trust Company.
Except for Certificates issued to the Depositor, the Certificates are
issuable only as registered Certificates. As provided in the Trust Agreement and
subject to certain limitations therein set forth, Certificates are exchangeable
for new Certificates evidencing the same aggregate percentage ownership interest
in the Trust, as requested by the holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
<PAGE> 43
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee, the Certificate Registrar or the Insurer may treat the person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the Owner Trustee, the Certificate Registrar nor any such agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement and
the Sale and Servicing Agreement and the disposition of all property held as
part of the Trust. The Servicer of the Receivables may at its option purchase
the corpus of the Trust at a price specified in the Sale and Servicing
Agreement, and such purchase of the Receivables and other property of the Trust
will effect a transfer of the Certificates; however, such right of purchase is
exercisable, subject to certain restrictions, only as of the last day of any
Monthly Period as of which the Pool Balance is 10% or less of the Original Pool
Balance.
The Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA, (b) a plan described in Section 4975(e) (1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding this
Certificate, the Holder hereof shall be deemed to have represented and warranted
that it is not a Benefit Plan.
The recitals contained herein shall be taken as the statements of the
Depositor or the Servicer, as the case may be, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Certificate or of any
Receivable or related document.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
<PAGE> 44
constituting and appointing
____________________ Attorney to transfer said Certificate on the books of the
Certificate Registrar, with full power of substitution in the premises.
Dated:
__________________________ *
Signature Guaranteed:
__________________________ *
- ------------
* NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within
Certificate in every particular, without alteration, enlargement or any
change whatever. Such signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate
Registrar, which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be determined
by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
<PAGE> 45
EXHIBIT B
CERTIFICATE OF TRUST OF
NATIONAL AUTO FINANCE 1997-1 TRUST
This Certificate of Trust of National Auto Finance 1997-1 Trust (the
"Trust"), dated as of July 21, 1997, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, as trustee, to form a
business trust under the Delaware Business Trust Act (12 Del. Code, ss. 3801 et
seq.).
1. Name. The name of the business trust formed hereby is National Auto
Finance 1997-1 Trust.
2. Delaware Trust. The name and business address of the Trustee of the
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001. Attn: Corporate Trust
Administration.
3. This Certificate of Trust will be effective July 21, 1997.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY not in its individual
capacity but solely as owner trustee of the Trust.
By:_________________________________
Name:
Title:
<PAGE> 46
EXHIBIT C
FORM OF INVESTMENT LETTER
[LETTERHEAD OF PURCHASER]
[Date]
Wilmington Trust Company, as trustee
of National Auto Finance 1997-1 Trust
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Ladies and Gentlemen:
The undersigned (the "Purchaser") proposes to purchase the Trust
Certificates issued pursuant to that certain Trust Agreement, dated as of July
21, 1997 (the "Trust Agreement"), between National Financial Auto Funding Trust,
a Delaware business trust, and Wilmington Trust Company, as trustee (the
"Trustee"). Unless the context or use indicates another or different meaning,
each capitalized term used herein and not otherwise defined herein shall have
the meaning ascribed to it in the Trust Agreement.
1. The undersigned hereby certifies that, as indicated below, the
undersigned is a duly authorized officer of the Purchaser.
2. In connection with the purchase by the Purchaser of the Trust
Certificates, the undersigned hereby certifies to you, and, if you act as broker
for one or more customers, to such customers, that the Purchaser is a "qualified
institutional buyer" as defined in Rule 144A ("Rule 144A") promulgated under the
Securities Act of 1933, as amended, because the Purchaser is an entity described
in paragraph (a) (1) ___ [refer to applicable subparagraph] of Rule 144A.
3. The Purchaser certifies and acknowledges that it is familiar with
Rule 144A and understands that you and your customers (if you act as a broker
for one or more customers) are relying on the statements made therein.
4. The Purchaser certifies that the Purchaser is purchasing the Trust
Certificates in the capacity marked below (check one):
[ ] The Purchaser certifies that the Purchaser is purchasing the Trust
Certificates for its own account only; or
<PAGE> 47
[ ] The Purchaser certifies that the Purchaser is purchasing the Trust
Certificates for the account of [one] [specify number] other qualified
institutional buyer(s), [each of] which is a "qualified institutional buyer."
5. The Purchaser certifies that it has received from the Trust the
information that satisfies the requirements of paragraph (d)(4) of Rule 144A
(the "Rule 144A Information").
6. The Purchaser certifies that it will comply with all applicable
federal and state securities laws in connection with any subsequent resale by
the Purchaser of the Trust Certificates.
7. The Purchaser understands and acknowledges that the Trust
Certificates have not been and will not be registered under the Securities Act
of 1933, as amended, or any state securities laws and may be resold only if (a)
the Trust Certificates are registered pursuant to the provisions of the
Securities Act of 1933, as amended, and such state securities laws, or (b) if an
exemption from such registration is available. The Purchaser understands and
acknowledges that the Trust is not required to register the Trust Certificates
and that any transfer must comply with Section 3.4 of the Trust Agreement. The
Trustee is not obligated to provide Rule 144A Information.
8. The Purchaser additionally represents (check one):
( ) The Purchaser is not a Plan for ERISA purposes.
( ) The Purchaser's acquisition of the Trust Certificates will
not cause the assets of the Trust to be assets of any Plan for ERISA
purposes.
Very truly yours,
[Purchaser]
By:
Name:
Title:
<PAGE> 1
EXHIBIT 4.3
================================================================================
SALE AND SERVICING
AGREEMENT
among
NATIONAL AUTO FINANCE 1997-1 TRUST,
Issuer,
NATIONAL FINANCIAL AUTO FUNDING TRUST,
Seller,
NATIONAL AUTO FINANCE COMPANY, INC.,
Servicer
and
HARRIS TRUST AND SAVINGS BANK
Trust Collateral Agent and Back-up Servicer
Dated as of June 29, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
Definitions
SECTION 1.1. Definitions......................................................1
SECTION 1.2. Other Definitional Provisions...................................23
SECTION 1.3. Usage of Terms..................................................23
SECTION 1.4. Certain References..............................................23
SECTION 1.5. No Recourse.....................................................23
SECTION 1.6. Action by or Consent of Noteholders.............................24
SECTION 1.7. Material Adverse Effect.........................................24
ARTICLE II
Conveyance of Receivables
SECTION 2.1. Conveyance of Initial Receivables...............................24
SECTION 2.2. Conveyance of Subsequent Receivables............................26
SECTION 2.3. Further Encumbrance of Trust Property...........................29
ARTICLE III
The Receivables
SECTION 3.1. Representations and Warranties of Seller........................30
SECTION 3.2. Repurchase upon Breach..........................................31
SECTION 3.3. Custody of Receivables Files....................................32
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.1. Duties of the Servicer...........................................32
SECTION 4.2. Sub-Servicing Agreements between Servicer and the Sub-Servicers..35
SECTION 4.3. Obligations of the Servicer......................................35
SECTION 4.4. No Contractual Relationship between a Sub-Servicer and
Trust Collateral Agent or Noteholders............................36
SECTION 4.5. Assumption or Termination of Sub-Servicing Agreement by
Trust Collateral Agent...........................................36
SECTION 4.6. Collection of Receivable Payments................................36
SECTION 4.7. Maintenance of Insurance.........................................38
SECTION 4.8. Realization upon Defaulted Receivables...........................38
i
<PAGE> 3
SECTION 4.9. Total Servicing Fee; Payment of Certain Expenses by Servicer....38
SECTION 4.10. [Reserved]......................................................39
SECTION 4.11. Reports.........................................................39
SECTION 4.12. Annual Statement as to Compliance, Notice of Servicer
Termination Event..............................................39
SECTION 4.13. Annual Independent Accountants' Report.........................40
SECTION 4.14. Access to Certain Documentation and Information Regarding
Receivables....................................................41
SECTION 4.15. Monthly Tape...................................................41
SECTION 4.16. Retention and Termination of Servicer..........................41
SECTION 4.17. Custodial Arrangement..........................................41
ARTICLE V
Trust Accounts; Distributions; Statements to Noteholders
SECTION 5.1. Establishment of Trust Accounts.................................42
SECTION 5.2. Pre-Funding Period Reserve Account..............................45
SECTION 5.3. Certain Reimbursements to the Servicer..........................46
SECTION 5.4. Application of Collections......................................46
SECTION 5.5. Withdrawals from Series 1997-1 Spread Account...................47
SECTION 5.6. Additional Deposits.............................................47
SECTION 5.7. Distributions...................................................47
SECTION 5.8. Note Distribution Account.......................................49
SECTION 5.9. Pre-Funding Account.............................................50
SECTION 5.10. Statements to Noteholders......................................51
SECTION 5.11. Optional Deposits by the Insurer...............................51
ARTICLE VI
The Note Policy
SECTION 6.1. Claims Under Note Policy........................................51
SECTION 6.2. Preference Claims...............................................52
SECTION 6.3. Surrender of Policy.............................................53
ii
<PAGE> 4
ARTICLE VII
RESERVED
ARTICLE VIII
The Seller
SECTION 8.1. Representations, Warranties and Covenants of the Seller.........54
SECTION 8.2. Corporate Existence.............................................56
SECTION 8.3. Liability of Seller; Indemnities................................57
SECTION 8.4. Merger or Consolidation of, or Assumption of the
Obligations of, Seller..........................................58
SECTION 8.5. Limitation on Liability of Seller and Others....................58
SECTION 8.6. Seller May Own Notes............................................58
ARTICLE IX
The Servicer
SECTION 9.1. Representations, Warranties and Covenants of the Servicer.......58
SECTION 9.2. Liability of Servicer; Indemnities..............................60
SECTION 9.3. Merger or Consolidation of, or Assumption of the Obligations
of the Servicer or the Trust Collateral Agent...................62
SECTION 9.4. Limitation on Liability of Servicer, Trust Collateral
Agent and Others................................................63
SECTION 9.5. Delegation of Duties............................................65
SECTION 9.6. Servicer and Trust Collateral Agent Not to Resign..............65
ARTICLE X
Default
SECTION 10.1. Servicer Termination Event.....................................66
SECTION 10.2. Consequences of a Servicer Termination Event...................68
SECTION 10.3. Appointment of Successor.......................................69
SECTION 10.4. Notification to Noteholders and Rating Agencies................71
SECTION 10.5. Waiver of Past Defaults........................................71
SECTION 10.6. Termination of Trust Collateral Agent..........................71
SECTION 10.7. Successor to Servicer..........................................72
iii
<PAGE> 5
ARTICLE XI
Termination
SECTION 11.1. Optional Purchase of All Receivables...........................72
ARTICLE XII
Administrative Duties of the Servicer
SECTION 12.1. Administrative Duties..........................................73
SECTION 12.2. Records........................................................75
SECTION 12.3. Additional Information to be Furnished to the Issuer...........75
ARTICLE XIII
Miscellaneous Provisions
SECTION 13.1. Amendment......................................................76
SECTION 13.2. Protection of Title to Trust...................................77
SECTION 13.3. Notices........................................................79
SECTION 13.4. Assignment.....................................................80
SECTION 13.5. Limitations on Rights of Others................................80
SECTION 13.6. Severability...................................................80
SECTION 13.7. Separate Counterparts..........................................80
SECTION 13.8. Headings.......................................................81
SECTION 13.9. Governing Law..................................................81
SECTION 13.10. Assignment to Trustee.........................................81
SECTION 13.11. Nonpetition Covenants.........................................81
SECTION 13.12. Limitation of Liability of Owner Trustee and Trustee..........81
SECTION 13.13. Independence of the Servicer..................................82
SECTION 13.14. No Joint Venture..............................................82
iv
<PAGE> 6
SALE AND SERVICING AGREEMENT dated as of June 29, 1997, among
NATIONAL AUTO FINANCE 1997-1 TRUST, a Delaware business trust (the "Issuer"),
NATIONAL FINANCIAL AUTO FUNDING TRUST, a Delaware business trust (the "Seller"),
and NATIONAL AUTO FINANCE COMPANY, INC., a Delaware corporation (the
"Servicer"), and HARRIS TRUST AND SAVINGS BANK, an Illinois banking association,
in its capacity as Trust Collateral Agent and Back-up Servicer.
WHEREAS the Issuer desires to purchase a portfolio of
receivables arising in connection with motor vehicle retail installment sale
contracts acquired by National Auto Finance Company, Inc. directly or indirectly
through motor vehicle dealers;
WHEREAS the Seller has acquired such receivables from National
Financial Auto Funding Trust II and National Auto Finance Company, Inc. and is
willing to sell such receivables to the Issuer;
WHEREAS the Issuer desires to acquire additional receivables
arising in connection with motor vehicle retail installment sale contracts to be
acquired by National Auto Finance Company, Inc. directly or indirectly through
motor vehicle dealers;
WHEREAS the Seller has an agreement to purchase such
additional receivables from National Auto Finance Company, Inc. and is willing
to sell such receivables to the Issuer;
WHEREAS the Servicer is willing to service all such
receivables;
NOW, THEREFORE, in consideration of the promises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"Accountants' Report" means the report of a firm of nationally
recognized independent accountants described in Section 4.14.
"Actuarial Method" means the method of allocating a fixed
level payment on an obligation between principal and interest, pursuant to which
the portion of such payment that is allocated to interest is equal to the
product of (a) 1/12, (b) the fixed rate of interest on such obligation and (c)
the outstanding principal balance of such obligation.
"Addition Notice" means, with respect to any transfer of
Subsequent Receivables to the Trust pursuant to Section 2.2 of this Agreement,
notice of the Seller's election to transfer Subsequent Receivables to the Trust,
such notice to designate the related Subsequent Transfer
<PAGE> 7
Date and the aggregate Amount Financed of the Subsequent Receivables to be
transferred on such Subsequent Transfer Date.
"Affiliate" means, with respect to any specified Person, any
other Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Aggregate Principal Balance" means, with respect to any date
of determination, the sum of the Principal Balances for all Receivables (other
than (i) any Receivable that became a Liquidated Receivable during the related
Due Period and (ii) any Receivable that became a Purchased Receivable during the
related Due Period) as of the date of determination.
"Agreement" means this Sale and Servicing Agreement, as the
same may be amended and supplemented from time to time.
"Amount Financed" means, with respect to a Receivable, the
original principal balance of such Receivable reduced by the portion of each
payment received thereon before the applicable Cut-off Date that would represent
principal if such payments were allocated to the principal of and interest on
such Receivable based on the amortization method provided in such Receivable.
"Annual Percentage Rate" or "APR" of a Receivable means the
annual percentage rate of finance charges or service charges, as stated in the
related Contract.
"Assignment Agreement" means the agreement, dated as of June
29, 1997, between Bankers Trust Company, not in its individual capacity but
solely as Trustee of the National Financial Auto Receivables Master Trust, and
National Financial Auto Funding Trust II.
"Available Amount" means, with respect to any Distribution
Date, an amount equal to the sum of (i) the amount on deposit in the
Distribution Account on the preceding Distribution Date after giving effect to
all withdrawals therefrom on such preceding Distribution Date, (ii) the amount,
if any, to be transferred by the Trust Collateral Agent to the Distribution
Account from the Pre-Funding Period Reserve Account and/or the Pre-Funding
Account, if any, as provided herein, (iii) the amount to be transferred by the
Trust Collateral Agent to the Distribution Account from the Collection Account
on such Distribution Date pursuant to Section 5.1(c), and (iv) any amounts paid
by the Insurer to the Trust Collateral Agent pursuant to Section 5.11 hereof for
distribution on such Distribution Date.
"Average Default Rate" means, with respect to any Distribution
Date, the arithmetic average of the Default Rates for each of the three Due
Periods immediately preceding the Due Period in which such Distribution Date
occurs.
2
<PAGE> 8
"Average Delinquency Ratio" means, with respect to any
Distribution Date, the arithmetic average of the Delinquency Ratios for each of
the three Due Periods immediately preceding the Due Period in which such
Distribution Date occurs.
"Average Net Loss Rate" means, with respect to any
Distribution Date, the arithmetic average of the Net Loss Rates for each of the
three Due Periods immediately preceding the Due Period in which such
Distribution Date occurs.
"Backup Servicer" means, Harris Trust and Savings Bank, as the
Back-up Servicer hereunder, including in its capacity as Servicer, in the event
NAFI resigns or is removed as Servicer.
"Bankruptcy Loss" means, with respect to a Receivable, if a
court of appropriate jurisdiction in an insolvency proceeding shall have issued
an order reducing the amount owed on a Receivable or otherwise modifying or
restructuring the scheduled payments to be made on a Receivable, an amount equal
to the excess of the principal balance of such Receivable immediately prior to
such order over the principal balance of such Receivable as so reduced or the
net present value (using as the discount rate the higher of the APR on such
Receivable or the rate of interest, if any, specified by the court in such
order) of the scheduled payments as so modified or restructured. A "Bankruptcy
Loss" shall be deemed to have occurred on the date of issuance of such order.
"Base Servicing Fee" means, with respect to any Due Period,
the fee payable to the Servicer for services rendered during such Due Period,
which shall be equal to one-twelfth of the Servicing Fee Rate multiplied by the
Pool Balance as of the close of business on the last day of the preceding Due
Period.
"Business Day" means a day other than a Saturday, a Sunday or
other day on which commercial banks located in New York, Illinois, Delaware or
Florida are authorized or obligated to be closed.
"Certificateholder" or "Certificateholders" means a person in
whose name a Trust Certificate is registered in the Certificate Register
maintained pursuant to the Trust Agreement.
"Closing Date" means July 23, 1997.
"Collateral Agent" means Harris Trust and Savings Bank, in its
capacity as Collateral Agent under the Spread Account Agreement.
"Collection Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"Computer Tape" means the computer tapes or other electronic
media furnished by the Seller to the Issuer and its assigns describing certain
characteristics of the Initial Receivables as of the Initial Cut-off Date and of
the Subsequent Receivables as of the related Subsequent Cut-off Date.
3
<PAGE> 9
"Contract" means a motor vehicle retail installment sale
contract.
"Controlling Party" means the Insurer, so long as no Insurer
Default shall have occurred and be continuing, and, in the event the Insurer
Default shall have occurred and be continuing, the Trust Collateral Agent for
the benefit of Section 5.10.
"Conveyance Agreements" means the Purchase Agreement, the Sale
Agreement and the Assignment Agreement.
"Corporate Trust Office" means (i) with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee, which at the
time of execution of this agreement is Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890- 0001, Attention: Corporate Trust
Administration, and (ii) with respect to the Trustee and the Trust Collateral
Agent, the principal corporate trust office of the Trustee, which at the time of
execution of this agreement is 311 West Monroe Street, 12th Floor, Chicago, IL
60606.
"Custodial Agreement" means the Custodial Agreement, dated as
of July 23, 1997, between NAFI and OFSA, as assigned to the Trust Collateral
Agent pursuant to Section 4.17 hereof.
"Custodian" means OFSA and any other Person named from time to
time as custodian in any Custodian Agreement acting as agent for the Trust
Collateral Agent, which Person must be acceptable to the Controlling Party (the
Custodian as of the Closing Date is acceptable to the Insurer as of the Closing
Date).
"Custodian Agreement" means the Custodial Agreement and any
other Custodian Agreement from time to time in effect between the Custodian
named therein and the Trust Collateral Agent, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, which Custodian Agreement and any amendments, supplements or
modifications thereto shall be acceptable to the Controlling Party (the
Custodian Agreement which is effective on the Closing Date is acceptable to the
Controlling Party).
"Cut-off Date" means the Initial Cut-off Date or Subsequent
Cut-off Date, as applicable.
"Dealer" means a dealer who sold a Financed Vehicle and who
originated and assigned the respective Receivable to NAFI or an Originator under
a Dealer Agreement.
"Dealer Agreement" means any agreement between an Originator
and a Dealer relating to the acquisition of Receivables from a Dealer by an
Originator.
"Dealer Assignment" means, with respect to a Receivable, the
executed assignment executed by a Dealer conveying such Receivable to an
Originator.
"Dealer Underwriting Guide" means either, (i) the underwriting
guidelines used by or on behalf of NAFI in the origination and purchase of
Receivables as amended from time to
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time or (ii) the underwriting guidelines used in the origination of Receivables
as reviewed by NAFI prior to the purchase of Receivables by NAFI.
"Default Rate" means, with respect to any Due Period, the
product of (i) twelve and (ii) the quotient, expressed as a percentage, obtained
by dividing (a) the sum of (x) the aggregate outstanding Principal Balance of
all Defaulted Receivables which became Defaulted Receivables during such Due
Period and (y) the aggregate outstanding Principal Balance of all Receivables
that became Purchased Receivables during such Due Period and were 30 days or
more past due as of the date such Receivables were retransferred hereunder by
(b) the arithmetic average of the Pool Balance as of the end of such Due Period
and the Pool Balance as of the end of the preceding Due Period.
"Defaulted Receivable" means, with respect to any Due Period,
a Receivable with respect to which any of the following has occurred during such
Due Period: (i) all or a part of any Scheduled Payment is 90 days or more
delinquent as of the end of such Due Period, (ii) such Receivable is in default
and the Servicer (or Sub-Servicer) has in good faith determined that payments
thereunder are not likely to be resumed, or (iii) the Financed Vehicle that
secures the Receivable has been repossessed without reinstatement of the
Receivable on or before the last day of such Due Period and any applicable
redemption period has expired.
"Deficiency Claim Amount" shall have the meaning set forth in
Section 5.5.
"Deficiency Claim Date" means, with respect to any
Distribution Date, the fourth Business Day immediately preceding such
Distribution Date.
"Deficiency Notice" shall have the meaning set forth in
Section 5.5.
"Delinquency Rate" means, with respect to any Due Period, the
quotient, expressed as a percentage, obtained by dividing (a) the aggregate
Principal Balance of all Receivables with respect to which a scheduled payment
is 30 or more days past due as of the end of such Due Period, by (b) the Pool
Balance as of the end of such Due Period.
"Delivery" when used with respect to Trust Account Property
means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and are
susceptible of physical delivery, transfer thereof to the Trust Collateral Agent
or its nominee or custodian by physical delivery to the Trust Collateral Agent
or its nominee or custodian endorsed to, or registered in the name of, the Trust
Collateral Agent or its nominee or custodian or endorsed in blank, and, with
respect to a certificated security (as defined in Section 8-102 of the UCC)
transfer thereof (i) by delivery of such certificated security endorsed to, or
registered in the name of, the Trust Collateral Agent or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined in
Section 8-313 of the UCC) and the making by such financial intermediary of
entries on its books and records identifying such certificated securities as
belonging to the Trust Collateral Agent or its nominee or custodian and the
sending by such financial intermediary of a confirmation of the
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purchase of such certificated security by the Trust Collateral Agent or its
nominee or custodian, or (ii) by delivery thereof to a "clearing corporation"
(as defined in Section 8-102(3) of the UCC) and the making by such clearing
corporation of appropriate entries on its books reducing the appropriate
securities account of the transferor and increasing the appropriate securities
account of a financial intermediary by the amount of such certificated security,
the identification by the clearing corporation of the certificated securities
for the sole and exclusive account of the financial intermediary, the
maintenance of such certificated securities by such clearing corporation or a
"custodian bank" (as defined in Section 8-102(4) of the UCC) or the nominee of
either subject to the clearing corporation's exclusive control, the sending of a
confirmation by the financial intermediary of the purchase by the Trust
Collateral Agent or its nominee or custodian of such securities and the making
by such financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Trust Collateral Agent or its
nominee or custodian (all of the foregoing, "Physical Property"), and, in any
event, any such Physical Property in registered form shall be in the name of the
Trust Collateral Agent or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Trust Account Property to the Trust
Collateral Agent or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury,
the Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following procedures, all
in accordance with applicable law, including applicable Federal regulations and
Articles 8 and 9 of the UCC: book-entry registration of such Trust Account
Property to an appropriate book-entry account maintained with a Federal Reserve
Bank by a financial intermediary which is also a "depository" pursuant to
applicable Federal regulations and issuance by such financial intermediary of a
deposit advice or other written confirmation of such book-entry registration to
the Trust Collateral Agent or its nominee or custodian of the purchase by the
Trust Collateral Agent or its nominee or custodian of such book-entry
securities; the making by such financial intermediary of entries in its books
and records identifying such book-entry security held through the Federal
Reserve System pursuant to Federal book-entry regulations as belonging to the
Trust Collateral Agent or its nominee or custodian and indicating that such
custodian holds such Trust Account Property solely as agent for the Trust
Collateral Agent or its nominee or custodian; and such additional or alternative
procedures as may hereafter become appropriate to effect complete transfer of
ownership of any such Trust Account Property to the Trust Collateral Agent or
its nominee or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is
an uncertificated security under Article 8 of the UCC and that is not governed
by clause (b) above, registration on the books and records of the issuer thereof
in the name of the financial intermediary, the sending of a confirmation by the
financial intermediary of the purchase by the Trust Collateral Agent or its
nominee or custodian of such uncertificated security, the making by such
financial intermediary of entries on its books and records identifying such
uncertificated certificates as belonging to the Trust Collateral Agent or its
nominee or custodian.
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(d) in each case of delivery contemplated herein, the Trust
Collateral Agent shall make appropriate notations on its records, and shall
cause the same to be made on the records of its nominees, indicating that such
securities are held in trust pursuant to and as provided in this Agreement.
"Depositor" shall mean the Seller in its capacity as Depositor
under the Trust Agreement.
"Determination Date" means, with respect to a Distribution
Date, the last day of the Due Period immediately preceding such Distribution
Date.
"Distribution Account" means the account established pursuant
to Section 5.1(a)(iv) hereof.
"Distribution Date" means, with respect to each Due Period,
the twenty first day of the following calendar month, or if such day is not a
Business Day, the immediately following Business Day, commencing August 21,
1997.
"Draw Date" means, with respect to any Distribution Date, the
fourth Business Day (as defined in the Note Policy) immediately preceding such
Distribution Date.
"Due Date" means, with respect to a Receivable, the date in
each Due Period on which a scheduled payment on such Receivable is due.
"Due Period" means , with respect to any Distribution Date,
the period from and including the first day of the calendar month preceding the
month in which such Distribution Date occurs to and including the last day of
the calendar month preceding the month of such Distribution Date.
"Electronic Ledger" means the electronic master record of the
retail installment sales contracts or installment loans of the Servicer.
"Eligible Bank" means any depository institution (which shall
initially be the Trust Collateral Agent) acceptable to the Insurer (so long as
an Insurer Default shall not have occurred and be continuing), organized under
the laws of the United States of America or any one of the states thereof or the
District of Columbia (or any United States branch or agency of a foreign bank),
which is subject to supervision and examination by federal or state banking
authorities and which at all times (a) has a net worth in excess of $50,000,000
and (b) has either (i) a rating of P-1 from Moody's and A-1 from S&P with
respect to short-term deposit obligations, or (ii) if such institution has
issued long-term unsecured debt obligations, a rating of A2 or higher from
Moody's and AA from S&P with respect to long-term unsecured debt obligations.
Such depository institution (other than the Trust Collateral Agent) shall have
been approved in writing by the Controlling Party, operating in its discretion,
by written notice to the Trust Collateral Agent.
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"Eligible Deposit Account" means (i) a segregated trust
account that is maintained with the corporate trust department of a depository
institution or trust company acceptable to the Insurer (unless a Insurer Default
has occurred and is continuing, in which case such institution shall be one
subject to regulations regarding fiduciary funds on deposit substantially
similar to 12 CFR ss.9.10(b)), or (ii) a segregated direct deposit account
maintained with a depository institution or trust company organized under the
laws of the United States of America, or any of the States thereof, or the
District of Columbia, having a certificate of deposit, short-term deposit or
commercial paper rating of at least "A-1+" from Standard & Poor's and "P-1" from
Moody's and (unless a Insurer Default has occurred and is continuing) acceptable
to the Insurer.
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct interest-bearing obligations of, and
interest-bearing obligations fully guaranteed as to timely payment of principal
and interest by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit
of any depository institution or trust company organized under the laws of the
United States of America or any state thereof or the District of Columbia (or
any domestic branch of a foreign bank) and subject to supervision and
examination by Federal or state banking or depository institution authorities
(including depository receipts issued by any such institution or trust company
as custodian with respect to any obligation referred to in clause (a) above or
portion of such obligation for the benefit of the holders of such depository
receipts); provided, however, that at the time of the investment or contractual
commitment to invest therein (which shall be deemed to be made again each time
funds are reinvested following each Distribution Date), the commercial paper or
other short-term senior unsecured debt obligations (other than such obligations
the rating of which is based on the credit of a Person other than such
depository institution or trust company) of such depository institution or trust
company shall have a credit rating from Standard & Poor's of AAA and from
Moody's of Aaa;
(c) commercial paper and demand notes investing solely in
commercial paper that (i) is payable in United States dollars and (ii) has, at
the time of the investment or contractual commitment to invest therein, a rating
from Standard & Poor's of A-1+ and from Moody's of P-1;
(d) investments in money market funds (including funds for
which the Trust Collateral Agent or the Owner Trustee in each of their
individual capacities or any of their respective Affiliates is investment
manager or advisor) having a rating from Standard & Poor's of AAA-m or AAAm-G
and from Moody's of Aaa and (other than funds for which the Trust Collateral
Agent or the Owner Trustee in each of their individual capacities or any of
their respective Affiliates is investment manager or advisor) having been
approved in writing by the Insurer;
(e) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
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(f) repurchase obligations pursuant to a written agreement (i)
with respect to any obligation described in clause (a) above, where the Trustee
has taken actual or constructive delivery of such obligation, and (ii) entered
into with the corporate trust department of a depository institution or trust
company organized under the laws of the United States or any State thereof, the
deposits of which are insured by the Federal Deposit Insurance Corporation and
the short-term unsecured debt obligations of which are rated "A-1+" by Standard
& Poor's and "P-1" by Moody's (including, if applicable, the Trustee or any
agent of the Trustee acting in its respective commercial capacities);
(g) any other investment which is consistent with the ratings
of the Notes and acceptable to the Rating Agencies and which, so long as no
Insurer Default shall have occurred and be continuing, has been approved by the
Insurer.
Any of the foregoing Eligible Investments may be purchased by
or through the Owner Trustee or the Trust Collateral Agent or any of their
respective Affiliates.
"Eligible Servicer" means the Servicer, the Back-up Servicer
or another Person that, at the time of its appointment as Servicer, (i) is
servicing a portfolio of motor vehicle retail installment sales contracts and/or
motor vehicle installment loans, (ii) is legally qualified and has the capacity
to service the Receivables and (iii) has demonstrated the ability professionally
and competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care.
"Eligible Sub-Servicer" means (x) OFSA or (y) any Person which
at the time of its appointment as Sub-Servicer, (i) is servicing a portfolio of
motor vehicle retail installment sales contracts and/or motor vehicle
installment loans, (ii) is legally qualified and has the capacity to service the
Receivables, (iii) has demonstrated the ability professionally and competently
to service a portfolio of motor vehicle retail installment sales contracts
and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care, and (iv) is qualified and entitled to use, pursuant
to a license or other written agreement, and agrees to maintain the
confidentiality of, the software which the Servicer uses in connection with
performing its duties and responsibilities under this Agreement or otherwise has
available software which is adequate to perform its duties and responsibilities
under this Agreement.
"Final Scheduled Distribution Date" means the Distribution
Date occurring in November, 2003.
"Financed Vehicle" means an automobile or light-duty truck,
van or minivan, together with all accessions thereto, securing an Obligor's
indebtedness under the respective Receivable.
"Funding Trust II" means National Auto Funding Trust II, a
Delaware business trust.
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"Indemnification Agreement" means the Indemnification
Agreement dated as of July 23, 1997 among the Insurer, the Seller and First
Union, as the same may be amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof.
"Indenture" means the Indenture dated as of June 29, 1997,
among the Issuer and Harris Trust and Savings Bank, as Trust Collateral Agent
and Trustee, as the same may be amended and supplemented from time to time.
"Initial Cut-off Date" means June 29, 1997.
"Initial Receivables" means any Receivable conveyed to the
Trust on the Closing Date.
"Initial Spread Account Deposit" has the meaning set forth in
the Spread Account Agreement.
"Insurance Agreement" means the Insurance and Indemnity
Agreement, dated as of July __, 1997, among the Insurer, the Trust, the Seller
and NAFI, as such agreement may be amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof.
"Insurance Agreement Event of Default" means an "Event of
Default" as defined in the Insurance Agreement.
"Insurance Policy" means, with respect to a Receivable, any
insurance policy (including the insurance policies described in Section 4.4
hereof) benefiting the holder of the Receivable providing loss or physical
damage, credit life, credit disability, theft, mechanical breakdown or similar
coverage with respect to the Financed Vehicle or the Obligor.
"Insurer" means Financial Security Assurance Inc., a monoline
insurance company incorporated under the laws of the State of New York, or any
successor thereto, as issuer of the Note Policy.
"Insurer Default" means the occurrence and continuance of any
of the following events:
(a) the Insurer shall have failed to make a payment required
under the Note Policy in accordance with its terms;
(b) the Insurer shall have (i) filed a petition or commenced
any case or proceeding under any provision or chapter of the United States
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made
a general assignment for the benefit of its creditors, or (iii) had an order for
relief entered against it under the United States Bankruptcy Code or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
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(c) a court of competent jurisdiction, the New York Department
of Insurance or other competent regulatory authority shall have entered a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Insurer or for all or any material portion of its
property or (ii) authorizing the taking of possession by a custodian, trustee,
agent or receiver of the Insurer (or the taking of possession of all or any
material portion of the property of the Insurer).
"Insurer Optional Deposit" means, with respect to any
Distribution Date, an amount delivered by the Insurer pursuant to Section 5.11,
at its sole option, other than amounts in respect of a Note Policy Claim Amount
to the Trust Collateral Agent for deposit into the Collection Account for any of
the following purposes: (i) to provide funds in respect of the payment of fees
or expenses of any provider of services to the Trust with respect to such
Distribution Date; or (ii) to include such amount as part of the Distribution
Amount for such Distribution Date to the extent that without such amount a draw
would be required to be made on the Note Policy.
"Interest Rate" means ____% per annum (computed on the basis
of a 360-day year of twelve 30-day months).
"Investment Earnings" means, with respect to any Distribution
Date and Trust Account, the investment earnings on amounts on deposit in such
Trust Account on such Distribution Date.
"Issuer" means National Auto Finance 1997-1 Trust.
"Lien" means a security interest, lien, charge, pledge,
equity, or encumbrance of any kind.
"Lien Certificate" means, with respect to a Financed Vehicle,
an original certificate of title, certificate of lien or other notification
issued by the Registrar of Titles of the applicable state to a secured party
which indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which the
original certificate of title is required to be given to the Obligor, the term
"Lien Certificate" shall mean only a certificate or notification issued to a
secured party.
"Liquidated Receivable" means, with respect to any Due Period,
a Receivable with respect to which any of the following has occurred during such
Due Period: (i) 90 days have elapsed since Repossession of the related Financed
Vehicle, (ii) the Servicer (or Sub-Servicer) has in good faith determined that
all amounts that it expects to recover under such Receivable have been received,
or (iii) 90% of any Scheduled Payment on such Receivable is 120 days or more
(or, if the related Obligor is a debtor under Chapter 13 of the U.S.
Bankruptcy Code, 180 days or more) delinquent as of the end of such Due Period.
"Liquidation Expenses" means, reasonable out-of-pocket
expenses which are incurred by the Servicer or any Sub-Servicer in connection
with the liquidation of any Defaulted Receivable. Such expenses shall include,
without limitation, legal fees and expenses, any
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unreimbursed amount expended by the Servicer or any Sub-Servicer pursuant to
Section 4.8 (to the extent such amount is reimbursable under the terms of
Section 4.8) respecting the related Receivable, and any related and unreimbursed
expenditures for property restoration or preservation.
"Liquidation Proceeds" means, with respect to a Liquidated
Receivable, all amounts realized with respect to such Receivable (other than
amounts withdrawn from the Series 1997-1 Spread Account and drawings under the
Note Policy), including any proceeds from any Insurance Policies.
"Lockbox Account" means any bank account maintained at a
Lockbox Bank into which collections under the Receivables are deposited in
accordance with Section 4.6.
"Lockbox Agreement" means a letter agreement among a Lockbox
Bank, the Seller, the Trust Collateral Agent, the Servicer and, if applicable,
any Sub-Servicer, relating to one or more Lockbox Accounts, as the same may be
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with the terms thereof. So long as no Insurer Default shall
have occurred and be continuing, any Lockbox Agreement is also required to be
acceptable to the Insurer.
"Lockbox Bank" means any bank at which a Lockbox Account is
maintained from time to time and whose short-term debt securities are rated A-1+
by S&P and P-1 by Moody's. So long as no Insurer Default shall have occurred and
be continuing, any Lockbox Bank is also required to be acceptable to the
Insurer.
"Mandatory Redemption Date" means the Distribution Date
relating to the Reporting Date next succeeding the last day of the Pre-Funding
Period.
"Monthly Pre-Funding Period Reserve Amount" means, with
respect to any Distribution Date occurring on or prior to the Distribution Date
next succeeding termination of the Pre-Funding Period, am amount equal to the
excess, if any, of (i) the product of (a) 1/12th, (b) the Note Rate and (c) the
average daily balance of funds on deposit in the Pre-Funding Account from and
including the preceding Distribution Date (or, in the case of the first
Distribution Date, the Closing Date) to but not including the current
Distribution Date, over (ii) the amount of interest accrued on Permitted
Investments on deposit in the Pre-Funding Account from and including the
preceding Distribution Date (or, in the case of the first Distribution Date, the
Closing Date) to but not including the current Distribution Date.
"Monthly Records" means all records and data maintained by the
Servicer with respect to the Receivables, including the following with respect
to each Receivable: the account number; the originating Dealer; Obligor name;
Obligor address; Obligor home phone number; Obligor business phone number;
original Principal Balance; original term; Annual Percentage Rate; current
Principal Balance; current remaining term; origination date; first payment date;
final scheduled payment date; next payment due date; date of most recent
payment; new/used classification; collateral description; days currently
delinquent; number of contract extensions
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(months) to date; amount of Scheduled Payment; current Insurance Policy
expiration date; and past due late charges.
"Moody's" means Moody's Investors Service, Inc., or its
successor.
"NAFI" means National Auto Finance Company, Inc and its
permitted successors and assigns hereunder in accordance with the terms hereof.
"Net Liquidation Proceeds" means, with respect to a Liquidated
Receivable, all Liquidation Proceeds net of (i) reasonable expenses, which
expenses shall not include any deficiency balances or post-disposition
recoveries collected, incurred by the Servicer in connection with the collection
of such Receivable and the repossession and disposition of the Financed Vehicle
and (ii) amounts that are required to be refunded to the Obligor on such
Receivable; provided, however, that the Net Liquidation Proceeds with respect to
any Receivable shall in no event be less than zero.
"Net Loss Rate" means, with respect to any Due Period, the
product, expressed as a percentage, of (i) twelve and (ii) a fraction, the
numerator of which equals the excess of (A) the sum of (1) the aggregate
Principal Balance of all Receivables that became Liquidated Receivables in such
Due Period and (2) accrued and unpaid interest on such Principal Balance through
the end of such Due Period and (3) the amount of any Bankruptcy Losses, over (B)
the Liquidation Proceeds received by the Trust during such Due Period with
respect to all Liquidated Receivables in the Trust (including Liquidated
Receivables that became Liquidated Receivables in a prior Due Period) and the
denominator of which equals the arithmetic average of the Pool Balance as of the
end of such Due Period and the Pool Balance as of the end of the preceding Due
Period.
"Note" or "Notes" has the meaning assigned to such term in the
Indenture.
"Note Balance" means initially, the aggregate principal amount
of Notes issued on the Closing Date and, thereafter, such principal amount
reduced by all amounts distributed to the Noteholders in respect of the
Noteholders' Principal Distributable Amount.
"Note Distribution Account" means the account designated as
such, established and maintained pursuant to Section 5.1.
"Note Majority" means a majority by aggregate outstanding
principal balance of the Noteholders so long as the Notes are outstanding.
"Note Policy" means the financial guaranty insurance policy
issued by the Insurer to the Trust Collateral Agent, as agent for the Trustee,
for the benefit of the Noteholders.
"Note Policy Claim Amount" means, for any Distribution Date,
shall equal the lesser of (i) the sum of the Scheduled Payments (as defined in
the Policy, including any endorsements thereto) for such Distribution Date and
(ii) the excess, if any, of (x) the amount required to be distributed pursuant
to clauses (i) through (iv) of Section 5.7(b) hereof over (y) the
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sum of the Available Amount and Deficiency Claim Amount with respect to such
Distribution Date.
"Note Pool Factor" for the Notes as of the close of business
on a Distribution Date means a seven-digit decimal figure equal to the
outstanding principal amount of such Notes (after giving effect to any
distributions reducing the Note Balance of the Notes on such Distribution Date)
divided by the original outstanding principal amount of such Class of Notes on
the Closing Date.
"Note Prepayment Amount" means, as of the Distribution Date on
or immediately following the last day of the Pre-Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount equal
to the remaining Pre-Funded Amount on deposit in the Pre-Funding Account.
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Noteholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Noteholders' Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that was actually
deposited in the Note Distribution Account on such preceding Distribution Date.
"Noteholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Noteholders' Interest
Carryover Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means,
with respect to any Distribution Date, the sum of (i) thirty (30) days of
interest (or, in the case of the initial Distribution Date, the number of days
from and including the Closing Date to but not including such initial
Distribution Date) at the Interest Rate on the Note Balance on such Distribution
Date (before reduction of the Note Balance by any distributions made on such
Distribution Date) and (ii)interest on the Noteholders' Interest Carryover
Shortfall at the Interest Rate from the preceding Distribution Date through the
current Distribution Date, to the extent permitted by law.
"Noteholders' Principal Carryover Shortfall" means, as of the
close of any Distribution Date, the excess of the Noteholders' Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Distribution Date over the amount in respect of
principal that was actually deposited in the Note Distribution Account on such
Distribution Date.
"Noteholders' Principal Distributable Amount" means, with
respect to (i) any Distribution Date prior to the Final Scheduled Distribution
Date, the sum of (a) 91% of the Principal Distributable Amount, (b) amounts
transferred from the Pre-Funding Account to the Note Distribution Account on
such Distribution Date, if any, pursuant to Section 5.7(a)(ii), and
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(c) the Noteholders' Principal Carryover Shortfall with respect to such
Distribution Date, and (ii) the Final Scheduled Distribution Date, the Note
Balance (before giving effect to any distribution on the Notes on such Final
Scheduled Distribution Date).
"Notice of Claim" means the notice required to file a claim
under the Policy.
"Obligor" on a Receivable means the purchaser or co-purchasers
of the Financed Vehicle and any other Person who owes payments under the
Receivable.
"Officers' Certificate" means a certificate signed by a
Co-Trustee of the Seller or Funding Trust II, as the case may be, or the
Chairman of the Board, President, Executive Vice President, Senior Vice
President, Vice President, or Assistant Vice President of the Custodian, NAFI,
or by a Servicing Official, as the case may be, and delivered to the Trust
Collateral Agent, as required by this Agreement.
"OFSA" means Omni Financial Services of America, Inc., a
Florida corporation, or any substitute Subservicer performing substantially the
same services on behalf of the Servicer as OFSA performs pursuant to the Amended
Restated Servicing Agreement, dated as of December 8, 1994, between the Servicer
and World Omni Financial Corp. ("WOFCO"), as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and the terms of this Agreement, and the Assignment and Assumption
Agreement dated as of October 23, 1995 between WOFCO and OFSA pursuant to which
WOFCO assigned its subservicing duties to OFSA.
"Opinion of Counsel" means an opinion of counsel reasonably
acceptable to the Insurer, and, if such opinion or a copy thereof is required by
the provisions of this Agreement to be delivered to the Insurer, to the Insurer.
"Original Pool Balance" means the sum, as of any date, of the
Pool Balance as of the Initial Cut-off Date.
"Originator" means consumer finance companies, depository
institutions and other financial institutions engaged in the financing of motor
vehicle retail installment sale contracts from whom NAFI acquired Receivables;
provided, however, that "Originators" shall not include Dealers.
"Originator Agreement" means an agreement pursuant to which
NAFI acquired Receivables from an Originator.
"Other Conveyed Property" means all property conveyed by the
Seller to the Trust pursuant to Section 2.1(b) through (h) and Section
2.2(a)(ii) through (x) of this Agreement.
"Owner Trust Property" has the meaning assigned to such term
in the Trust Agreement.
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"Owner Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, its
successors in interest or any successor Owner Trustee under the Trust Agreement.
"Person" means any individual, corporation, estate,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"Physical Property" has the meaning assigned to such term in
the definition of "Delivery" above.
"Pool Balance" means, as of any date of determination, the
Original Pool Balance, plus the aggregate Principal Balance of the Subsequent
Receivables, if any, sold to the Trust, reduced by any principal amounts
previously paid (excluding Purchased Receivables and Liquidated Receivables).
"Preference Claim" has the meaning set forth in Section 6.2
hereof.
"Pre-Funded Amount" means, with respect to any Distribution
Date, the amount on deposit in the Pre-Funding Account, (exclusive of
Pre-Funding Earnings) which initially shall be $6,689,091.18
"Pre-Funding Account" has the meaning specified in
Section 5.1.
"Pre-Funding Earnings" means any Investment Earnings on
amounts on deposit in the Pre-Funding Account.
"Pre-Funding Period" means the period beginning on and
including the Closing Date and ending on the first to occur of (a) the first
date on which the amount on deposit in the Pre-Funding Account (after giving
effect to any transfers therefrom in connection with the transfer of Subsequent
Receivables to the Issuer on such date) is less than $100,000, (b) the date on
which an Event of Default occurs under the Indenture or a Servicer Termination
Event occurs and (c) the close of business on October 30, 1997.
"Pre-Funding Period Reserve Account" means the account
designated as such, established and maintained pursuant to Section 5.2.
"Pre-Funding Period Reserve Account Initial Deposit" means
$86,824.40 deposited on the Closing Date.
"Principal Balance" means, with respect to any Receivable, as
of any date, the Amount Financed minus (i) that portion of all amounts received
on or prior to such date and allocable to principal in accordance with the
Actuarial Method and (ii) any Bankruptcy Loss in respect of such Receivable.
"Principal Distributable Amount" means, with respect to any
Distribution Date (other than the Final Scheduled Distribution Date), the sum of
(i) that portion of all collections
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on the Receivables (other than Liquidated Receivables and Purchased Receivables
and, to the extent included in clause (iv) below, the Principal Balance of all
Retransfer Default Receivables) allocable to principal, including all full and
partial principal prepayments, deposited into the Collection Account during the
related Due Period, (ii) the Principal Balance of all Receivables that became
Liquidated Receivables during the related Due Period (other than Liquidated
Receivables that became Purchased Receivables during such Due Period and, to the
extent included in clause (iv) below, the Principal Balance of all Retransfer
Default Receivables), (iii) the portion of the Purchase Amount allocable to
principal of all Receivables that became Purchased Receivables on or prior to
the related Reporting Date and subsequent to the preceding Reporting Date, (iv)
in the sole discretion of the Insurer, the Principal Balance as of the related
Reporting Date of all the Receivables that were required to be purchased
pursuant to Sections 3.2 and 4.1 but were not purchased, and (v) the aggregate
amount of Bankruptcy Losses that occurred during the related Due Period.
"Purchase Agreement" means the Purchase and Contribution
Agreement between the Seller and NAFI, dated as of July 23, 1997, as such
Agreement may be amended from time to time.
"Purchase Amount" means, with respect to a Receivable, the
Principal Balance and all accrued and unpaid interest on the Receivable, after
giving effect to the receipt of any moneys collected (from whatever source) on
such Receivable, if any, as of the date of purchase.
"Purchased Receivable" means a Receivable purchased as of the
close of business on the last day of a Due Period by the Servicer pursuant to
Section 4.7 or repurchased by the Seller or NAFI pursuant to Section 3.2 or
Section 11.1(a).
"Rating Agency" means Moody's and Standard & Poor's. If no
such organization or successor maintains a rating on the Notes, "Rating Agency"
shall be a nationally recognized statistical rating organization or other
comparable Person designated by the Seller and acceptable to the Insurer (so
long as an Insurer Default shall not have occurred and be continuing), notice of
which designation shall be given to the Seller, the Trust Collateral Agent, the
Owner Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action,
that each Rating Agency shall have been given 10 days' (or such shorter period
as shall be acceptable to each Rating Agency) prior notice thereof and that each
of the Rating Agencies shall have notified the Seller, the Servicer, the
Insurer, the Owner Trustee and the Trust Collateral Agent in writing that such
action will not result in a reduction or withdrawal of the then current rating
of the Notes.
"Receivable" means each motor vehicle retail installment sale
contract and security agreement (including any and all rights to receive
payments thereunder on and after the applicable Cut-off Date and security
interests in the Financed Vehicle securing such contract or note) assigned and
transferred to the Issuer hereunder as of the Closing Date or a Subsequent
Transfer Date and not reassigned, retransferred or otherwise released in
accordance herewith, each such Receivable being identified in a Receivable
Schedule attached to a Subsequent Transfer Agreement.
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"Receivable Documents" means, with respect to a Receivable,
all papers and documents (including those contained in the Receivable File) and
all other papers and records (including computerized data) of whatever kind or
description, whether developed or originated by NAFI, a Dealer, an Originator,
the Servicer or another Person, required to document the Receivable or to
service the Receivable.
"Receivable Files" means with respect to a Receivable, the
fully executed original of such Receivable; the assignment of such Receivable by
a Dealer or Originator to NAFI, the original Title Document or UCC financing
statement evidencing that the security interest in a Financed Vehicle granted to
NAFI under such Receivable has been perfected under applicable state law public
records office, in which case NAFI will deliver to National Financial, on the
Closing Date or the Subsequent Transfer Date, as the case may be, an Officer's
Certificate of NAFI indicating that the original of such Title Document has been
applied for at, or the original of such UCC financing statement was delivered
to, such public office and shows NAFI as the lienholder or secured party and
that NAFI will deliver the originals thereof when returned from such office; the
original of any assumption agreement or any modification, extension or
refinancing agreement; and the original application of the related Obligor to
obtain the financing extended by such Receivable.
"Receivables Schedule" means the schedule of all retail
installment sales contracts and promissory notes originally held as part of the
Trust which is attached as Schedule A.
"Record Date" with respect to each Distribution Date means
the Business Day immediately preceding such Distribution Date, unless otherwise
specified in the Agreement.
"Registrar of Titles" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"Reporting Date" means, with respect to a Distribution Date,
the earlier of (i) the 15th day of the calendar month in which such Distribution
Date occurs, and (ii) the fourth business Day preceding such Distribution Date.
"Repossession" means any action taken or to be taken pursuant
to the UCC or other applicable laws in connection with recovery on a Defaulted
Receivable (including any Liquidated Receivable), including repossession of the
related Financed Vehicle with or without judicial proceedings, sale of such
Financed Vehicle at public or private sale, retention of such Financed Vehicle
in satisfaction of the Obligor's obligations under such Defaulted Receivable, or
a levy on and sheriff's sale of the related Financed Vehicle in enforcement of a
judgment on such Defaulted Receivable or by voluntary surrender or otherwise.
"Required Reserve Amount" means, with respect to any
Distribution Date, an amount equal to the product of (i) a per annum rate equal
to the Interest Rate less 250 basis points (2.5%), (ii) the amount of funds on
deposit in the Pre-Funding Account after giving effect to any withdrawals
therefrom on such Distribution Date and (iii) a fraction, the numerator of which
is the number of days from and including such Distribution Date to (but
excluding) the
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Distribution Date immediately following the end of the Pre-Funding Period, and
the denominator of which is 360.
"Requisite Amount" has the meaning specified in the Spread
Account Agreement.
"Responsible Officer" means, with respect to the Trust
Collateral Agent, any officer within the Corporate Trust Office of the Trust
Collateral Agent, including any Managing Director, Vice President, Assistant
Vice President, Assistant Treasurer, Assistant Secretary or any other officer of
the Trust Collateral Agent, customarily performing functions similar to those
performed by any of the above designated officers, and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
"Purchase Amount" means, with respect to any Receivable
required to be retransferred pursuant to Sections 3.2 or 4.1, an amount equal to
the sum of (I) 100% of the Principal Balance thereof on the date of retransfer
and (ii) unpaid accrued interest thereon from the date to which interest was
last paid by the Obligor to the due Date in the Due Period in which such
retransfer occurs. For purposes of determining the Purchase Amount of any
Receivable, the Principal Balance thereof on the date of retransfer shall not be
reduced to zero as a result of its classification as a Liquidated Receivable.
"Retransfer Default Receivable" means any Receivable with
respect to which the Seller or the Servicer is required to deposit in the
Collection Account the related Purchase Amount pursuant to Section 3.2 or
Section 4.1 and has not so deposited such amount on the Reporting Date on which
it is required to repurchase such Receivable following receipt of notice from
the Trust Collateral Agent that such Receivable is required to be retransferred.
"Retransfer Receivable" means any Receivable retransferred to
the Seller or the Servicer pursuant to Sections 3.2 or 4.1 hereof.
"Sale Agreement" means the Sale Agreement, dated of even date
herewith, between Funding Trust II and the Seller, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
"Schedule of Representations" means the Schedule of
Representations and Warranties attached hereto as Schedule B.
"Scheduled Payment" means, with respect to any Due Period for
any Receivable, the amount set forth in such Receivable as required to be paid
by the Obligor in such Due Period. If after the Closing Date, the Obligor's
obligation under a Receivable with respect to a Collection Period has been
modified so as to differ from the amount specified in such Receivable as a
result of (i) the order of a court in an insolvency proceeding involving the
Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended, or (iii) modifications or extensions of the Receivable permitted by
Sections 4.2(b) and (c), the Scheduled Payment with respect to such Due Period
shall refer to the Obligor's payment obligation with respect to such Due Period
as so modified.
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"Seller" means National Financial Auto Funding Trust, a
Delaware business trust, and its successors in interest to the extent permitted
hereunder.
"Series 1997-1 Spread Account" means the account designated as
such, established and maintained pursuant to the Spread Account Agreement.
"Servicer" means National Auto Finance Company, Inc., as the
servicer of the Receivables, and each successor Servicer pursuant to Section
10.3.
"Servicer Extension Notice" means the notice specified in
Section 4.16.
"Servicer Termination Event" means an event specified in
Section 10.1.
"Servicing Fee" has the meaning specified in Section 4.9.
"Servicing Fee Rate" means 2.00% per annum.
"Servicing Official" means any employee of the Servicer
involved in, or responsible for, the administration and servicing of the
Receivables whose name appears on a list of servicing employees furnished to the
Trust Collateral Agent and the Insurer by the Servicer, as such list may from
time to time be amended.
"Servicer's Certificate" means an Officers' Certificate of the
Servicer delivered pursuant to Section 4.12, substantially in the form of
Exhibit B.
"Simple Interest Method" means the method of allocating a
fixed level payment on an obligation between principal and interest, pursuant to
which the portion of such payment that is allocated to interest is equal to the
product of the fixed rate of interest on such obligation multiplied by the
period of time (expressed as a fraction of a year, based on the actual number of
days in the calendar month and 365 days in the calendar year) elapsed since the
preceding payment under the obligation was made.
"Simple Interest Receivable" means a Receivable under which
the portion of the payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"Spread Account Agreement" means the Spread Account Agreement
dated as of July __, 1997 among the Insurer, the Seller, the Trust Collateral
Agent and the Collateral Agent, as the same may be modified, supplemented or
otherwise amended from time to time in accordance with the terms thereof.
"Standard & Poor's" means Standard & Poor's Ratings Services,
a division of The McGraw Hill Companies, Inc., or its successor.
"Subsequent Cut-off Date" means, with respect to any
Subsequent Transfer Date, the third Business Day prior thereto.
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"Subsequent Purchase Agreement" means an agreement by and
between the Seller and NAFI pursuant to which the Seller will acquire Subsequent
Receivables.
"Subsequent Receivables" means the Receivables transferred to
the Issuer pursuant to Section 2.2, which shall be listed on Schedule A to the
related Subsequent Transfer Agreement.
"Subsequent Transfer Agreement" means the agreement among the
Issuer, the Seller and the Servicer, substantially in the form of Exhibit A.
"Subsequent Transfer Date" means, with respect to Subsequent
Receivables, any date, occurring not more frequently than once a month, during
the Pre-Funding Period on which Subsequent Receivables are to be transferred to
the Trust pursuant to this Agreement, and a Subsequent Transfer Agreement is
executed and delivered to the Trust and the Insurer.
"Sub-Servicer" means any Eligible Sub-Servicer with whom NAFI
has entered into a Sub-Servicing Agreement. Initially, the Sub-Servicer will be
OFSA.
"Sub-Servicer Account" means the account maintained by OFSA
with Mellon Financial Services to which Obligors have been or will be instructed
to remit payments in respect of the Receivables.
"Sub-Servicing Agreement" means the written contract between
NAFI and any Sub-Servicer relating to servicing and/or administration of the
Receivables as permitted by Section 4.2 hereof.
"Supplemental Servicing Fee" means, with respect to any Due
Period, any payments received from an Obligor or a Dealer in connection with any
application fees, tax processing fees, wire transfer fees, express mail fees,
insurance premiums, late charges, taxes, fees or other charges imposed by any
Governmental Authority (other than any extension fees).
"Title Documents" means, with respect to any Financed Vehicle,
the actual motor vehicle title or certificate of title for such Financed Vehicle
issued by the Registrar of Titles or other government agency in the jurisdiction
in which such Financed Vehicle is registered; alternatively, in those certain
jurisdictions whose law requires that the original of the actual motor vehicle
title or certificate of title be possessed by the Obligor, then, in lieu of the
actual title or certificate of title, Title Documents shall mean such duplicate
titles, certificates or other documents as are permitted, required and/or
contemplated to be possessed by the secured party under the laws of such
jurisdiction.
"Transaction Documents" shall have the meaning assigned
thereto in the Insurance and Indemnity Agreement.
"Trigger Event" has the meaning assigned thereto in the Spread
Account Agreement.
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"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), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section
5.1.
"Trust Agreement" means the Trust Agreement dated as of July
__, 1997, between the Seller and the Owner Trustee, as the same may be amended
and supplemented from time to time.
"Trust Certificates" means the certificates issued pursuant to
the Trust Agreement evidencing beneficial ownership interests in the Trust.
"Trust Collateral Agent" means the Person acting as Trust
Collateral Agent hereunder, its successors in interest and any successor Trust
Collateral Agent hereunder.
"Trust Officer" means, (i) in the case of the Trust Collateral
Agent, any officer within the Corporate Trust Office of the Trust Collateral
Agent, including any Managing Director, Vice President, Assistant Vice
President, Assistant Treasurer, Assistant Secretary or any other officer of the
Trust Collateral Agent, customarily performing functions similar to those
performed by any of the above designated officers, and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject., and
(ii) in the case of the Owner Trustee, any officer in the Corporate Trust Office
of the Owner Trustee or any agent of the Owner Trustee under a power of attorney
with direct responsibility for the administration of this Agreement or any of
the Transaction Documents on behalf of the Owner Trustee.
"Trust Property" means the property and proceeds conveyed
pursuant to Section 2.1 and Section 2.2. Although the Seller has pledged the
Series 1997-1 Spread Account to the Trust Collateral Agent and the Insurer
pursuant to the Spread Account Agreement, the Series 1997-1 Spread Account shall
not under any circumstances be deemed to be a part of or otherwise includable in
the Trust or the Trust Property.
"Trustee" means the Person acting as Indenture Trustee under
the Indenture, its successors in interest and any successor trustee under the
Indenture.
"UCC" means the Uniform Commercial Code as in effect in the
relevant jurisdiction on the date of the Agreement.
"Unearned Finance Charge" means, with respect to any Contract
of a Receivable, the amount of the add-on finance charge that, under the term of
such Contract, would be required to be refunded or credited to the related
Obligor in accordance with such Contract if such Contract were then prepaid in
full.
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SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Indenture, or, if not defined
therein, in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.
(c) As used in this Agreement, in any instrument governed
hereby and in any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms not defined in this Agreement or in any such
instrument, certificate or other document, and accounting terms partly defined
in this Agreement or in any such instrument, certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such instrument, certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such instrument, certificate
or other document shall control.
(d) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
SECTION 1.3. Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural includes the
singular; words importing any gender include the other gender; references to
"writing" include printing, typing, lithography, and other means of reproducing
words in a visible form; references to agreements and other contractual
instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
the terms "include" or "including" mean "include without limitation" or
"including without limitation; "the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, and Article, Section, Schedule
and Exhibit references, unless otherwise specified, refer to Articles and
Sections of Schedules and Exhibits to this Agreement.
SECTION 1.4. Certain References. All references to the
Principal Balance of a Receivable as of any date of determination shall refer to
the close of business on such day.
SECTION 1.5. No Recourse. Without limiting the obligations of
NAFI hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any
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certificate or other writing delivered in connection herewith or therewith,
against any stockholder, officer or director, as such, of NAFI, or of any
predecessor or successor of NAFI.
SECTION 1.6. Action by or Consent of Noteholders. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Noteholders, such provision shall be deemed to refer to the Noteholder of record
as of the Record Date immediately preceding the date on which such action is to
be taken, or consent given, by Noteholders. Solely for the purposes of any
action to be taken, or consented to, by Noteholders, any Note registered in the
name of NAFI or any Affiliate thereof shall be deemed not to be outstanding;
provided, however, that, solely for the purpose of determining whether a Trust
Officer of the Trustee or the Trust Collateral Agent is entitled to rely upon
any such action or consent, only Notes which the Owner Trustee, the Trust
Officer of the Trustee or the Trust Collateral Agent, respectively, actually
knows to be so owned shall be so disregarded.
SECTION 1.7. Material Adverse Effect. Whenever a determination
is to be made under this Agreement as to whether a given event, action, course
of conduct or set of facts or circumstances could or would have a material
adverse effect on the Noteholders (or any similar or analogous determination),
such determination shall be made without taking into account the insurance
provided by the Policy.
SECTION 1.8. For all purposes of this Agreement the allocation
of a payment on a Receivable between principal and interest shall be made based
upon the amortization method provided in such Receivable. For purposes of
allocating a pay-ahead payment on a Receivable between principal and interest,
the pay-ahead shall be deemed to have been received on the date it was actually
due. For all purposes of this Agreement, no amount shall be treated as collected
under a Contract until such amount has been deposited into the Collection
Account.
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. Conveyance of Initial Receivables. In
consideration of the Issuer's delivery to or upon the order of the Seller on the
Closing Date of the net proceeds from the sale of the Notes and the other
amounts to be distributed from time to time to the Seller in accordance with the
terms of this Agreement, the Seller does hereby sell, transfer, assign, set over
and otherwise convey to the Issuer, without recourse (subject to the obligations
set forth herein), all right, title and interest of the Seller in and to:
(a) the Initial Receivables and all monies received thereon on
or after the Initial Cut-off Date (including amounts due on or before the
Initial Cut-off Date but received by NAFI, the Seller or the Issuer on or after
the Initial Cut-off Date);
(b) any proceeds and the right to receive proceeds with
respect to the Initial Receivables from claims on any physical damage, credit
life or disability insurance policies covering Financed Vehicles or Obligors,
including rebates of insurance premiums relating to the Receivables and any
proceeds from the liquidation of the Initial Receivables;
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(c) all rights against Dealers pursuant to Dealer Agreements
or against Originators pursuant to Originator Agreements;
(d) the related Receivables Files and any and all other
documents that NAFI keeps on file in accordance with its customary procedures
relating to the Receivables, the Obligors or the Financed Vehicles;
(e) property (including the right to receive future
Liquidation Proceeds) that secures a Receivable and that has been acquired by or
on behalf of the Trust pursuant to liquidation of such Receivable;
(f) all funds on deposit from time to time in the Trust
Accounts (less all investments and proceeds thereof), and all rights of the
Issuer therein;
(g) the rights and benefits, but none of its obligations or
burdens, under the Conveyance Agreements, including the delivery requirements,
representations and warranties and the cure and repurchase obligations of NAFI
under the Purchase Agreement; and
(h) the proceeds of any and all of the foregoing.
The foregoing transfer and assignment does not constitute and
is not intended to result in an assumption by the Trust Collateral Agent, any
Noteholder or the Insurer of any obligation of the Seller, the Master Trust,
Funding Trust II or NAFI to the Obligors, Dealers, insurers or any other Person
in connection with the Receivables, the Receivable Files, or the insurance
policies or any agreements or instruments relating to any of them. It is the
intention of the Seller that the transfer and assignment contemplated by this
Agreement shall constitute a sale of the Receivables and other Trust Property
from the Seller to the Issuer and the beneficial interest in and title to the
Receivables and the other Trust Property shall not be part of the Seller's
estate in the event of the filing of a bankruptcy petition by or against the
Seller under any bankruptcy law. In the event that, notwithstanding the intent
of the Seller, the transfer and assignment contemplated hereby is held not to be
a sale, this Agreement shall constitute a grant of a security interest in the
property referred to in this Section 2.1 for the benefit of the Noteholders and
the Insurer.
The Seller intends that the transfer and assignment of
Receivables by the Seller to the Trust constitute an absolute transfer to the
Trust of all the Seller's right, title, and interest in and to the Receivables
and the remainder of the Trust Property (other than the Policy); provided that,
in the event that, notwithstanding the intent of the Seller, the transfer is not
held to be a sale, then it is intended that the conveyance shall be deemed to be
a grant of a security interest in the Receivables and the remainder of the Trust
Property. By the transfer, assignment and set-over contemplated by this Section
2.1, the Seller further grants and transfers to the Trustee, for the benefit of
all Noteholders, and the Insurer a first priority, perfected security interest,
as their respective interests appear in Section 5.7, in all of the Seller's
right, title and interest in, to and under the Receivables and the remainder of
the Trust Property, whether now existing or hereafter acquired, and agrees that
this Agreement shall also constitute a security agreement under applicable law.
Within two Business Days of the Closing Date, the Seller shall have filed a UCC
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financing statement or statements, appropriate under the applicable UCC, to
reflect the assignment of the Receivables and the remainder of the Trust
Property (other than the Policy) by the Seller to the Trustee and the Insurer
and to protect the Noteholders' and the Insurer's interest in the Receivables,
their proceeds and the Financed Vehicles, against all other Persons and shall
thereafter file any appropriate continuation statements in respect thereof.
During the term of this Agreement, the Seller shall not change its name,
identity or structure or relocate its chief executive office or principal place
of business without first giving at least 30 days' advance written notice to the
Trust Collateral Agent, the Servicer and the Insurer; provided however, that the
Trust Collateral Agent, the Servicer and the Insurer shall, subject to the last
sentence of this paragraph, have no right or power to prohibit a change in the
Seller's name, identity or structure or a relocation of, its chief executive
office or principal place of business. If any change in the Seller's name,
identity or structure or the relocation of its chief executive office or
principal place of business would make any financing or continuation statement
or notice of lien filed in connection with this Agreement misleading within the
meaning of applicable provisions of the UCC or any title statute, the Seller,
promptly but in no event later than thirty days after the effective date of such
change, shall file such amendments or take such other actions as may be required
to preserve and protect the Trust Collateral Agent's interest in the Receivable
and proceeds thereof and the Financed Vehicles and the remainder of the Trust
Property. Promptly after filing such amendments or taking such other action, the
Seller shall deliver to the Trust Collateral Agent and the Insurer an Opinion of
Counsel stating that all financing statements, continuation statements or
amendments thereto necessary to continue the perfection of the interest of the
Trust Collateral Agent in the Trust Property have been filed and reciting the
details thereof.
SECTION 2.2. Conveyance of Subsequent Receivables.
(a) Subject to the conditions set forth in paragraph (b)
below, in consideration of the Issuer's delivery on each related Subsequent
Transfer Date to or upon the order of the Seller of the amount described in
Section 5.9(a) to be delivered to the Seller, the Seller does hereby sell,
transfer, assign, set over and otherwise convey to the Issuer without recourse
(subject to the obligations set forth herein), all right, title and interest of
the Seller in and to:
(i) the Subsequent Receivables listed on Schedule A to the
related Subsequent Transfer Agreement and all monies received thereon
on or after the related Subsequent Transfer Date (including amounts due
on or before the Subsequent Cut-off Date but received by NAFI, the
Seller or the Issuer on or after the Subsequent Cut-off Date);
(ii) any proceeds and the right to receive proceeds with
respect to such Subsequent Receivables from claims on any physical
damage, credit life or disability insurance policies covering the
related Financed Vehicles or Obligors, including rebating of insurance
premiums relating to the Receivables, and any proceeds from the
liquidation of the Subsequent Receivables;
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(iii) all rights of the Seller against the Dealers pursuant to
Dealer Agreements; or against Originators pursuant to Originator
Agreements;
(iv) the related Receivables Files; and any and all other
documents that NAFI or the Seller keeps on file in accordance with its
customary procedures relating to the Receivables, the Obligors or the
Financed Vehicles;
(v) property (including the right to receive future
Liquidation Proceeds) that secures a Receivable and that has been
acquired by or on behalf of the Trust pursuant to liquidation of such
Receivable;
(vi) all funds on deposit from time to time in the Trust
Accounts (less all investments and proceeds thereof), and all rights of
the Issuer therein;
(vii) all of the Seller's right, title and interest in its
rights and benefits, but none of its obligations or burdens, under each
of the Subsequent Purchase Agreements, including the delivery
requirements, representations and warranties and the cure and
repurchase obligations of NAFI under each of the Subsequent Purchase
Agreements, on or after the related Subsequent Cut-off Date; and
(viii) the proceeds of any and all of the foregoing.
(b) The Seller shall transfer to the Issuer the Subsequent
Receivables and the other property and rights related thereto described in
paragraph (a) above during the Pre-Funding Period (but not more often than once
during each calendar month or as more frequently consented to in writing by the
Insurer) only upon the satisfaction of each of the following conditions on or
prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trust Collateral Agent,
the Owner Trustee, each Rating Agency and the Insurer with an Addition
Notice not later than ten days prior to such Subsequent Transfer Date
and shall have provided any information reasonably requested by any of
the foregoing with respect to the Subsequent Receivables;
(ii) the Seller shall have delivered the Receivables Schedule
for the Additional Receivables to be transferred to the Trust on such
Subsequent Transfer Date to each Rating Agency and the Insurer at least
three Business Days prior to such Subsequent Transfer Date, and the
Trust Collateral Agent and the Insurer shall have received, prior to
10:00 a.m., New York City time, on such Subsequent Transfer Date,
written notice from each Rating Agency to the effect that such transfer
will result in the downgrade or withdrawal of the rating then assigned
by such Rating Agency to the Notes;
(iii) the Seller shall have delivered to the Owner Trustee and
the Trust Collateral Agent a duly executed Subsequent Transfer
Agreement which shall include supplements to Schedule A, listing the
Subsequent Receivables and a copy thereof to the Insurer;
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(iv) the Seller shall, to the extent required by Section 4.2,
have deposited or caused to be deposited in the Collection Account all
collections in respect of the Subsequent Receivables;
(v) as of each Subsequent Transfer Date, no Servicer
Termination Event or Insurance Agreement Event of Default shall have
occurred and be continuing;
(vi) after giving effect to any transfer of Subsequent
Receivables on a Subsequent Transfer Date, the Receivables transferred
to the Trust pursuant hereto shall meet the following criteria (based
on the characteristics of the Initial Receivables on the Initial
Cut-off Date and the Subsequent Receivables on the related Subsequent
Cut-off Dates): (i) the weighted average APR of the Receivables
transferred to the Trust shall not be less than 18.0%, unless, with the
prior consent of the Rating Agencies and the Insurer, the Seller
increases the Initial Spread Account Deposit with respect to such
Subsequent Receivables by the amount required by the Insurer; (ii) the
weighted average remaining term of the Receivables transferred to the
Trust shall not be greater than 55 months; (iii) not more than 80% of
the Aggregate Principal Balance shall represent loans to finance the
purchase of used Financed Vehicles; and (iv) the final scheduled
payment date on the Receivable with the latest maturity shall not be
later than October 30, 2002;
(vii) each of the representations and warranties made by the
Seller pursuant to Section 8.1 and pursuant to Section 3.1 with respect
to the Subsequent Receivables to be transferred on such Subsequent
Transfer Date shall be true and correct as of the related Subsequent
Transfer Date, and the Seller shall have performed all obligations to
be performed by it hereunder on or prior to such Subsequent Transfer
Date;
(viii) the Insurer (so long as no Insurer Default shall have
occurred and be continuing), in its absolute and sole discretion, shall
have approved the transfer of such Subsequent Receivables to the Trust,
the Insurer shall have been reimbursed for any fees and expenses
incurred by the Insurer in connection with the granting of such
approval, and shall have received a copy of the executed Subsequent
Transfer Agreement; and
(ix) the Seller shall have delivered to the Insurer and the
Trust Collateral Agent an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this paragraph
(b).
The Seller covenants that in the event any of the foregoing
conditions precedent are not satisfied with respect to any Subsequent Receivable
on the date required as specified above, the Seller will immediately repurchase
such Subsequent Receivable from the Trust, at a price equal to the Purchase
Amount thereof, in the manner specified in Section 4.7.
(c) Within ten Business Days after the last day of the
Pre-Funding Period, the Seller shall, at its cost and expense, cause KPMG Peat
Marwick or such other nationally recognized firm of public accountants as may be
acceptable to the Insurer to deliver to the Insurer a report covering the
Receivables then in the Trust and addressing such procedures as the Seller and
the Insurer may agree upon.
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SECTION 2.3. Further Encumbrance of Trust Property. (a)
Immediately upon the conveyance to the Trust by the Seller of any item of the
Trust Property pursuant to Section 2.1, all right, title and interest of the
Seller in and to such item of Trust Property shall terminate, and all such
right, title and interest shall vest in the Trust, in accordance with the Trust
Agreement and Sections 3802 and 3805 of the Business Trust Statute (as defined
in the Trust Agreement).
(b) Prior to the payment in full on the Notes, the payment of
all amounts due to the Insurer under the Insurance Agreement, the end of the
Term of the Note Policy (as defined therein) and the surrender of the Note
Policy by the Collateral Agent to the Insurer, the Trust Collateral Agent shall
hold the Trust Property for the exclusive benefit of the Trustee on behalf of
the Noteholders and the Insurer.
(c) The Trust Collateral Agent shall, at such time as there
are no Securities outstanding and all sums due to (i) the Trustee or any agent
or counsel thereof pursuant to the Indenture, (ii) the Insurer under the
Insurance Agreement and (iii) the Trust Collateral Agent pursuant to this
Agreement, have been paid, and the term of the Note Policy has expired and the
Trust Collateral Agent has surrendered the Note Policy to the Insurer, release
any remaining portion of the Trust Property to the Seller.
SECTION 2.4. (a) The Servicer shall be responsible for
maintaining, and shall maintain and cause the respective Subservicers, if any,
to maintain, a complete set of books and records (including tapes and disks for
computer use) for each Receivable to the extent that such books and records were
delivered to the Servicer or such Subservicer or were developed by it during the
course of servicing such Receivable. The Servicer shall, and shall cause the
respective Subservicers to, maintain such books of account and other records as
will enable the Trust Collateral Agent to determine the ownership status of each
Receivable; provided however, that neither the Servicer nor any Subservicer
shall be required to physically mark or segregate any Receivables or other
Receivable Documents to indicate such ownership status. Promptly after the
Closing Date and each Subsequent Transfer Date, the Seller and the Servicer
shall deliver to the Custodian all Receivable Documents in its possession or
under its control, and shall promptly deliver to the Custodian any Receivable
Documents that subsequently come into its possession or within its control. NAFI
hereby warrants, represents and covenants to and with the Trust Collateral Agent
and the Insurer that recordation of the name of NAFI as lienholder in the Title
Documents respecting any Financed Vehicle as well as such lien itself is
maintained by NAFI as agent for the Trust Collateral Agent for the benefit of
the Trust and NAFI has no equitable ownership in the Receivables, except as it
may have by virtue of ownership of a Certificate or an equity interest in the
Seller or any Noteholder.
(b) On the Closing Date, the Seller shall deliver to the Trust
Collateral Agent for deposit in the Collection Account, or to the extent
received by the Servicer or any Subservicer, cause the Servicer to deliver or
cause to be delivered to the Trust Collateral Agent for deposit in the
Collection Account, all payments received on the Receivables on or after the
Initial Cut-off Date and on or before the second Business Day preceding the
Closing Date. Within two Business Days after a Subsequent Transfer Date, the
Seller shall deliver to the Trust
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Collateral Agent for deposit in the Collection Account, or to the extent
received by the Servicer or any Subservicer, cause the Servicer to deliver or
cause to be delivered to the Trust Collateral Agent for deposit in the
Collection Account, all payments received on the Receivables on or after the
applicable Cut-off Date and on or before such Subsequent Transfer Date.
SECTION 2.5. The Trust Collateral Agent, based solely upon the
representations of the Custodian, acknowledges receipt by the Custodian as of
the Closing Date and each Subsequent Transfer Date, as the case may be, of a
Receivable File relating to each Receivable. It is understood and agreed that
OFSA makes no representation as to the contents of the Receivable File. If the
Servicer or any such Subservicer subsequently finds any document or documents
constituting a part of a Receivable File to be missing or defective in any
material respect, the Servicer or such Subservicer shall promptly so notify the
Trust Collateral Agent, the Insurer and the Seller in writing, and the Servicer
shall add such item to the exceptions list. The Seller shall use best efforts to
cure each such omission or defect on the exceptions list. If the Seller does not
correct or cure any such omission or defect within sixty (60) days from the date
the Trust Collateral Agent was notified of such omission or defect, then the
Seller shall promptly accept a retransfer of the related Receivable from the
Trust Collateral Agent. The Purchase Amount for the retransferred Receivable
shall be delivered by the Seller to the Trust Collateral Agent for deposit in
the Collection Account and upon receipt of the Purchase Amount by the Trust
Collateral Agent and its receipt of written notice thereof, the Trust Collateral
Agent shall cause the Custodian to release to the Seller the related Receivable
File and the Trust Collateral Agent shall execute and deliver such instruments
of transfer or assignment, in each case without recourse, as shall be reasonably
necessary to vest in the Seller or its designee any Receivable released pursuant
hereto. It is understood and agreed that the obligation of the Seller to accept
a retransfer of any Receivable as to which a material defect in or omission of a
constituent document exists shall constitute the sole remedy respecting such
defect or omission available to Noteholders or the Trust Collateral Agent on
behalf of Noteholders.
ARTICLE III
THE RECEIVABLES
SECTION 3.1. Representations and Warranties of Seller. The
Seller makes the following representations and warranties as to the Receivables
and the Other Conveyed Property on which the Issuer is deemed to have relied in
acquiring the Receivables and upon which the Insurer shall be deemed to rely in
issuing the Note Policy. Such representations and warranties speak as of the
execution and delivery of this Agreement and as of the Closing Date in the case
of the Initial Receivables, and as of the related Subsequent Transfer Date in
case of the Subsequent Receivables (unless another date or time period is
otherwise specified or indicated in the particular representation or warranty),
but shall survive the sale, transfer and assignment of the Receivables to the
Issuer and the pledge thereof to the Trustee pursuant to the Indenture.
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(a) Schedule of Representations. The representations and
warranties set forth on the Schedule of Representations attached hereto as
Schedule B are true and correct.
(b) The representations and warranties set forth in this
Section shall survive assignment of the Receivables to the Trust Collateral
Agent and shall survive as long as any Note is outstanding or this Agreement has
not been terminated.
SECTION 3.2. Repurchase upon Breach.
(a) The Seller, the Servicer, any Subservicer, the Insurer,
any Trust Officer of the Trust Collateral Agent or the Owner Trustee, as the
case may be, shall promptly inform each of the other parties and the Insurer, in
writing, upon the discovery of any breach of the Seller's representations and
warranties made pursuant to Section 3.1 which materially and adversely affects
the interests of the Noteholders or the Insurer in the related Receivable (any
Sub-servicer being so obligated under the related Sub-Servicing Agreement);
provided, however, that the failure to give any such notice shall not derogate
from any obligations of the Seller under this Section 3.2. In addition, with
respect to any Receivables in respect of which the Title Documents were being
applied for on the Closing Date or the related Subsequent Transfer Date, as
applicable, if such Title Documents have not been received by the Servicer
within 180 days after the Closing Date or such Subsequent Transfer Date, as
applicable, the Servicer shall give the Trust Collateral Agent, the Insurer and
Seller written notice of such fact. If the Seller does not correct or cure such
breach (including delivery of such Title Documents, if applicable) by the
Reporting Date occurring during the second full calendar month following the
calendar month in which the Trust Collateral Agent was notified or the Seller,
any Subservicer or the Servicer became aware, if earlier, of such breach
(including failure to deliver such Title Documents), then the Seller shall
promptly repurchase such Receivables from the Issuer. Any such repurchase by the
Seller shall be in exchange for the delivery by the Seller to the Issuer of the
Purchase Amount and shall be accomplished in the manner set forth in Section 5.6
and the Trust shall execute such assignments and other documents reasonably
requested by such Person in order to effect such repurchase. It is understood
and agreed that the obligation of the Seller to accept a repurchase of any
Receivable as to which such a breach has occurred and is continuing as described
above shall constitute the sole remedy respecting such breach available to the
Servicer, the Noteholders, the Insurer, the Issuer, the Trust Collateral Agent,
the Trustee and the Owner Trustee.
In addition to the foregoing and notwithstanding whether the related Receivable
shall have been purchased by the Seller or NAFI, the Seller shall indemnify the
Trust, the Trust Collateral Agent, the Insurer, and the Noteholders and any of
their respective officers, directors, employees or agents against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of the events or facts giving rise to
a breach of the representation.
(b) Pursuant to Section 2.1 and 2.2 of this Agreement, the
Seller conveyed to the Trust all of the Seller's right, title and interest in
its rights and benefits, but none of its obligations or burdens, under the
Purchase Agreement including the Seller's rights under the
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Purchase Agreement and the delivery requirements, representations and warranties
and the cure or repurchase obligations of NAFI thereunder. The Seller hereby
represents and warrants to the Trust that such assignment is valid, enforceable
and effective to permit the Trust to enforce such obligations of NAFI under the
Purchase Agreement.
SECTION 3.3. Custody of Receivables Files. The Custodian shall
maintain custody and possession of the Receivable Files as custodian and bailee
for, in accordance with and pursuant to the Custodial Agreement.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.1. Duties of the Servicer.
(a) The Servicer shall service and administer the Receivables
on behalf of the Trust and shall have full power and authority, acting alone
and/or through Sub-Servicers as provided in Section 4.2, to do any and all
things which it may deem necessary or desirable in connection with such
servicing and administration and which are consistent with this Agreement.
Consistent with the terms of this Agreement, the Servicer may waive, modify or
vary any term of any Receivable or consent to the postponement of strict
compliance with any such term or in any manner, grant indulgence to any Obligor
if, in the Servicer's sole determination, which shall be conclusive and binding,
such waiver, modification, postponement or indulgence is not materially adverse
to the Noteholders or the Insurer; provided however, that the Servicer may not
permit any modification with respect to any Receivable that would change its
Annual Percentage Rate, defer the payment of any principal or interest (except
to the extent permitted by Section 4.6(a)), reduce the outstanding principal
balance (except for actual payments of principal), or extend (except to the
extent permitted by Section 4.6(a)) the final maturity date on such Receivable.
Without limiting the generality of the foregoing, the Servicer in its own name
or in the name of the Seller is hereby authorized and empowered by the Trust
Collateral Agent when the Servicer believes it appropriate in its best judgment
to execute and deliver, on behalf of the Trust, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, with respect to the Receivables and with respect
to the Financed Vehicles; provided however, that notwithstanding the foregoing,
the Servicer shall not, except pursuant to an order from a Court of competent
jurisdiction, release an Obligor from payment of any unpaid amount under any
Receivable or waive the right to collect the unpaid balance of any Receivable
from the Obligor, except that the Servicer may forego collection efforts if the
amount subject to collection is de minimis and if it would forego collection in
accordance with its customary procedures. If any Receivable contains a
"due-on-sale" provision allowing the holder thereof to accelerate the Receivable
upon sale of the Financed Vehicle financed thereunder, the Servicer shall take
reasonable steps under the circumstances to enforce such due on sale provision
if a Financed Vehicle is sold as soon as practicable after determining that such
Financed Vehicle has been sold; provided however, that the Servicer shall not be
obligated to take any legal action to enforce such provision.
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(b) The Servicer shall service and administer the Receivables
by employing procedures (including collection procedures) and a degree of care
consistent with prudent industry standards and as are customarily employed by
servicers in servicing and administering comparable motor vehicle retail
installment sales contracts and, to the extent more exacting, the degree of
skill and attention that the Servicer exercises from time to time with respect
to all comparable motor vehicle receivables that it services for itself or
others. The Servicer shall take all actions (other than those required to be
taken by the Seller pursuant to this Agreement) that are necessary or desirable
to maintain continuous perfection and first priority of security interests
granted by the obligors in the Financed Vehicles to NAFI, as the case may be,
and to maintain continuous perfection of the security interest created by each
Receivable in the related Finance Vehicle on behalf of the Trust Collateral
Agent, including, but not limited to, using reasonable efforts to obtain
execution by the Obligors and the recording, registering, filing, re-recording,
re-registering and refiling of all Title Documents (it being understood that
Title Documents have not been and need not be endorsed or delivered to the Trust
Collateral Agent and do not and need not identify the Trust Collateral Agent as
the secured party or lienholder with respect to the Receivables), security
agreements, financing statements, continuation statements or other instruments
as are necessary to maintain the security interests granted by the Obligors
under the respective Receivables on behalf of the Trust Collateral Agent;
provided however, that the Servicer is not required to expend any of its own
funds to remove any security interest, lien or other encumbrance on any Financed
Vehicle. The Servicer shall not take any action to impair the Trust's rights in
any Receivable, except to the extent allowed pursuant to this Agreement or
required by law. The Financed Vehicle securing each Receivable shall not be
released in whole or in part from the security interest granted by the
Receivable, except upon payment in full of the Receivable or as otherwise
contemplated herein. The Servicer shall not extend or otherwise amend the terms
of any Receivable, except in accordance with Section 4.1(a). Upon discovery by
either the Servicer or any Sub-Servicer or actual knowledge by a Trust Officer
of the Trust Collateral Agent of a default by the Servicer in the performance of
its obligations under this Section 4.1(b) which materially and adversely affects
the interests of the Noteholders or the Insurer in the related Receivable, the
party discovering or having knowledge of such breach shall give prompt written
notice thereof to the other parties and the Insurer. If the Servicer does not
correct or cure such default by the Reporting Date occurring during the second
full calendar month following the calendar month in which the Trust Collateral
Agent was notified, or the Servicer, the Trust Collateral Agent or the
Sub-servicer became aware, if earlier, of such default, then the Servicer shall
promptly purchase such Receivable from the Trust. Any such purchase by the
Servicer shall be in exchange for the delivery by the Servicer to the Trust of
the Purchase Amount. Except as expressly provided in Section 9.2 and subject to
Section 10.1, it is understood and agreed that the obligation of the Servicer to
repurchase any Receivable as to which such a default has occurred and is
continuing as described above shall constitute the sole remedy respecting such
default available to the Seller, the Noteholders, the Insurer or the Indenture
Trustee on behalf of the Noteholders.
(c) Upon the occurrence of an Insurance Agreement Event of
Default pursuant to Section 5.01(b), (c), (d), (e) or (j), the Insurer may (so
long as an Insurer Default shall not have occurred and be continuing) instruct
the Trust Collateral Agent and the Servicer in writing to take or cause to be
taken, or, if an Insurer Default shall have occurred, upon the occurrence of a
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Servicer Termination Event, the Trust Collateral Agent and the Servicer shall
take or cause to be taken such action as may, in the opinion of counsel to the
Controlling Party, be necessary to perfect or re-perfect the security interests
in the Financed Vehicles securing the Receivables in the name of the Trust by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Controlling Party, be
necessary or prudent. NAFI hereby agrees to pay all expenses related to such
perfection or reperfection and to take all action necessary therefor. In
addition, prior to the occurrence of an Insurance Agreement Event of Default,
the Controlling Party may instruct the Trust Collateral Agent and the Servicer
to take or cause to be taken such action as may, in the opinion of counsel to
the Controlling Party, be necessary to perfect or re-perfect the security
interest in the Financed Vehicles underlying the Receivables in the name of the
Trust, including by amending the title documents of such Financed Vehicles or by
such other reasonable means as may, in the opinion of counsel to the Controlling
Party, be necessary or prudent; provided, however, that if the Controlling Party
requests that the title documents be amended prior to the occurrence of an
Insurance Agreement Event of Default, the out-of-pocket expenses of the Servicer
in connection with such action shall be reimbursed to the Servicer by the
Controlling Party.
(d) The Servicer may perform any of its duties pursuant to
this Agreement, including those delegated to it by the Trust Collateral Agent
pursuant to this Agreement, through Persons appointed by the Servicer. Such
Persons may include affiliates of the Servicer and may include the Seller and
its affiliates. Notwithstanding any such delegation of a duty, the Servicer
shall remain obligated and liable for the performance of such duty as if the
Servicer were performing such duty.
(e) Upon the execution and delivery of this Agreement, the
Servicer shall deliver to the Trust Collateral Agent and the Insurer a list of
officers and employees of the Servicer, upon which the Trust Collateral Agent
may conclusively rely, involved in, or responsible for, the administration and
servicing of the Receivables, which list shall from time to time be updated by
the Servicer as additional officers and employees of the Servicer become
involved, or responsible for, the administration and servicing of the
Receivables or officers or employees of the Servicer previously identified on
any such list become disassociated with the administration and servicing of the
Receivables.
(f) The Servicer may take such actions as are necessary to
discharge its duties as Servicer in accordance with this Agreement, including
the power to execute and deliver on behalf of the Trust such instruments and
documents as may be customary, necessary or desirable in connection with the
performance of the Servicer's duties under this Agreement (including consents,
waivers and discharges relating to the Receivables and the Financed Vehicles and
such instruments or documents as may be necessary to effect foreclosure or other
conversion of the ownership of any Financed Vehicle). In furtherance thereof,
the Trust Collateral Agent hereby irrevocably appoints the Servicer as its
attorney-in-fact, such appointment being coupled with an interest, to execute on
its behalf such documents or instruments as are necessary to effect the
Repossession of Financed Vehicles, to deliver applicable Receivable Files,
Receivable Documents and Title
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Documents to the Seller upon the sale of a Receivable to the Seller under this
Agreement and to deliver applicable Receivable Files, Receivable Documents and
Title Documents upon liquidation or final payment of a Receivable. The Trust
Collateral Agent, upon receipt of a certificate of a Servicing Official
requesting the same be accepted by the Trust Collateral Agent and certifying as
to the reasons such documents are required, shall furnish the Servicer with any
other powers of attorney or other documents reasonably necessary or appropriate
which the Trust Collateral Agent may legally execute to enable the Servicer to
carry out its servicing and administrative duties hereunder. Neither the
Servicer nor any of its directors, officers, employees or agents will be under
any liability to the Trust, the Trust Collateral Agent, the Insurer, any
Noteholder, or the Seller for the consequences of any delay resulting from
having to obtain such documents from the Trust Collateral Agent, provided that
the Servicer furnished such certificate to the Trust Collateral Agent reasonably
promptly after determining the necessity therefor in the particular instance.
(g) The Servicer warrants, represents and covenants to the
Trust Collateral Agent that recordation of the name of the Servicer as
lienholder in Title Documents respecting any Financed Vehicle is maintained by
the Servicer as agent for the Trust and that the Servicer has no equitable
ownership in the Receivables, except as it may have by virtue of ownership of a
Note or an equity interest in the Seller or any Noteholder. The Servicer
acknowledges that it is holding the Receivables coming into its possession and
any other property constituting a part of the Trust held by it, in trust, for
the benefit of the Noteholders and the Insurer.
SECTION 4.2. Sub-Servicing Agreements between Servicer and the
Sub-Servicers. The Servicer may enter into Sub-Servicing Agreements with one or
more Sub-Servicers for the servicing and administration of certain of the
Receivables; provided however, that the Servicer shall not enter into any such
Sub-Servicing Agreement with any Sub-Servicer other than OFSA, without the prior
written consent of the Insurer (so long as a Insurer Default shall not have
occurred and be continuing), which consent shall not be unreasonably withheld;
provided further that the Servicer shall not amend any Sub-Servicing Agreement
without (i) with respect to a material amendment, the consent of the Insurer and
(ii) with respect to all other amendments, upon five (5) days prior written
notice of such amendment. References in this Agreement to actions taken or to be
taken by the Servicer in servicing the Receivables include actions taken or to
be taken by a Sub-Servicer on behalf of the Servicer. Each Servicing Agreement
shall be upon such terms and conditions as are not inconsistent with this
Agreement and as the Servicer and the Sub-Servicer have agreed. Each
Sub-Servicing Agreement shall require that the related Sub-Servicer acknowledge
that it is holding the Receivables and the Receivable Documents for the related
Receivables coming into its possession and any other property constituting a
part of the Trust Property held by it, in trust, for the benefit of the
Noteholders and the Insurer. The Servicer and a Sub-Servicer may enter into
amendments thereto; provided however, that any such amendments or different
forms shall be consistent with and not violate the provisions of this Agreement.
The Servicer shall notify each Rating Agency, the Trust Collateral Agent and the
Insurer upon entering into any Sub-Servicing Agreement.
SECTION 4.3. Obligations of the Servicer. Notwithstanding any
Sub-Servicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer or a Sub-Servicer or reference
to actions taken through a Sub-Servicer or otherwise, the Servicer shall remain
obligated for the servicing and administering of
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the Receivables in accordance with the provisions of Section 4.1 of this
Agreement without diminution of such obligation or liability by virtue of such
Sub-Servicing Agreements or arrangements or by virtue of indemnification from a
Sub-Servicer and to the same extent and under the same terms and conditions as
if the Servicer alone were servicing and administering the Receivables. The
Servicer shall be entitled to enter into any agreement with a Sub-Servicer for
indemnification of the Servicer, and nothing contained in this Agreement shall
be deemed to limit or modify such indemnification.
SECTION 4.4. No Contractual Relationship between a
Sub-Servicer and Trust Collateral Agent or Noteholders. Any Sub-Servicing
Agreement that may be entered into and any other transactions or services
relating to the Receivables involving a Sub-Servicer in its capacity as such and
not as an originator shall be deemed to be between a Sub-Servicer and the
Servicer alone, and the Trust Collateral Agent, the Trust, the Insurer and
Noteholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to a Sub-Servicer except
as expressly set forth in Section 4.5 or in the applicable Sub-Servicing
Agreement; provided that, if the Servicer is deemed terminated, the Sub-Servicer
may be terminated. Servicer shall promptly provide to the Trust Collateral Agent
and the Insurer any notice received from a Sub-Servicer.
SECTION 4.5. Assumption or Termination of Sub-Servicing
Agreement by Trust Collateral Agent. In the event the Servicer shall for any
reason no longer be the servicer of the Receivables (including by reason of a
Servicer Termination Event), the Trust Collateral Agent, its designee or any
successor Servicer will thereupon assume all of the rights and obligations of
the Servicer under one or more Sub-Servicing Agreements that may have been
entered into by giving notice of such assumption to the related Sub-Servicer or
Sub-Servicers within ten (10) Business Days of the termination of the Servicer
as servicer of the Receivables. Upon the giving of such notice, the Trust
Collateral Agent, its designee or the successor Servicer, shall be deemed to
have assumed all of the Servicer's interest therein and to have replaced the
Servicer as a party to the Sub-Servicing Agreement to the same extent as if the
Sub-Servicing Agreement had been assigned to the assuming party except that the
Servicer and the Sub-Servicer, if any, shall not thereby be relieved of any
accrued liability or obligations under the Sub-Servicing Agreement and the
Sub-Servicer, if any, shall not be relieved of any liability or obligation to
the Servicer that survives the assignment or termination of the Sub-Servicing
Agreement. The Trust Collateral Agent shall notify each Rating Agency and the
Insurer if any Sub-Servicing Agreement is assumed by the Trust Collateral Agent,
its designee or the successor Servicer.
The Servicer shall, upon request of the Trust Collateral Agent
but at the expense of the Servicer, deliver to the assuming party all documents
and records relating to the Sub-Servicing Agreement and the Receivables then
being serviced and an accounting of amounts collected and held by it and
otherwise use its reasonable efforts to effect the orderly and efficient
transfer of the Sub-Servicing Agreement to the assuming party.
SECTION 4.6. Collection of Receivable Payments.
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(a) The Servicer shall proceed diligently to collect all
payments called for under the terms and provisions of the Receivables, and shall
service the Receivables in a manner consistent with the servicing standards and
procedures generally accepted in the financial services industry for similar
Receivables, and as otherwise expressly provided by this Agreement. Consistent
with the foregoing, the Servicer may in its discretion (i) waive any late
payment charge and (ii) extend the then current maturity date of a Receivable by
two months, once during each calendar year at the request of the related Obligor
on account of the Obligor's adverse financial circumstances that affect the
Obligor's ability to make payments under such Receivable; provided however, that
the Servicer may not so extend the then current maturity date of Receivable more
than twice during the life of such Receivable; provided further, that the
aggregate number of Receivables that have been so extended during any twelve
month period shall not exceed the product of (i) 3.5% (0.035) and (ii) the
aggregate number of outstanding Receivables as of the beginning of such twelve
month period.
(b) The Servicer shall instruct (or shall cause the
Sub-Servicer to instruct) all Obligors to make all payments due in respect of
the Receivables to the Sub-Servicer Account. The Servicer shall, pursuant to the
Sub-Servicing Agreement, cause the Sub-Servicer to use any amounts other than
collections in respect of motor vehicle financing obligations serviced by the
Sub-Servicer. The Servicer shall cause the Sub-Servicer to use its best efforts
to transfer to the Collection Account all collected funds on deposit in the
Sub-Servicer Account that constitute part of the Trust Property within one
Business Day, and in any event within two Business Days of receipt thereof. If
the Servicer, the Seller, NAFI or any Sub-Servicer receives collections under or
other payments in respect of the Receivables, each such Person shall as soon as
practicable, but no later than two Business Days following receipt of such item
by such Person, cause such payment to be remitted to the Trust Collateral Agent
for deposit to the Collection Account. If the Servicer determines that any
amount that is not a part of the Trust Property has been deposited in any Trust
Account, the Servicer shall promptly instruct the Trust Collateral Agent by
facsimile (with prompt telephone confirmation) to segregate such amount, and
shall therein direct the Trust Collateral Agent to turn over such amounts to the
Person entitled thereto within two Business Days. A copy of any such direction
shall be delivered by the Servicer to the Insurer.
(c) The Servicer shall cause OFSA to maintain the Sub-Servicer
Account or a comparable account, and shall cause any other Sub-Servicer to
maintain an account comparable to the Sub-Servicer Account, to which Obligors
shall have been directed to remit payments in respect of the Receivables. If the
Sub-Servicer Account or any comparable account maintained by a Sub-Servicer is
terminated for any reason prior to the establishment of, and notification to
Obligors to remit payments to, a replacement servicing account comparable to the
Sub-Servicer Account, the Servicer shall promptly, and in any event within 30
days of termination of such Sub-Servicer Account or comparable account,
establish a pursuant to a Lockbox Agreement and notify all Obligors to remit
payments in respect of the Receivables to such Lockbox Account.
(d) Notwithstanding any Lockbox Agreement, or any of the
provisions of this Agreement relating to a Lockbox Agreement, a Lockbox Bank or
a Lockbox Account, the Servicer shall remain obligated and liable to the Trust
Collateral Agent and the Noteholders for
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servicing and administering the Receivables and the rest of the Trust Property
in accordance with the provisions of this Agreement without diminution of such
obligations or liability by virtue thereof.
SECTION 4.7. Maintenance of Insurance. The Servicer shall use
its reasonable efforts to cause each Obligor to maintain on the related Financed
Vehicle a comprehensive and collision policy providing coverage at least equal
to the lesser of (i) the actual cash value of such Financed Vehicle and (ii) the
unpaid balance owing on the related Receivable, less Unearned Finance Charges;
provided however, that the Servicer shall not be obligated to expend its own
funds to pay any insurance premiums or obtain or maintain any such policy.
Pursuant to Section 4.6 any amounts collected by the Servicer under any such
policies (other than amounts to be applied to the restoration or repair of the
related Financed Vehicles or amounts released to the Obligor in accordance with
the Servicer's normal servicing procedures) shall be deposited in the Collection
Account. All policies required by this paragraph shall be endorsed with clauses
providing for loss payable to the Servicer or the related Subservicer and its
successors and assigns. Servicer shall maintain and keep in place a vendor's
single interest insurance policy.
SECTION 4.8. Realization upon Defaulted Receivables. In the
event that a Receivable becomes and continues to be a Defaulted Receivable, the
Servicer shall take all reasonable and lawful steps necessary for Repossession;
provided however, that the Servicer shall not be obligated to institute any
action for Repossession through judicial proceedings unless it determines in its
good faith judgment, which determination will be conclusive and binding, that
Insurance Proceeds or Liquidation Proceeds that would be realized in connection
therewith or amounts payable pursuant to the last sentence of this Section 4.8
would be sufficient for the reimbursement in full of its out-of-pocket expenses
pursuant to this Agreement. In connection with such Repossession, the Servicer
shall follow such practices and procedures required by Section 4.1 and make
advances of its own funds for any out-of-pocket expenses incurred. The Servicer
shall be reimbursed for Liquidation Expenses (including advances) by retention
of the required reimbursement from the first Liquidation Proceeds or Insurance
Proceeds received with respect to such Defaulted Receivable. The Servicer shall
be entitled to receive the following amounts with respect to any Receivable the
Obligor of which has filed bankruptcy or against whom a petition for involuntary
bankruptcy has been filed: a one time fee of $200 in respect of those
Receivables not referred to outside legal counsel, or, in the case of those
Receivables that are so referred, reimbursement of the reasonable fees and
expenses of outside legal counsel, if their retention was necessary in the
reasonable judgment of the Servicer.
SECTION 4.9. Total Servicing Fee; Payment of Certain Expenses
by Servicer. On each Distribution Date, the Servicer shall be entitled to
receive out of the Collection Account the Base Servicing Fee and any
Supplemental Servicing Fee for the related Due Period pursuant to Section 5.7.
The Servicer shall be required to pay all expenses incurred by it in connection
with its activities under this Agreement (including taxes imposed on the
Servicer, expenses incurred in connection with distributions and reports made by
the Servicer to Noteholders or the Insurer and all other fees and expenses of
the Owner Trustee, the Trust Collateral Agent or the Trustee, except taxes
levied or assessed against the Trust, and claims against the Trust in respect of
indemnification, which taxes and claims in respect of indemnification against
the Trust are
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expressly stated to be for the account of NAFI) and shall not be entitled to
reimbursement therefor except as specifically provided herein. The Servicer
shall be liable for the fees, charges and expenses of the Owner Trustee, the
Trust Collateral Agent, the Trustee, the Custodian, the Collateral Agent, the
Lockbox Bank, any Sub-Servicer and their respective agents (and any fees under
the Lockbox Agreement).
SECTION 4.10. [Reserved]
SECTION 4.11. Reports.
(a) Not later than the Reporting Date, the Servicer shall
forward to the Trust Collateral Agent, the Indenture Trustee, each Rating
Agency, the Insurer and the Seller a statement substantially in the form
attached hereto as Exhibit 4.11 (as such form may be modified from time to time
by agreement between the Trust Collateral Agent and the Servicer with the prior
written consent of the Insurer), certified by an officer of the Servicer. In
addition to the information required by Exhibit 4.11, the Servicer shall include
in the copy of such statement delivered to the Insurer (i) the Delinquency
Ratio, Average Delinquency Ratio, Default Rate, Average Default Rate, Net Loss
Rate and Average Net Loss Rate for such Reporting Date, (ii) whether any Trigger
Event has occurred as of such Reporting Date, (iii) whether any Trigger Event
that may have occurred as of a prior Reporting Date is deemed cured as of such
Reporting Date, and (iv) whether to the knowledge of the Servicer an Insurance
Agreement Event of Default has occurred.
(b) On the first Business Day after each Determination Date,
the Trust Collateral Agent shall forward by telecopier to the Servicer, the
Insurer and the Seller a statement (and shall also mail a copy to the Servicer,
the Insurer and the Seller) setting forth the amount, if any, on deposit in the
Collection Account, the Distribution Account, the Pre-Funding Account, the Note
Distribution Account and the Pre-Funding Period Reserve Account as of such
Determination Date. Not later than the close of business on the fourth Business
Day prior to each Distribution Date, the Trust Collateral Agent shall forward by
telecopier to the Collateral Agent and the Insurer a copy of the statement
required to be delivered to Noteholders on such Distribution Date pursuant to
Section 5.10 prepared assuming that the Insurer will not exercise its right
under Section 5.11. Not later than five days after each Determination Date, the
Trust Collateral Agent shall forward to the Servicer, the Insurer and the Seller
a statement showing, for the previous Distribution Date, the aggregate of
withdrawals from the Distribution Account and the withdrawals and deposits to
the Spread Account.
SECTION 4.12. Annual Statement as to Compliance, Notice of
Servicer Termination Event.
(a) The Servicer shall deliver or cause to be delivered to the
Trustee, the Owner Trustee, the Trust Collateral Agent and the Insurer on or
before April 30 (or 120 days after the end of the Servicer's fiscal year, if
other than December 31) of each year, beginning on April 30, 1998, an Officer's
Certificate signed by any responsible officer of the Servicer, or such Eligible
Sub-Servicer who is performing the servicing duties of the Servicer, dated as of
December 31 (or other applicable date) of the immediately preceding year,
stating that (i) a
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review of the activities of the Servicer during the preceding calendar year and
of performance under this Agreement has been made under such officer's
supervision, (ii) to the best of such officer's knowledge, based on such review,
the Servicer has fulfilled all its obligations under this Agreement throughout
such year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof and (iii) to the best of such officer's knowledge, each
Subservicer has fulfilled its obligations under its Subservicing Agreement in
all material respects, or if there has been a material default in the
fulfillment of such obligations, specifying such default known to such employee
and the nature and status thereof.
(b) The Servicer shall deliver to the Trust Collateral Agent,
the Insurer, the Noteholders and each Rating Agency, promptly after having
obtained knowledge thereof, but in no event later than two Business Days
thereafter, written notice in an Officer's Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Servicer
Termination Event under Section 10.1.
SECTION 4.13. Annual Independent Accountants' Report.
(a) The Servicer shall, at its expense, cause a firm of
nationally recognized independent certified public accountants (the "Independent
Accountants"), who may also render other services to the Servicer or to the
Seller, to deliver to the Trustee, the Owner Trustee, the Trust Collateral
Agent, the Insurer, on or before March 30 (or 90 days after the end of the
Servicer's fiscal year, if other than December 31) of each year, beginning on
March 30, 1998, with respect to the twelve months ended the immediately
preceding December 31 (or other applicable date) (or such other period as shall
have elapsed from the Closing Date to the date of such certificate), a statement
(the "Accountants' Report") addressed to the Board of Directors of the Servicer,
to the Trustee, the Owner Trustee, the Trust Collateral Agent and to the
Insurer, to the effect that such firm has audited the books and records of the
Servicer and that such audit (1) was made in accordance with generally accepted
auditing standards, and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered necessary in
the circumstances; (2) included an examination of documents and records relating
to the servicing of automobile installment sales contracts under pooling and
servicing agreements substantially similar one to another (such statement to
have attached thereto a schedule setting forth the servicing agreements covered
thereby, including this Agreement); (3) included an examination of the
delinquency and loss statistics relating to the Servicer's portfolio of
automobile installment sales contracts; and (4) except as described in the
statement, disclosed no exceptions or errors in the records relating to
automobile and light truck loans serviced for others that, in the firm's
opinion, generally accepted auditing standards requires such firm to report. The
Accountants' Report shall further state that (1) a review in accordance with
agreed upon procedures was made of three randomly selected Servicer's
Certificates for the Trust; (2) except as disclosed in the Report, no exceptions
or errors in the Servicer's Certificates so examined were found; and (3) the
delinquency and loss information relating to the Receivables contained in the
Servicer Certificates were found to be accurate.
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(b) The Accountants' Report shall also indicate that the firm
is independent of the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
(c) A copy of the Accountant's Report may be obtained by any
Noteholder by a request in writing to the Trust Collateral Agent addressed to
its Corporate Trust Office.
SECTION 4.14. Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide to representatives of the
Trust Collateral Agent and the Insurer Seller and Servicer will permit any
authorized representative or agent designated by the Insurer to visit and
inspect any of the properties of the Seller or Servicer, as the case may be, to
examine the corporate books and financial records of the Seller or Servicer, as
the case may be, its records relating to the Receivables, and make copies
thereof or extracts therefrom and to discuss the affairs, finances, and accounts
of the Seller or Servicer, as the case may be, with its principal officers, as
applicable, and its independent accountants. Any expense incident to the
exercise by the Insurer of any right under this Section 4.14 shall be borne by
NAFI, so long as NAFI is the Servicer. In each case, such access shall be
afforded without charge but only upon reasonable request and during normal
business hours.
SECTION 4.15. Monthly Tape. On or before the fourth Business
Day, but in no event later than the fifth calendar day, of each month, the
Servicer will deliver or cause to be delivered to the Trust Collateral Agent and
the Insurer a computer tape and a diskette (or any other electronic transmission
acceptable to the Trust Collateral Agent and the Insurer in a format acceptable
to the Trust Collateral Agent and the Insurer, containing the information with
respect to the Receivables as of the preceding Determination Date necessary for
preparation of the Servicer's Certificate relating to the immediately succeeding
Determination Date and necessary to determine the application of collections as
provided in Section 5.4.
SECTION 4.16. Retention and Termination of Servicer. The
Servicer hereby covenants and agrees to act as such under the Agreement for an
initial term, commencing on the Closing Date and ending on September 30, 1997,
which term shall be extendible by the Insurer for successive quarterly terms
ending on each successive March 31, June 30, September 30 and December 31 (or,
pursuant to revocable written standing instructions from time to time to the
Servicer and the Trust Collateral Agent, for any specified number of terms
greater than one), until the termination of the Trust. Each such notice
(including each notice pursuant to standing instructions, which shall be deemed
delivered at the end of successive quarterly terms for so long as such
instructions are in effect) (a "Servicer Extension Notice") shall be delivered
by the Insurer to the Trust Collateral Agent and the Servicer. The Servicer
hereby agrees that, as of the date hereof and upon its receipt of any such
Servicer Extension Notice, the Servicer shall become bound, for the initial term
beginning on the date hereof and for the duration of the term covered by such
Notice, to continue as the Servicer subject to and in accordance with the other
provisions of this Agreement. Until such time as an Insurer Default shall have
occurred and be continuing, the Trust Collateral Agent agrees that, as of the
fifteenth day prior to the last day of any term of the Servicer, if in which the
Trust Collateral Agent shall not have received any Servicer Extension Notice
from the Insurer, the Trust Collateral Agent will, within five days thereafter,
give written
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notice of such non-receipt to the Insurer, and the Servicer and the Servicer's
term shall not be extended unless a Servicer Extension Notice is received on or
before the last day of such term.
SECTION 4.17. Custodial Arrangement. The Custodian shall
maintain custody and possession of the Receivable Files as custodian and bailee
in accordance with and pursuant to the Custodial Agreement. The Servicer hereby
assigns all of its right, title and interest in, but none of its obligators
thereunder, and to such Custodial Agreement to the Trust Collateral Agent. To
the extent the Servicer receives any notices with respect to the Custodial
Agreement, the Servicer will forward a copy of such notice to the Trust
Collateral Agent and the Insurer.
ARTICLE V
TRUST ACCOUNTS; DISTRIBUTIONS;
STATEMENTS TO NOTEHOLDERS
SECTION 5.1. Establishment of Trust Accounts.
(a) (i) The Trust Collateral Agent, on behalf of the
Noteholders, the Certificateholders and the Insurer, shall establish and
maintain in its own name an Eligible Deposit Account (the "Collection Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Trust Collateral Agent on behalf of the Noteholders,
the Certificateholders and the Insurer. The Collection Account shall initially
be established with the Trust Collateral Agent.
(ii) The Trust Collateral Agent, on behalf of the Noteholders,
shall establish and maintain in its own name an Eligible Deposit Account (the
"Note Distribution Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Trust Collateral Agent
on behalf of the Noteholders and the Insurer. The Note Distribution Account
shall initially be established with the Trust Collateral Agent.
(iii) The Trust Collateral Agent, on behalf of the Noteholders
and the Insurer, shall establish and maintain in its own name an Eligible
Deposit Account (the "Pre-Funding Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Trust Collateral Agent on behalf of the Noteholders and the Insurer. The
Pre-Funding Account shall initially be established with the Trust Collateral
Agent.
(iv) The Trust Collateral Agent, on behalf of the Noteholders,
the Certificateholders and the Insurer, shall establish and maintain in its own
name an Eligible Deposit Account (the "Distribution Account"), bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Trust Collateral Agent on behalf of the Noteholders, the
Certificateholders and Insurer. The Distribution Account shall initially be
established with the Trust Collateral Agent.
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(b) The Trust Collateral Agent shall deposit the following
amounts into the Collection Account upon receipt: (i) all amounts withdrawn by a
Sub-Servicer from the Sub-Servicer Account and all amounts received by the
Servicer, the Seller, NAFI or any subservicer and transferred to the Trustee
pursuant to Section 4.6(b); (ii) the Purchase Amount received in respect of any
Purchased Receivables pursuant to Sections 2.4, 3.2 and 4.1 hereof; (iii) all
income and gain from investments of funds in the Collection Account; and (iv)
all Liquidation Proceeds (net of Liquidation Expenses retained by the Servicer
or Sub-Servicer) and other amounts with respect to the Trust Property, if any,
received from the Seller, the Servicer or any Sub-Servicer.
(c) No later than each Distribution Date, the Trust Collateral
Agent shall, at the written direction of the Servicer, withdraw from the
Collection Account and deposit in the Distribution Account the amount on deposit
in the Collection Account as of the close of business on the related
Determination Date (other than any pay-ahead amounts, as provided in Section
5.4) and any amount deposited to the Collection Account in respect of
Receivables on or prior to the related Reporting Date and subsequent to the
preceding Reporting Date, less the sum of (i) the Supplemental Servicing Fee
collected with respect to the Receivables on deposit in the Collection Account
as of such Determination Date, (ii) any income and gain on investments of
deposits in the Collection Account as of such Determination Date, (iii) any
collection or other amounts deposited to the Collection Account in respect of
Purchased Receivables other than the Purchase Amounts. In addition, on each
Distribution Date, the Trust Collateral Agent shall, in accordance with the
written direction of the Servicer, withdraw from the Collection Account and
shall pay (i) to the Seller any income and gain on investments then on deposit
in the Collection Account and all late payment fees then on deposit in the
Collection Account and (ii) to pay to the Seller with respect to each Receivable
or property acquired in respect thereof that has been retransferred to the
Seller pursuant to Sections 2.4, 3.2, 4.1 or 11.1, all amounts received thereon
and not distributed as of, or received after, the date on which the related
Purchase Amount (or, in the case of a retransfer pursuant to Section 11.1, the
purchase amount required therein) is determined. In the event the Servicer, any
Sub-Servicer or the Trust Collateral Agent shall deposit in the Collection
Account any amount in error and such amount is not required to be deposited
therein, the Trust Collateral Agent may withdraw at any time, on its own behalf
if the erroneous deposit was made by the Trust Collateral Agent and on behalf of
the Servicer or Sub-Servicer if the erroneous deposit was made by the Servicer
or Sub-Servicer promptly after receipt of an Officer's Certificate setting forth
the reason for such withdrawal of such amount from the Collection Account, any
provision herein to the contrary notwithstanding.
(d) Funds on deposit in the Collection Account, the
Pre-Funding Account, the Note Distribution Account and the Pre-Funding Period
Reserve Account (collectively, the "Trust Accounts") shall be invested by the
Trust Collateral Agent (or any custodian with respect to funds on deposit in any
such account) in Eligible Investments selected in writing by the Servicer
(pursuant to standing instructions or otherwise) which, absent any instruction
shall be the investments specified in clause (d) of the definition of Eligible
Investments set forth herein. Other than as permitted by the Rating Agencies and
the Insurer, funds on deposit in any Trust Account other than the Pre-Funding
Period Reserve Account shall be invested in Eligible Investments that will
mature so that such funds will be available at the close of business on the
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Business Day immediately preceding the following Distribution Date. Funds
deposited in the Pre-Funding Account shall be invested by the Trust Collateral
Agent pursuant to written instructions from the Seller in Eligible Investments
that mature no later than the Business Day next preceding the earlier of the
date on which such funds are expected to be needed and the Distribution Date
next succeeding the date of such investment (or on such date or such
Distribution Date, as the case may be, if such Eligible Investment is an
obligation of the institution maintaining the Pre-Funding Account), and no such
investment shall be sold prior to its maturity. Funds deposited in a Trust
Account on the day immediately preceding a Distribution Date upon the maturity
of any Eligible Investments are not required to be invested overnight. All
Eligible Investments will be held to maturity.
(e) All investment earnings of moneys deposited in the Trust
Accounts shall be deposited (or caused to be deposited) by the Trust Collateral
Agent in the Collection Account no later than the close of business on the
Business Day immediately preceding the related Distribution Date, and any loss
resulting from such investments shall be charged to the Collection Account. The
Servicer shall not direct the Trust Collateral Agent to make any investment of
any funds held in any of the Trust Accounts unless the security interest granted
and perfected in such account will continue to be perfected in such investment,
in either case without any further action by any Person, and, in connection with
any direction to the Trust Collateral Agent to make any such investment, if
necessary, the Servicer shall deliver to the Trust Collateral Agent an Opinion
of Counsel to such effect upon which the Trust Collateral Agent may conclusively
rely.
(f) The Trust Collateral Agent shall not in any way be held
liable by reason of any insufficiency in any of the Trust Accounts resulting
from any loss on any Eligible Investment included therein except for losses
attributable to the Trust Collateral Agent's negligence or bad faith or its
failure to make payments on such Eligible Investments issued by the Trust
Collateral Agent, in its commercial capacity as principal obligor and not as
trustee, in accordance with their terms.
(g) If (i) the Servicer shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Trust
Collateral Agent by 2:00 p.m. Eastern Time (or such other time as may be agreed
by the Issuer and Trust Collateral Agent) on any Business Day; or (ii) a Default
or Event of Default shall have occurred and be continuing with respect to the
Notes but the Notes shall not have been declared due and payable, or, if such
Notes shall have been declared due and payable following an Event of Default,
amounts collected or receivable from the Trust Property are being applied as if
there had not been such a declaration and a Responsible Officer of the Trust
Collateral Agent shall have actual knowledge; then the Trust Collateral Agent
shall, to the fullest extent practicable, invest and reinvest funds in the Trust
Accounts in one or more Eligible Investments pursuant to paragraph (b) above.
(h) (i) The Trust Collateral Agent shall possess all right,
title and interest in all funds on deposit from time to time in the Trust
Accounts and in all proceeds thereof (excluding all Investment Earnings on the
Collection Account) and all such funds, investments, proceeds and income shall
be part of the Owner Trust Property. Except as
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otherwise provided herein, the Trust Accounts shall be under the sole dominion
and control of the Trust Collateral Agent for the benefit of the Noteholders and
the Insurer. If, at any time, any of the Trust Accounts ceases to be an Eligible
Deposit Account, the Trust Collateral Agent (or the Servicer on its behalf)
shall within five Business Days (or such longer period as to which each Rating
Agency and the Insurer may consent) establish a new Trust Account as an Eligible
Deposit Account and shall transfer any cash and/or any investments to such new
Trust Account. In connection with the foregoing, the Servicer agrees that, in
the event that any of the Trust Accounts are not accounts with the Trust
Collateral Agent, the Servicer shall notify the Trust Collateral Agent in
writing promptly upon any of such Trust Accounts ceasing to be an Eligible
Deposit Account.
(ii) With respect to the Trust Account Property:
(A) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Deposit Accounts; and,
except as otherwise provided herein, each such Eligible Deposit Account
shall be subject to the exclusive custody and control of the Trust
Collateral Agent, and the Trust Collateral Agent shall have sole
signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Trust Collateral Agent in accordance
with paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Trust Collateral Agent
or a financial intermediary (as such term is defined in Section
8-313(4) of the UCC) acting solely for the Trust Collateral Agent;
(C) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to Federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Trust
Collateral Agent, pending maturity or disposition, through continued
book-entry registration of such Trust Account Property as described in
such paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by clause
(C) above shall be delivered to the Trust Collateral Agent in
accordance with paragraph (c) of the definition of "Delivery" and shall
be maintained by the Trust Collateral Agent, pending maturity or
disposition, through continued registration of the Trust Collateral
Agent's (or its nominee's) ownership of such security.
SECTION 5.2. Pre-Funding Period Reserve Account.
(a) The Servicer shall cause the Trust Collateral Agent to
establish and maintain an Eligible Deposit Account (the "Pre-Funding Period
Reserve Account") with the Trust Collateral Agent, bearing a designation clearly
indicating that the funds deposited therein are held in trust for the benefit of
the Noteholders and the Insurer.
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On or prior to the Closing Date, the Seller shall deposit an
amount equal to the Pre-Funding Period Reserve Account Initial Deposit into the
Pre-Funding Period Reserve Account.
(b) (i) On the Distribution Dates occurring in August,
September and October of 1997 the Trust Collateral Agent shall, in accordance
with the Servicer's Certificate, withdraw from the Pre-Funding Period Reserve
Account the Monthly Pre-Funding Period Reserve Amount for such Distribution Date
and deposit such amount in the Collection Account as further provided in Section
5.7.
(ii) On the Distribution Dates occurring on or prior to the
Distribution Date next succeeding termination of the Pre-Funding Period,
Servicer shall instruct the Trust Collateral Agent in writing to withdraw from
the Pre-Funding Period Reserve Account and pay to the Seller on such
Distribution Date an amount equal to the amount of funds on deposit in the
Pre-Funding Period Reserve Account (after giving effect to any required transfer
pursuant to the preceding clause (i) on such Distribution Date) in excess of the
Required Reserve Amount for such Distribution Date. Any amounts remaining in the
Pre-Funding Period Reserve Account on the Distribution Date which immediately
follows the end of the Pre-Funding Period after taking into account the transfer
pursuant to Section 5.7(a)(i) shall be remitted by the Trust Collateral Agent to
the Seller. Upon any such distributions to the Seller, the Noteholders and the
Insurer will have no further rights in, or claims to, such amounts.
SECTION 5.3. Certain Reimbursements to the Servicer. The
Servicer will be entitled to be reimbursed from amounts on deposit in the
Collection Account with respect to a Due Period for amounts previously deposited
in the Collection Account but later determined by the Servicer to have resulted
from mistaken or postings or checks returned for insufficient funds. The amount
to be reimbursed hereunder shall be paid to the Servicer on the related
Distribution Date pursuant to Section 5.7(b)(i) upon certification by the
Servicer of such amounts and the provision of such information to the Trust
Collateral Agent and the Insurer as may be necessary in the opinion of the
Insurer to verify the accuracy of such certification. In the event that the
Insurer has not received evidence satisfactory to it of the Servicer's
entitlement to reimbursement pursuant to this Section, the Insurer shall (unless
an Insurer Default shall have occurred and be continuing) give the Trust
Collateral Agent written notice to such effect, following receipt of which the
Trust Collateral Agent shall not make a distribution to the Servicer in respect
of such amount pursuant to Section 5.7, or if the Servicer prior thereto has
been reimbursed pursuant to Section 5.7, the Trust Collateral Agent shall
withhold such amounts from amounts otherwise distributable to the Servicer on
the next succeeding Distribution Date.
SECTION 5.4. Application of Collections. For all purposes of
this Agreement the allocation of a payment on a Receivable between principal and
interest shall be made based upon the amortization method provided in the
related Contract. For purposes of allocating a pay-ahead payment on a Receivable
between principal and interest, the pay-ahead shall be deemed to have been
received on the date it was actually due. For all purposes of this Agreement, no
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amount shall be treated as collected under a Receivable until such amount has
been deposited into the Collection Account.
SECTION 5.5. Withdrawals from Series 1997-1 Spread Account.
(a) In the event that the Servicer's Certificate with respect
to any Determination Date shall state that the Available Amount with respect to
such Distribution Date is less than the sum of the amounts payable on the
related Distribution Date pursuant to clauses (i) through (iv) (other than any
Note Prepayment Amount) of Section 5.7(b) (such deficiency being a "Deficiency
Claim Amount"), which notice shall also state if there are not sufficient
amounts in the Spread Account to cover such deficiency, then on the Business Day
immediately preceding the related Draw Date, the Trust Collateral Agent shall
deliver to the Collateral Agent, the Owner Trustee, the Insurer and the
Servicer, by hand delivery, telex or facsimile transmission, a written notice (a
"Deficiency Notice") specifying the Deficiency Claim Amount for such
Distribution Date and the Note Policy Claim Amount, if any. Such Deficiency
Notice shall direct the Collateral Agent to remit such Deficiency Claim Amount
(to the extent of the funds available to be distributed pursuant to the Spread
Account Agreement) to the Trust Collateral Agent for deposit in the Collection
Account on the related Distribution Date.
(b) Any Deficiency Notice shall be delivered by 10:00 am., New
York City time, on the Business Day immediately preceding the Draw Date
immediately preceding the related Distribution Date. The amounts distributed by
the Collateral Agent to the Trust Collateral Agent pursuant to a Deficiency
Notice shall be deposited by the Trust Collateral Agent into the Collection
Account pursuant to Section 5.6.
SECTION 5.6. Additional Deposits.
(a) NAFI and the Seller, as applicable, shall deposit or cause
to be deposited in the Collection Account on the Reporting Date following the
date on which such obligations are due the aggregate Purchase Amount with
respect to Purchased Receivables. On or before each Draw Date, the Trust
Collateral Agent shall remit to the Collection Account any amounts delivered to
the Trust Collateral Agent by the Collateral Agent.
(b) The proceeds of any purchase or sale of the assets of the
Trust described in Section 11.1 hereof shall be deposited in the Collection
Account.
SECTION 5.7. Distributions.
(a) On each Distribution Date, the Trust Collateral Agent
shall (based solely on the information contained in the Servicer's report
delivered pursuant to Section 4.11 on the related Reporting Date unless the
Insurer shall have notified the Trust Collateral Agent of any errors or
deficiencies with respect thereto) cause to be made the following transfers and
distributions in the amounts set forth in such report for such Distribution
Date:
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(i) During the Pre-Funding Period, from the Pre-Funding Period
Reserve Account to the Note Distribution Account, in immediately
available funds, the Monthly Pre-Funding Period Reserve Amount for such
Distribution Date; and
(ii) If such Distribution Date is the Mandatory Redemption
Date, from the Pre-Funding Account to the Note Distribution Account, in
immediately available funds, the Pre-Funded Amount after giving effect
to the purchase of Subsequent Receivables, if any, on the Mandatory
Redemption Date.
(b) On each Distribution Date, the Trust Collateral Agent
shall, to the extent of the Available Amount together with (i) funds withdrawn
from the Spread Account, if any, (ii) the Policy Claim Amount, if any, and (iii)
any amount deposited to the Distribution Account pursuant to Section 5.11 (such
amounts so deposited to be applied only as directed by the Insurer) make the
following payments (in case of the withdrawals from the Spread Account, for
payments of the Servicing Fee, the Noteholders Distributable Amount and any
amounts owing to the Insurer pursuant to clause (iv) below, and in the case of
the Policy Claim Amount, for Scheduled Payments (as defined in the Policy) only)
from the Distribution Account in the following order of priority:
(i) to the Servicer, the Servicing Fee for the related Due
Period, Period, and any unpaid Servicing Fees from prior Due Periods to
the extent not previously paid;
(ii) to each of the Trust Collateral Agent, the Indenture
Trustee, the Owner Trustee, the Collateral Agent and the Custodian,
their respective accrued and unpaid fees to the extent not paid by the
Servicer;
(iii) to the Note Distribution Account, the Noteholders'
Distributable Amount;
(iv) to the Insurer (or any designee thereof), to the extent
of any amounts owing to the Insurer under the Insurance Agreement, the
Indenture or this Agreement and not paid;
(v) to the Collateral Agent for deposit to the Spread Account,
an amount, if necessary, required to increase the amount therein to the
Requisite Amount (after taking into account all withdrawals from the
Spread Account on such Distribution Date);
(vi) to the Pre-Funding Period Reserve Account, the amount by
which the Required Reserve Amount exceeds the amount of funds on
deposit therein after giving effect to any withdrawals from the
Pre-Funding Period Reserve Account on such Distribution Date;
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(vii) to the Indenture Trustee and the Owner Trustee for any
unreimbursed expenses and to pay any indemnities owed by the Seller to
the Indenture Trustee under the Indenture or to the Owner Trustee under
the Trust Agreement;
(viii) to reimburse the Servicer for any expense of an Opinion
of Counsel incurred in connection with an amendment to the Indenture,
and any expenses incurred by the Servicer in connection with a
realization upon a Defaulted Receivable;
(ix) to reimburse the Backup Servicer for expenses incurred by
the Backup Servicer and to reimburse the Servicer for expenses incurred
by and reimbursable, or any indemnities payable by the Seller, to the
Servicer pursuant to this Agreement;
(x) to reimburse the Seller for expenses incurred by and
reimbursable to the Seller pursuant to the Indenture and this
Agreement; and
(xi) to the holder(s) of the Trust Certificates, the balance
of any funds remaining in the Distribution Account after application
pursuant to the preceding clauses (i) through (x).
provided, however, that, (A) following an acceleration of the Notes or, (B) if
an Insurer Default shall have occurred and be continuing and an Event of Default
pursuant to Section 5.1(i), 5.1(ii), 5.1(iv), 5.1(v) or 5.1(vi) of the Indenture
shall have occurred and be continuing, in each case, to the extent actually
known by a Trust Officer of the Trust Collateral Agent, or (C) the receipt of
Insolvency Proceeds pursuant to Section 11.1(b), amounts deposited in the Note
Distribution Account (including any such Insolvency Proceeds) and the
Distribution Account shall be paid to the Noteholders and the Certificateholders
pursuant to Section 5.6 of the Indenture.
(c) In the event that the Collection Account is maintained
with an institution other than the Trust Collateral Agent, the Servicer shall
instruct and cause such institution to make all deposits and distributions
pursuant to Section 5.7(b) on the related Distribution Date.
SECTION 5.8. Note Distribution Account.
(a) On each Distribution Date, the Trust Collateral Agent
shall distribute all amounts on deposit in the Note Distribution Account, as
such amounts on deposit in the Note Distribution Account are specified on the
Monthly Servicer's Certificate, to Noteholders in respect of the Notes to the
extent of amounts due and unpaid on the Notes for principal and interest in the
following amounts and in the following order of priority:
(i) accrued and unpaid interest on the Notes; provided that if
there are not sufficient funds in the Note Distribution Account to pay
the entire amount of accrued and unpaid interest then due on the Notes,
the amount in the Note Distribution Account shall be applied to the
payment of such interest on the Notes pro rata on the basis of the
amount of accrued and unpaid interest due on the Notes; and
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(ii) to the Holders of the Notes, the Noteholders' Principal
Distributable Amount until the outstanding principal balance of the
Notes is reduced to zero.
(b) On each Distribution Date, the Trust Collateral Agent
shall send to each Noteholder the statement provided to the Trust Collateral
Agent by the Servicer pursuant to Section 5.10 hereof on such Distribution Date.
(c) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Noteholder, such tax shall
reduce the amount otherwise distributable to the Noteholder in accordance with
this Section. The parties hereto hereby agree to provide to the Trust Collateral
Agent the information any such party may have, if any, with respect to any such
withholding tax. The Trust Collateral Agent is hereby authorized and directed to
retain from amounts otherwise distributable to the Noteholders sufficient funds
for the payment of any tax that is legally owed by the Trust (but such
authorization shall not prevent the Trust Collateral Agent from contesting any
such tax in appropriate proceedings, and withholding payment of such tax, if
permitted by law, pending the outcome of such proceedings). The amount of any
withholding tax imposed with respect to a Noteholder shall be treated as cash
distributed to such Noteholder at the time it is withheld by the Trust and
remitted to the appropriate taxing authority. If there is a possibility that
withholding tax is payable with respect to a distribution (such as a
distribution to a non-U.S. Noteholder), the Trust Collateral Agent may in its
sole discretion withhold such amounts in accordance with this clause (c). In the
event that a Noteholder wishes to apply for a refund of any such withholding
tax, the Trust Collateral Agent shall reasonably cooperate with such Noteholder
in making such claim so long as such Noteholder agrees to reimburse the Trust
Collateral Agent for any out-of-pocket expenses incurred.
(d) Distributions required to be made to Noteholders on any
Distribution Date shall be made to each Noteholder of record on the preceding
Record Date either by wire transfer, in immediately available funds, to the
account of such Holder at a bank or other entity having appropriate facilities
therefor, if such Noteholder shall have provided to the Note Registrar
appropriate written instructions at least five Business Days prior to such
Distribution Date and such Holder's Notes in the aggregate evidence a
denomination of not less than $1,000,000 or, if not, by check mailed to such
Noteholder at the address of such holder appearing in the Note Register;
provided, however, that, unless Definitive Notes have been issued pursuant to
Section 3.13 of the Trust Agreement, with respect to Notes registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.), distributions will be made by wire transfer in
immediately available funds to the account designated by such nominee.
Notwithstanding the foregoing, the final distribution in respect of any Note
(whether on the Final Scheduled Distribution Date or otherwise) will be payable
only upon presentation and surrender of such Note at the office or agency
maintained for that purpose by the Note Registrar pursuant to Section 2.4 of the
Indenture.
SECTION 5.9. Pre-Funding Account.
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(a) On the Closing Date, the Trust Collateral Agent will
deposit, on behalf of the Seller, in the Pre-Funding Account $6,689,091.18 from
the proceeds of the sale of the Notes. On each Subsequent Transfer Date, the
Servicer shall instruct the Trust Collateral Agent to withdraw from the
Pre-Funding Account (i) an amount equal to 91% of the Principal Balance of the
Subsequent Receivables transferred to the Issuer on such Subsequent Transfer
Date and to distribute such amount to or upon the order of the Seller upon
satisfaction of the conditions set forth in this Agreement with respect to such
transfer. The Trust Collateral Agent shall also deposit into the Pre-Funding
Account any income or gain earned from the investment of amounts on deposit in
the Pre-Funding Account as received. On each Distribution Date, any income and
gain earned from the investment of amounts on deposit in the Pre-Funding Account
since the previous Distribution Date (or the Closing Date, in the case of the
first Distribution Date) shall be deposited into the Note Distribution Account.
(b) If the Pre-Funded Amount has not been reduced to zero on
the date on which the Pre-Funding Period ends after giving effect to any
reductions in the Pre-Funded Amount on such date, the Servicer shall instruct
the Trust Collateral Agent to withdraw from the Pre-Funding Account on the
Mandatory Redemption Date the Pre-Funded Amount (exclusive of any Pre-Funding
Earnings) and deposit an amount equal to the Note Prepayment Amount in the Note
Distribution Account in accordance with the priority of payments under Section
5.7(b).
SECTION 5.10. Statements to Noteholders. Concurrently with
each distribution charged to the Note Distribution Account, the Trust Collateral
Agent shall forward by mail to each Noteholder, the Seller, the Servicer, the
Insurer and each Rating Agency, a written statement prepared by the Servicer
substantially in the form attached hereto as Exhibit 5.10.
SECTION 5.11. Optional Deposits by the Insurer. The Insurer
shall at any time, and from time to time, with respect to a Distribution Date,
have the option (but shall not be required, except in accordance with the terms
of a Policy) to deliver amounts to the Trust Collateral Agent for deposit into
the Collection Account for any of the following purposes: (i) to provide funds
in respect of the payment of fees or expenses of any provider of services to the
Trust with respect to such Distribution Date, or (ii) to include such amount to
the extent that without such amount a draw would be required to be made on the
Note Policy.
ARTICLE VI
THE NOTE POLICY
SECTION 6.1. Claims Under Note Policy.
(a) In the event that the Trust Collateral Agent has delivered
a Deficiency Notice with respect to any Reporting Date pursuant to Section 5.5
hereof, the Trust Collateral Agent shall on the related Draw Date determine the
Note Policy Claim Amount for the related Distribution Date. If the Note Policy
Claim Amount specified on the Deficiency Notice for such Distribution Date is
greater than zero, the Trust Collateral Agent shall furnish to the Insurer no
later than 12:00 noon New York City time on the related Draw Date, a completed
Notice of Claim (as defined in (b) below) in the amount of the Note Policy Claim
Amount. Amounts paid
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by the Insurer pursuant to a claim submitted under this Section 6.1. shall be
deposited by the Trust Collateral Agent into the Note Distribution Account for
payment pursuant to paragraph (b) below to Noteholders on the related
Distribution Date.
(b) Any notice delivered by the Trust Collateral Agent to the
Insurer pursuant to subsection 6.1(a) shall specify the Note Policy Claim Amount
claimed under the Note Policy and shall constitute a "Notice of Claim" under the
Note Policy. In accordance with the provisions of the Note Policy, the Insurer
is required to pay to the Trust Collateral Agent the Note Policy Claim Amount
properly claimed thereunder by 12:00 noon, New York City time, on the later of
(i) the third Business Day (as defined in the Policy) following receipt on a
Business Day of the Notice of Claim, and (ii) the applicable Distribution Date.
Any payment made by the Insurer under the Note Policy shall be applied solely to
the payment of the Notes, and for no other purpose.
(c) The Trust Collateral Agent shall (i) receive as
attorney-in-fact of each Noteholder any Note Policy Claim Amount from the
Insurer and (ii) deposit the same in the Note Distribution Account for
distribution to Noteholders. Any and all Note Policy Claim Amounts disbursed by
the Trust Collateral Agent from claims made under the Note Policy shall not be
considered payment by the Trust or from the Spread Account with respect to such
Notes, and shall not discharge the obligations of the Trust with respect
thereto. The Insurer shall, to the extent it makes any payment with respect to
the Notes, become subrogated to the rights of the recipients of such payment, to
the extent of such payments. Subject to and conditioned upon any payment with
respect to the Notes by or on behalf of the Insurer, the Trust Collateral Agent
shall assign to the Insurer all rights to the payment of interest or principal
with respect to the Notes which are then due for payment to the extent of all
payments made by the Insurer and the Insurer may exercise any option, vote,
right, power or the like with respect to the Notes to the extent that it has
made payment pursuant to the Policy. The Trust Collateral Agent agrees that the
Insurer shall be subrogated to all of the rights of payment of the Noteholders
or in relation thereto to the extent that any such payment was made to such
Noteholders with payments made under the Policy. To evidence such subrogation,
the Trust Collateral Agent shall note the Insurer's rights as subrogee upon the
Note Register upon receipt from the Insurer of proof of payment by the Insurer
of any Scheduled Payments (as defined in the Policy).
(d) The Trust Collateral Agent shall keep a complete and
accurate record of all funds deposited by the Insurer into the Note Distribution
Account and the allocation of such funds to payment of interest on and principal
paid in respect of any Note. The Insurer shall have the right to inspect such
records at reasonable times upon one Business Day's prior notice to the Trust
Collateral Agent.
(e) The Trust Collateral Agent shall be entitled to enforce on
behalf of the Noteholders the obligations of the Insurer under the Note Policy.
Notwithstanding any other provision of this Agreement or any Transaction
Document, the Noteholders are not entitled to make any claims under the Note
Policy or institute proceedings directly against the Insurer.
SECTION 6.2. Preference Claims.
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(a) In the event that the Trust Collateral Agent has received
a certified copy of an order of the appropriate court that any Scheduled Payment
(as defined in the Note Policy) has been avoided in whole or in part as a
preference payment under applicable bankruptcy law, the Trust Collateral Agent
shall so notify the Insurer, shall comply with the provisions of the Note Policy
to obtain payment by the Insurer of such avoided payment, and shall, at the time
it provides notice to the Insurer, notify Holders of the Notes by mail that, in
the event that any Noteholder's payment is so recoverable, such Noteholder will
be entitled to payment pursuant to the terms of the Note Policy. The Trust
Collateral Agent shall furnish to the Insurer its records evidencing the
payments of principal of and interest on Notes, if any, which have been made by
the Trust Collateral Agent and subsequently recovered from Noteholders, and the
dates on which such payments were made. Pursuant to the terms of the Note
Policy, the Insurer will make such payment on behalf of the Noteholder to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order (as defined in the Note Policy) and not to the Trust Collateral Agent
or any Noteholder directly (unless a Noteholder has previously paid such payment
to the receiver, conservator, debtor-in-possession or trustee in bankruptcy, in
which case the Insurer will make such payment to the Trust Collateral Agent for
distribution to such Noteholder upon proof of such payment reasonably
satisfactory to the Insurer).
(b) The Trust Collateral Agent shall promptly notify the
Insurer of any proceeding or the institution of any action (of which a
Responsible Officer of the Trust Collateral Agent has actual knowledge) seeking
the avoidance as a preferential transfer under applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (a "Preference Claim")
of any distribution made with respect to the Notes. Each Holder, by its purchase
of Notes, and the Trust Collateral Agent hereby agree that so long as an Insurer
Default shall not have occurred and be continuing, the Insurer may at any time
during the continuation of any proceeding relating to a Preference Claim direct
all matters relating to such Preference Claim including, without limitation, (i)
the direction of any appeal of any order relating to any Preference Claim and
(ii) the posting of any surety, supersedeas or performance bond pending any such
appeal at the expense of the Insurer, but subject to reimbursement as provided
in the Insurance Agreement. In addition, and without limitation of the
foregoing, as set forth in Section 6.1(c), the Insurer shall be subrogated to,
and each Noteholder and the Trust Collateral Agent hereby delegate and assign,
to the fullest extent permitted by law, the rights of the Trust Collateral Agent
and each Noteholder in the conduct of any proceeding with respect to a
Preference Claim, including, without limitation, all rights of any party to an
adversary proceeding action with respect to any court order issued in connection
with any such Preference Claim.
SECTION 6.3. Surrender of Note Policy. The Trust Collateral
Agent shall surrender the Note Policy to the Insurer for cancellation upon the
expiration of such policy in accordance with the terms thereof.
ARTICLE VII
RESERVED
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ARTICLE VIII
THE SELLER
SECTION 8.1. Representations, Warranties and Covenants of the
Seller. The Seller hereby represents, warrants and covenants to the Trust
Collateral Agent, the Insurer and the Servicer, which representations,
warranties and covenants shall survive as long as any Note shall be outstanding
or this Agreement has not been terminated, that as of the Closing Date and each
Subsequent Transfer Date:
(a) the Seller is a Delaware business trust duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and has all licenses and approvals necessary to carry on its business as now
being conducted and shall appoint and employ agents or attorneys in each
jurisdiction where it shall be necessary to take action under this Agreement and
the other Transaction Documents; the Seller has the full power and authority to
own its property, to carry on its business as presently conducted, and to
execute, deliver and perform this Agreement (including all instruments of
transfer to be delivered pursuant to this Agreement) and the other Transaction
Documents by the Seller and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized; this Agreement
evidences the valid, binding and enforceable obligations of the Seller (subject
to applicable bankruptcy and insolvency laws and other similar laws affecting
the enforcement of creditors' rights generally whether enforcement is sought in
a proceeding in equity or at law); and all requisite action has been taken by
the Seller to make this Agreement and the other Transaction Documents valid and
binding upon the Seller (subject as aforesaid in the preceding clause);
(b) the Seller is not required to obtain the consent of any
other party or obtain the consent, license, approval or authorization of, or
make any registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any other Transaction Documents;
(c) the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents will not result in the breach of
any term or provision of the trust agreement of the Seller or result in the
breach of any term or provision of, or conflict with or constitute a default
(with or without notice, lapse of time or both) under or result in the
acceleration of any obligation under, any agreement, indenture or loan or credit
agreement or other instrument to which the Seller or its property is subject or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such agreement, indenture or loan or credit
agreement or other instruments (aside from the lien created pursuant to this
Agreement), or result in the violation of any law (including, without
limitation, any bulk transfer or similar law), rule, regulation, order, judgment
or decree to which the Seller or its property or the Receivables are subject;
(d) no statement, report or other document furnished or to be
furnished pursuant to this Agreement or in connection with the transaction
contemplated hereby contains or will, when furnished, contain any untrue
statement of a material fact or omits or will, when
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furnished, omit to state a material fact necessary to make the statements
contained therein not misleading, in light of the circumstances under which they
were made;
(e) neither the Seller nor any of its subsidiaries or
affiliates is a party to, bound by or in breach or violation of any indenture or
other agreement or instrument, or subject to or in violation of any statute,
order or regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it, which materially and adversely
affects, or may in the future materially and adversely affect, the ability of
the Seller to perform its obligations under this Agreement or any other
Transaction Document;
(f) this Agreement and each Basic Agreement, when duly
executed and delivered, shall effect a valid sale, transfer and assignment of
the Receivables and the remaining Trust Property, enforceable against the Seller
and creditors of and purchasers from the Seller;
(g) there are no proceedings or investigations pending or, to
the Seller's knowledge, threatened against the Seller or NAFI, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Seller or its properties (i)
asserting the invalidity of this Agreement or any of the Transaction Documents,
(ii) seeking to prevent the issuance of the Notes or the consummation of any of
the transactions contemplated by this Agreement or any of the Transaction
Documents, (iii) seeking any determination or ruling that might materially and
adversely affect the performance by the Seller of its obligations under, or the
validity or enforceability of, this Agreement or any of the Transaction
Documents, (iv) involving the Seller and which might adversely affect the
federal income tax or other federal, state or local tax attributes of the Notes,
or (e) that could have a material adverse effect on the Receivables.
(h) the Seller has obtained or made all necessary consents,
approvals, waivers and notifications of creditors, lessors and other
non-governmental persons, in each case, in connection with the execution and
delivery of this Agreement and the other Transaction Documents, and the
consummation of all the transactions herein and therein contemplated;
(i) the Seller shall not take any action to impair the Trust
Collateral Agent's rights on behalf of the Noteholder and the Insurer in any
Contract;
(j) the Seller has filed all federal, state, county, local and
foreign income, franchise and other tax returns required to be filed by it
through the date hereof, and has paid all taxes reflected as due thereon;
(k) since the date of its organization, the Seller has
maintained its chief executive office in the State of Florida or the State of
Delaware, and there have been no other locations of the Seller's principal
office during the four (4) months preceding the Closing Date;
(l) Seller is solvent and will not become insolvent after
giving effect to the transactions contemplated hereunder; Seller is paying its
debts as they become due; Seller, after giving effect to the contemplated
transactions, will have adequate capital to conduct its business;
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(m) since February 1995, "National Financial Auto Funding
Trust" is the only trade name under which the Seller has operated its business
and, prior to such date, NAFCO Funding Trust was the only trade name under which
the Seller operated its business;
(n) the Seller shall not engage in any business or activity
other than in connection with or relating to the purchase of auto loan
receivables and the issuance of securities secured by, or evidencing beneficial
interests in, such auto loan receivables;
(o) the Seller is not and shall not be involved in the
day-to-day or other management of its parent or any of its affiliates;
(p) the Seller's financial statements shall reflect its
separate legal existence from any of its affiliates;
(q) the Seller shall maintain records and books of account of
the Seller and shall not commingle such records and books of account with the
records and books of account of any Person;
(r) the Seller shall act solely in its own name and through
the duly authorized trustees or agents in the conduct of its business, and shall
conduct its business so as not to mislead others as to the identity of the
entity with which they are concerned;
(s) at all times, except in the case of a temporary vacancy,
which shall promptly be filled, the Seller shall have at least one trust
collateral agent who qualifies as an "Independent Trust Collateral Agent" as
such term is defined in the Trust Agreement as in effect on the date hereof.
The Seller shall indemnify the Trust Collateral Agent, the
Insurer, the Servicer, their respective officers, directors, agents and
employees and each Noteholder, and hold each of them harmless against any and
all damages (including all expenses and legal fees) resulting from a breach of
the representations and warranties set forth in this Section 8.1.
The Insurer shall be deemed to have relied on the foregoing
representations, warranties and covenants in executing and delivering the Note
Policy.
SECTION 8.2. Corporate Existence.
(a) During the term of this Agreement, the Seller will keep in
full force and effect its existence, rights and franchises as a business trust
under the laws of Delaware and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, any
Subsequent Transfer Agreement, the Transaction Documents and each other
instrument or agreement necessary or appropriate to the proper administration of
this Agreement and the transactions contemplated hereby and thereby and the
performance of its obligations hereunder and thereunder.
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(b) During the term of this Agreement, the Seller shall
observe the applicable legal requirements for the recognition of the Seller as a
legal entity separate and apart from its Affiliates, including as follows:
(i) the Seller shall maintain business records and books of
account separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the
Seller shall not commingle its assets and funds with those of its
Affiliates;
(iii) the Seller shall at all times hold itself out to the
public under the Seller's own name as a legal entity separate and
distinct from its Affiliates; and
(iv) all transactions and dealings between the Seller and its
Affiliates will be conducted on an arm's-length basis.
SECTION 8.3. Liability of Seller; Indemnities. The Seller
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken under this Agreement by the Seller and the
representations made by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Trust, the Insurer, the Trustee, the Trust
Collateral Agent and their respective officers, directors, agents and employees
from and against any taxes that may at any time be asserted against any such
Person with respect to the transactions contemplated in this Agreement and any
of the Transaction Documents (except any income taxes arising out of fees paid
to the Owner Trustee, the Trust Collateral Agent, the Trustee and the Insurer
and except any taxes to which the Owner Trustee, the Trust Collateral Agent or
the Trustee may otherwise be subject to), including any sales, gross receipts,
general corporation, tangible personal property, privilege or license taxes
(but, in the case of the Issuer, not including any taxes asserted with respect
to, federal or other income taxes arising out of distributions on the Notes) and
costs and expenses in defending against the same.
(b) The Seller shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Trustee, the Trust Collateral Agent, the Insurer,
their respective officers, directors, agents and employees and the Noteholders
from and against any loss, liability or expense incurred by reason of (i) the
Seller's willful misfeasance, bad faith or negligence in the performance of its
duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement and (ii) the Seller's or the
Issuer's violation of Federal or state securities laws in connection with the
offering and sale of the Notes.
(c) The Seller shall indemnify, defend and hold harmless the
Owner Trustee, Trustee and the Trust Collateral Agent and their respective
officers, directors, employees and agents from and against any and all costs,
expenses, losses, claims, damages and liabilities arising out of, or incurred in
connection with the acceptance or performance of the trusts and duties set forth
herein and in the Transaction Documents except to the extent that such cost,
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expense, loss, claim, damage or liability shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of the
Owner Trustee.
Indemnification under this Section shall survive the
resignation or removal of the Owner Trustee, the Trustee or the Trust Collateral
Agent and the termination of this Agreement or the Indenture or the Trust
Agreement or the Custodian Agreement, as applicable, and shall include
reasonable fees and expenses of counsel and other expenses of litigation. If the
Seller shall have made any indemnity payments pursuant to this Section and the
Person to or on behalf of whom such payments are made thereafter shall collect
any of such amounts from others, such Person shall promptly repay such amounts
to the Seller, without interest.
SECTION 8.4. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. The Seller may not be merged or consolidated with or
into any person or transfer substantially all of its assets to any Person.
SECTION 8.5. Limitation on Liability of Seller and Others. The
Seller and any director or officer or employee or agent of the Seller may rely
in good faith on the written advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any matters
arising under any Transaction Document. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under this Agreement, and that in its opinion may
involve it in any expense or liability.
SECTION 8.6. Seller May Own Notes. The Seller and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Notes with the same rights as it would have if it were not the
Seller or an Affiliate thereof, except as expressly provided herein or in any
Transaction Document. Notes so owned by the Seller or such Affiliate shall have
an equal and proportionate benefit under the provisions of the Transaction
Documents, without preference, priority, or distinction as among all of the
Notes; provided, however, that any Notes owned by the Seller or any Affiliate
thereof, during the time such Notes are owned by them, shall be without voting
rights for any purpose set forth in the Documents and will not be entitled to
the benefits of the Note Policy. The Seller shall notify the Owner Trustee, the
Trustee, the Trust Collateral Agent and the Insurer promptly after it or any of
its Affiliates become the owner or pledgee of a Note.
ARTICLE IX
THE SERVICER
SECTION 9.1. Representations, Warranties and Covenants of the
Servicer. The Servicer hereby represents, warrants and covenants to the Trust
Collateral Agent and the Insurer that as of the Closing Date and each Subsequent
Transfer Date:
(a) the Servicer is duly organized, validly existing and in
good standing under the laws of the state of its organization and is qualified
to transact business in and is in good standing under the laws of each state in
which it is necessary for it to be so qualified in order to
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carry on its business as now being conducted and has all licenses necessary to
carry on its business as now being conducted; the Servicer has the full power
and authority to own its property, to carry on its business as presently
conducted, and to execute, deliver and perform each of the Transaction Documents
to which it is a party; the execution, delivery and performance of each of the
Transaction Documents to which it is a party (including all instruments of
transfer to be delivered pursuant to any such Transaction Documents to which it
is a party) by the Servicer and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized; each of
the Transaction Documents to which it is a party evidences the valid, binding
and enforceable obligation of the Servicer (subject to applicable bankruptcy and
insolvency laws and other similar laws affecting the enforcement of creditors'
rights generally and to general principles of equity, regardless of whether
enforcement is sought in a proceeding in equity or at law) and all requisite
partnership action has been taken by the Servicer to make each of the
Transaction Documents to which it is a party valid and binding upon the Servicer
(subject as aforesaid in the preceding clause);
(b) the Servicer is not required to obtain the consent of any
other party or obtain the consent, license, approval or authorization of, or
make any registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of each of the Transaction Documents to which it is a party;
(c) the consummation of the transactions contemplated by the
Transaction Documents will not result in the breach of any term or provision of
the partnership agreement of the Servicer or result in the breach of any term or
provision of, or conflict with or constitute a default (with or without notice,
lapse of time or both) under or result in the acceleration of any obligation
under, any agreement, indenture or loan or credit agreement or other instrument
to which the Servicer or its property is subject, or result in the creation or
imposition of any Lien upon any of the properties pursuant to the terms of any
such agreement indenture or loan or credit agreement or other instrument (aside
from the lien created pursuant to this Agreement) or result in the violation of
any law, rule, regulation, order, judgment or decree to which the Servicer or
its property or the Receivables are subject;
(d) the Servicer is not a party to, bound by or in breach or
violation of any indenture or other agreement or instrument, or subject to or in
violation of any statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction over it, which
materially and adversely affects, or may in the future materially and adversely
affect, the ability of the Servicer to perform its obligations under this
Agreement or the interest of the Noteholders, the Trust or the Insurer in any
material respect;
(e) there are no actions, suits, proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
any of the Transaction Documents, (ii) seeking to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated by the
Transaction Documents, (iii) seeking any determination or ruling that might
materially and
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adversely affect the performance by the Servicer of its obligations under, or
the validity or enforceability of, this Agreement or any of the Transaction
Documents, (iv) involving the Servicer and which might adversely affect the
federal income tax or other federal, state or local tax attributes of the Notes,
or (v) that could have a material adverse effect on the Receivables. To the
Servicer's knowledge, there are no proceedings or investigations pending or
threatened against the Servicer, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality having
jurisdiction over the Servicer or its properties relating to the Servicer which
might adversely affect the federal income tax or other federal, state or local
tax attributes of the Notes;
(f) the principal office of the Servicer is located at One
Park Place, 621 NW 53rd Street, Suite 200, Boca Raton, Florida 33487; and
(g) the Subservicing Agreement is enforceable against the
Servicer and has been duly authorized by all necessary corporate action of the
Servicer and has been duly executed and delivered by the Servicer.
(h) It is understood and agreed that the representations and
warranties set forth in this Section 9.1 shall survive delivery of the
respective Receivable Files to the Custodian and the Sub-Servicers, if any, on
behalf of the Trust Collateral Agent and shall survive as long as any Note shall
be outstanding or this Agreement has not been terminated. Upon discovery by the
Seller, the Servicer or a Responsible Officer of the Trust Collateral Agent of a
breach of any of the representations and warranties set forth in this Section
9.1 which materially and adversely affects the interests of the Noteholders or
the Insurer in any Receivable, the party discovering such breach shall give
prompt written notice thereof to the other parties and to the Insurer. In
addition to the foregoing, the Servicer shall indemnify the Seller, the Trust
Collateral Agent, the Insurer, the Trust and the Noteholders against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of the events or facts giving rise to
a breach of the covenants or representations and warranties set forth in Section
9.1.
The Insurer shall be deemed to have relied on the foregoing
representations, warranties and covenants in executing and delivering the Note
Policy.
SECTION 9.2. Liability of Servicer; Indemnities.
(a) The Servicer (in its capacity as such) shall be liable
hereunder only to the extent of the obligations in this Agreement specifically
undertaken by the Servicer and the representations made by the Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the
Trust, the Trustee, the Trust Collateral Agent, the Owner Trustee, the Insurer,
their respective officers, directors, agents and employees, and the Noteholders
from and against any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation arising out of or resulting from the use, ownership or operation by
the Servicer or any Affiliate thereof of any Financed Vehicle.
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(c) The Servicer shall indemnify, defend and hold harmless the
Trustee, the Trust Collateral Agent and the Owner Trustee and their respective
officers, directors, agents and employees from and against any taxes that may at
any time be asserted against any of such parties with respect to the
transactions contemplated in this Agreement except to the extent that such
costs, expenses, losses, damages, claims and liabilities arise out of the
negligence or willfully misconduct of such parties.
(d) The Servicer (when the Servicer is NAFI) shall indemnify,
defend and hold harmless the Trust, the Trustee, the Trust Collateral Agent, the
Owner Trustee, the Insurer, their respective officers, directors, agents and
employees and the Noteholders from and against any taxes that may at any time be
asserted against any of such parties with respect to the transactions
contemplated in this Agreement, including, without limitation, any sales, gross
receipts, tangible or intangible personal property, privilege or license taxes
(but not including any federal or other income taxes, including franchise taxes
asserted with respect to, and as of the date of, the sale of the Receivables and
the Other Conveyed Property to the Trust or the issuance and original sale of
the Securities) and costs and expenses in defending against the same.
(e) The Servicer (when the Servicer is not NAFI) shall
indemnify, defend and hold harmless the Trust, the Trustee, the Trust Collateral
Agent, the Owner Trustee, the Insurer, their respective officers, directors,
agents and employees and the Noteholders from and against any taxes with respect
to the sale of Receivables in connection with servicing hereunder that may at
any time be asserted against any of such parties with respect to the
transactions contemplated in this Agreement, including, without limitation, any
sales, gross receipts, tangible or intangible personal property, privilege or
license taxes (but not including any federal or other income taxes, including
franchise taxes asserted with respect to, and as of the date of, the sale of the
Receivables and the Other Conveyed Property to the Trust or the issuance and
original sale of the Securities) and costs and expenses in defending against the
same.
(f) The Servicer shall indemnify, defend and hold harmless the
Trust, the Trustee, the Trust Collateral Agent, the Owner Trustee, the Insurer,
their respective officers, directors, agents and employees and the Noteholders
from and against any and all costs, expenses, losses, claims, damages, and
liabilities to the extent that such cost, expense, loss, claim, damage, or
liability arose out of, or was imposed upon the Trust, the Trustee, the Trust
Collateral Agent, the Insurer or the Noteholders by reason of the breach of this
Agreement by the Servicer, the negligence, misfeasance, or bad faith of the
Servicer in the performance of its duties under this Agreement or by reason of
reckless disregard of its obligations and duties under this Agreement or
otherwise incurred in connection with the transactions contemplated hereby.
(g) NAFI shall indemnify, defend and hold harmless the Trust,
the Trustee, the Trust Collateral Agent, the Owner Trustee, the Insurer, their
respective officers, directors, agents and employees and the Noteholders from
and against any loss, liability or expense incurred by reason of the violation
by Servicer or Seller of federal or state securities laws in connection with the
registration or the sale of the Securities.
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(h) Indemnification under this Article shall survive the
termination of this Agreement and will survive the early resignation or removal
of any of the parties hereto and shall include, without limitation, reasonable
fees and expenses of counsel and expenses of litigation. If the Servicer has
made any indemnity payments pursuant to this Article and the recipient
thereafter collects any of such amounts from others, the recipient shall
promptly repay such amounts collected to the Servicer, without interest.
Notwithstanding any other provision of this Agreement, the obligations of the
Servicer shall not terminate or be deemed released upon the resignation or
termination of NAFI as the Servicer and shall survive any termination of this
Agreement.
SECTION 9.3. Merger or Consolidation of, or Assumption of the
Obligations of the Servicer or the Trust Collateral Agent.
(a) During the term of this Agreement, the Servicer will keep
in full force and effect its existence, rights and franchises as a business
trust under the laws of Delaware and will obtain and preserve its qualification
to do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, any
Subsequent Transfer Agreement, the Transaction Documents and each other
instrument or agreement necessary or appropriate to the proper administration of
this Agreement and the transactions contemplated hereby and thereby and the
performance of its obligations hereunder and thereunder.
(b) The Servicer may be merged or consolidated with or into
any Person, or transfer substantially all of its assets to any Person, in which
case any Person resulting from any merger or consolidation to which the Servicer
shall be a party, or any Person succeeding to the business of the Servicer,
shall be the successor of the Servicer hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided however, that the
successor or surviving person to the Servicer shall be an Eligible Servicer and
each successor to the Servicer by virtue of its acquisition of substantially all
of the Servicer's assets shall be deemed to have made the representations and
warranties set forth in Section 9.01 hereof and shall agree in writing to be
bound by each of the Servicer's obligations hereunder; provided further, that,
(i) no representation or warranty of the Servicer is breached at the time of
merger, (ii) no event has occurred that, after notice or lapse of time or both,
would be an Insurance Agreement Event of Default and (iii) an opinion of counsel
to the effect that all conditions precedent to merger have been satisfied and a
security interest opinion have been provided. The Servicer shall provide notice
of any such merger, consolidation or transfer of substantially all of its assets
to the Insurer, the Trust Collateral Agent and the Rating Agencies.
(c) Any Person (i) into which the Trust Collateral Agent may
be merged or consolidated, (ii) resulting from any merger or consolidation to
which the Trust Collateral Agent shall be a party, (iii) which acquires by
conveyance, transfer or lease substantially all of the assets of the Trust
Collateral Agent, or (iv) succeeding to the business of the Trust Collateral
Agent, in any of the foregoing cases shall execute an agreement of assumption to
perform every obligation of the Trust Collateral Agent under this Agreement and,
whether or not such
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assumption agreement is executed, shall be the successor to the Trust Collateral
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties to this Agreement, anything in
this Agreement to the contrary notwithstanding. In the event that the resulting
entity does not meet the eligibility requirements set forth in Section 6.11 of
the Indenture, the Trust Collateral Agent, upon the written request of the
Insurer, shall resign. Nothing contained herein shall be deemed to release the
Trust Collateral Agent from any obligation.
SECTION 9.4. Limitation on Liability of Servicer, Trust
Collateral Agent and Others.
(a) The Servicer will defend and indemnify the Trust
Collateral Agent, the Insurer and their respective officers, directors,
employees and agents and the Noteholders against any and all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel and expenses of litigation, arising out of or resulting from the use
or operation of any Financed Vehicle by the Servicer or any Subservicer. In
addition, the Servicer will defend and indemnify the Trust Collateral Agent, the
Insurer and their respective officers, directors, employees and agents and the
Noteholders against any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation, arising from a breach of its obligations to service the Contracts in
accordance with this Agreement; provided however, that the Servicer shall not be
liable for any such costs, expenses, losses, damages, claims or liabilities to
the extent that any thereof resulted from the negligence or willful misconduct
of the Trust Collateral Agent, its officers, directors, employees and agents;
and provided further that the Servicer will not be liable for any such amount
that resulted from any act or omission to act by it done in conformity with the
written instruction of the Trust Collateral Agent. If the Servicer or Seller has
made any indemnity payments to the Noteholders or the Trust Collateral Agent,
the Insurer or their respective officers, directors, employees or agents
pursuant to this paragraph, and the Trust Collateral Agent, the Insurer or their
respective officers, directors, employees or agents thereafter collects any of
the amounts which gave rise to such indemnity payments from others or any such
amounts are received by the Trust Collateral Agent or its officers, directors,
employees or agents, the Trust Collateral Agent or its officers, directors,
employees or agents shall repay such amounts collected to the Servicer or Seller
who made such indemnity payment. These indemnities of the Servicer and the
Seller will survive any transfer of the respective rights, duties and
obligations of the Servicer or the Seller hereunder to another Person, the
termination of this Agreement, any Servicer Default, the termination of the
Trust Property or the resignation or replacement of the Trust Collateral Agent
for acts accruing prior to the transfer, termination of the Trust Property or
the resignation or replacement of the Trust Collateral Agent, but will not cover
actions or omissions of any successor Servicer after a Servicer Default. Neither
the Servicer nor any of its directors, officers, employees or agents shall be
under any liability to the Trust Property, the Trust Collateral Agent, any
Noteholder, the Insurer or the Seller for any action taken by the Servicer in
its capacity as such (and not in any other capacity) in good faith or for errors
in judgment except for any action taken or errors committed which caused a
breach of a representation or warranty of the Servicer under Section 9.1. The
Seller, the Servicer and any director, officer, employee or agent of any
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Seller or the Servicer may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder.
(b) The Seller, the Servicer and any director, officer,
employee or agent of the Seller or the Servicer shall be indemnified by the
Trust Property and held harmless against any loss, liability or expense incurred
in connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense for which the Seller or
Servicer provides an indemnity as provided in the preceding paragraph (except as
any such loss, liability or expense shall be otherwise reimbursable pursuant to
this Agreement). Neither the Seller nor the Servicer shall be under any
obligation to appear in, prosecute or defend any legal action which is not in
its reasonable judgment incidental to its respective duties under this Agreement
and which in its reasonable judgment may subject it to any expense or liability;
provided however, that the Servicer may in its discretion undertake any such
action which it may deem necessary or desirable in respect to this Agreement and
the rights and duties of the parties hereto and the interest of the Noteholders
hereunder. In such event, the legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and liabilities of the
Trust Property, and the Servicer shall be entitled to be reimbursed therefor as
provided herein. The rights of the Servicer to indemnity, reimbursement or
limitation on its liability pursuant to this Section 9.4 shall survive the
transfer of the rights, duties and obligations of the Servicer to another Person
or any Servicer Default.
(c) The Servicer shall defend, indemnify and hold harmless the
Trust, the Trust Collateral Agent, the Insurer, their respective officers,
directors, agents and employees, and the Noteholders from and against any taxes
that may at any time be asserted against the Trust, the Trust Collateral Agent
or the Noteholders with respect to the transactions contemplated in this
Agreement, including, without limitation, any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes (but not
including any taxes asserted with respect to, and as of the date of, the sale of
the Receivables and the other Trust Property to the Trust Collateral Agent or
the issuance and original sale of the Certificates, or asserted with respect to
ownership of the Receivables, or federal or other income taxes arising out of
distributions on the Certificates) and costs and expenses in defending against
the same.
(d) The Servicer shall indemnify, defend and hold harmless the
Trust, the Trust Collateral Agent, the Insurer, their respective officers,
directors, agents and employees and the Noteholders from and against any and all
costs, expenses, losses, claims, damages, and liabilities to the extent that
such cost, expense, loss, claim, damage, or liability arose out of, or was
imposed upon the Trust Collateral Agent, the Trust, the Insurer or the
Noteholders through the breach of this Agreement, the negligence, willful
misfeasance, or bad faith of the Servicer in the performance of its duties under
this Agreement or by reason of reckless disregard of its obligations and duties
under this Agreement.
(e) Notwithstanding anything herein to the contrary, the Trust
Collateral Agent shall not be liable for any obligation of the Servicer
contained in this Agreement, and the Trust Collateral Agent, the Seller, the
Insurer and the Noteholders shall look only to the Servicer to perform such
obligations.
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(f) The parties expressly acknowledge and consent to Harris
Trust and Savings Bank acting in the possible dual capacity of successor
Servicer and in the capacity as Trust Collateral Agent. Harris Trust and Savings
Bank may, in such dual or other capacity, discharge its separate functions
fully, without hindrance or regard to conflict of interest principles, duty of
loyalty principles or other breach of fiduciary duties to the extent that any
such conflict or breach arises from the performance by Harris Trust and Savings
Bank of express duties set forth in the this Agreement in any of such
capacities, all of which defenses, claims or assertions are hereby expressly
waived by the other parties hereto and the Noteholders except in the case of
gross negligence and willful misconduct by Harris Trust and Savings Bank.
SECTION 9.5. Delegation of Duties. The Servicer may delegate
duties under this Agreement to an Affiliate of NAFI, or, pursuant to Section
4.2, to a Sub-Servicer with the prior written consent of the Insurer (unless an
Insurer Default shall have occurred and be continuing) and the Trust Collateral
Agent; provided, however, that such consent shall not be required for the
initial delegation to OFSA. The Servicer also may at any time perform through
sub-contractors the specific duties of (i) repossession of Financed Vehicles,
(ii) tracking Financed Vehicles' insurance and (iii) pursuing the collection of
deficiency balances on certain Liquidated Receivables, in each case, without the
written consent of the Insurer and may perform other specific duties through
such sub-contractors in accordance with Servicer's customary servicing policies
and procedures, with the prior consent of the Insurer; provided, however, that
no such delegation or sub-contracting duties by the Servicer shall relieve the
Servicer of its responsibility with respect to such duties. So long as no
Insurer Default shall have occurred and be continuing neither NAFI or any party
acting as Servicer hereunder shall appoint any Sub-Servicer hereunder without
the prior written consent of the Insurer and the Trust Collateral Agent.
SECTION 9.6. Servicer and Trust Collateral Agent Not to
Resign.
(a) Subject to the provisions of Section 9.3, the Servicer
shall not resign from the obligations and duties imposed on it by this Agreement
as Servicer except upon a determination that by reason of a change in legal
requirements the performance of its duties under this Agreement would cause it
to be in violation of such legal requirements in a manner which would have a
material adverse effect on the Servicer, and the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or a Note Majority (if an
Insurer Default shall have occurred and be continuing) does not elect to waive
the obligations of the Servicer to perform the duties which render it legally
unable to act or to delegate those duties to another Person. Any such
determination permitting the resignation of the Servicer shall be evidenced by
an Opinion of Counsel to such effect delivered and acceptable to the Trust
Collateral Agent, the Owner Trustee and the Insurer (unless an Insurer Default
shall have occurred and be continuing). No resignation of the Servicer shall
become effective until, so long as no Insurer Default shall have occurred and be
continuing, the Back-up Servicer or an entity acceptable to the Insurer shall
have assumed the responsibilities and obligations of the Servicer or, if an
Insurer Default shall have occurred and be continuing, a successor Servicer that
is an Eligible Servicer shall have assumed the responsibilities and obligations
of the Servicer. Upon
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the resignation of the Servicer, the Servicer shall give prompt written notice
thereof to the Rating Agencies.
(b) Subject to the provisions of Section 9.3, the Trust
Collateral Agent shall not resign from the obligations and duties imposed on it
by this Agreement as Trust Collateral Agent and successor Servicer except (i)
upon a determination that by reason of a change in legal requirements the
performance of its duties under this Agreement would cause it to be in violation
of such legal requirements in a manner which would have a material adverse
effect on the Trust Collateral Agent and the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or a Note Majority (if an
Insurer Default shall have occurred and be continuing) does not elect to waive
the obligations of the Trust Collateral Agent to perform the duties which render
it legally unable to act or to delegate those duties to another Person or (ii)
the Trust Collateral Agent is no longer in the business of providing servicing
and/or administrative services of the type contemplated herein (any such
determination shall be evidenced by an Officer's Certificate to such effect
delivered to the Insurer and the Trust Collateral Agent) or (iii) subject to
paragraph (c) below, upon 30 days written notice to the Insurer, the Trust
Collateral Agent, the Owner Trustee and the Servicer. Any such determination
permitting the resignation of the Trust Collateral Agent pursuant to clause (i)
above shall be evidenced by an Opinion of Counsel to such effect delivered and
acceptable to the Servicer, the Owner Trustee and the Insurer (unless an Insurer
Default shall have occurred and be continuing). No resignation of the Trust
Collateral Agent shall become effective until, so long as no Insurer Default
shall have occurred and be continuing, an entity acceptable to the Insurer shall
have assumed the responsibilities and obligations of the Trust Collateral Agent
or, if an Insurer Default shall have occurred and be continuing a Person that is
an Eligible Sub-Servicer and an entity that satisfies the eligibility
requirements set forth in Section 6.11 of the Indenture shall have assumed the
responsibilities and obligations of the Trust Collateral Agent; provided,
however, that, subject to paragraph (c) below, in the event a successor servicer
is not appointed within 30 days after the Trust Collateral Agent has given
notice of its resignation and has provided the Opinion of Counsel required by
this Section 9.6, the Trust Collateral Agent may petition a court for the
appointment of a successor Trust Collateral Agent. Upon the resignation of the
Trust Collateral Agent, the Trust Collateral Agent shall give prompt written
notice thereof to the Rating Agencies.
ARTICLE X
DEFAULT
SECTION 10.1. Servicer Termination Event. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination Event"
(whatever the reason for such Servicer Termination Event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) Any failure by the Servicer to deliver, or cause to be
delivered by any Sub-Servicer, to the Trust Collateral Agent for distribution to
Noteholders or deposit in the Spread
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Account any proceeds or payment required to be so delivered under the terms of
this Agreement (including deposits of the Purchase Amount) that continues
unremedied for a period of two Business Days (one Business Day with respect to
payment of Purchase Amounts) after written notice is received by the Servicer
from the Trust Collateral Agent or (unless an Insurer Default shall have
occurred and be continuing) the Insurer or after discovery of such failure by a
Responsible Officer of the Servicer (but in no event later than five Business
Days after the Servicer is required to make such delivery or deposit);
(b) Any failure by the Servicer to observe or perform any
other of the covenants or agreements on the part of the Servicer in this
Agreement, which failure (i) materially and adversely affects the rights of
Noteholders (determined without regard to the availability of funds under the
Note Policy) or of the Insurer (unless an Insurer Default shall have occurred
and be continuing), and (ii) continues unremedied for a period of thirty days
after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trust Collateral Agent,
or to the Servicer and the Trust Collateral Agent by the Insurer (or, if an
Insurer Default has occurred and is continuing, Noteholders evidencing in the
aggregate not less than 25% of the aggregate outstanding Principal Balance of
the Notes); or
(c) The entry of a decree or order for relief by a court or
regulatory authority having jurisdiction in respect of the Servicer in an
involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or another present or future, federal bankruptcy, insolvency or similar
law, or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer or of any substantial
part of its property or ordering the winding up or liquidation of the affairs of
the Servicer or the commencement of an involuntary case under the federal
bankruptcy laws, as now or hereinafter in effect, or another present or future
federal or state bankruptcy, insolvency or similar law and such case is not
dismissed within 60 days; or
(d) The commencement by the Servicer of a voluntary case under
the federal bankruptcy laws, as now or hereafter in effect, or any other present
or future, federal or state, bankruptcy, insolvency or similar law, or the
consent by the Servicer to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or of any substantial part of its property or
the making by the Servicer of an assignment for the benefit of creditors or the
failure by the Servicer generally to pay its debts as such debts become due or
the taking of corporate action by the Servicer in furtherance of any of the
foregoing; or
(e) Any representation, warranty or statement of the Servicer
made in this Agreement or any certificate, report or other writing delivered
pursuant hereto shall prove to be incorrect in any material respect as of the
time when the same shall have been made, and the incorrectness of such
representation, warranty or statement has a material adverse effect on the
interests of the Trust, the Insurer or the Noteholders (or of the Seller if NAFI
is the Servicer) in the Receivables (determined without regard to the
availability of funds under the Note Policy) and, within 30 days after written
notice thereof shall have been given to the Servicer by the Trust Collateral
Agent or the Insurer (or, if an Insurer Default shall have occurred and be
continuing, a
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Noteholder), the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured; or
(f) (x) an Insurance Agreement Event of Default or (y) under
any other Insurance and Indemnity Agreement relating to any Series (as defined
in the Insurance Agreement) an Event of Default thereunder shall have occurred;
(g) The Servicer fails to deliver the report required to be
delivered by the Servicer pursuant to Section 4.12 and such failure remains
unremedied for a period of five days; or
(h) A claim is made under the Note Policy.
SECTION 10.2. Consequences of a Servicer Termination Event. If
a Servicer Termination Event shall occur, then, and in each and every such case,
so long as such Servicer Termination Event shall not have been remedied, the
Trust Collateral Agent may, with the written consent of the Insurer (unless an
Insurer Default has occurred and is continuing), and at the written direction of
the Insurer (or, if an Insurer Default has occurred and is continuing,
Noteholders evidencing in the aggregate not less than 51% of the aggregate
outstanding Principal Balance of the Notes), the Trust Collateral Agent shall,
by notice in writing to the Servicer, the Seller and the Back-up Servicer, (i)
terminate all of the rights and obligations of the Servicer under this Agreement
and in and to any Receivables and the proceeds thereof, subject to compensation,
rights of reimbursement, indemnity and limitation on liability to which the
Servicer is then entitled and the rights of indemnity to which the Trust
Collateral Agent and the Insurer are then entitled pursuant to Section 9.04
hereof, and (ii) subject to 10.03, appoint the Back-up Servicer as the successor
Servicer. Such notice shall specify, to the extent possible, the timing and
method of transition of the servicing of the Receivables from the Servicer to
the Back-up Servicer or another successor Servicer appointed pursuant to Section
10.03. On and after the receipt by the Servicer of such written notice and upon
the effective date of the transfer to the Back-up Servicer or such other
successor Servicer specified in such notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Notes or the
Receivables or otherwise, shall pass to and be vested in the Back-up Servicer or
such other successor Servicer, pursuant to and under this Section; and, without
limitation, such Person is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, an attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Receivables and related documents, or otherwise. The Servicer agrees to
cooperate with such Person in effecting the termination of the Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to such party for administration by is of all cash amounts which shall
thereafter be received with respect to the Receivables.
The Trust Collateral Agent shall not be charged with knowledge
of any event referred to in clauses (a) through (f) above unless a Responsible
Officer of the Trust Collateral Agent at the Corporate Trust Office obtains
actual knowledge of such event or receives written
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notice of such event from the Servicer, the Insurer or from a Noteholder. The
Trust Collateral Agent promptly shall send written notice to each Rating Agency
and the Insurer of each Servicer Termination Event of which it is charged with
knowledge in accordance with the preceding sentence.
If the Servicer is terminated pursuant to this Section 10.02,
then the Servicer shall bear all of the costs and expenses of transferring the
duties and obligations of the Servicer to a successor Servicer and except as
otherwise agreed by the Insurer such costs and expenses shall not be
reimbursable from the Trust Property nor payable by the Seller or the Trust
Collateral Agent. To the extent not borne by the Servicer as described above,
such costs and expenses (including attorney's fees and expenses) shall be borne
by the Trust Property in accordance with Section 5.7(b)(ix).
SECTION 10.3. The successor Servicer is authorized and
empowered by this Agreement to execute and deliver, on behalf of the terminated
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Receivables and the Other Conveyed
Property and related documents to show the Trust as lienholder or secured party
on the related Lien Certificates, or otherwise. The terminated Servicer agrees
to cooperate with the successor Servicer in effecting the termination of the
responsibilities and rights of the terminated Servicer under this Agreement,
including, without limitation, the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
terminated Servicer for deposit, or have been deposited by the terminated
Servicer, in the Collection Account or thereafter received with respect to the
Receivables and the delivery to the successor Servicer of all Receivable Files,
Monthly Records and a computer tape in readable form as of the most recent
Business Day containing all information necessary to enable the successor
Servicer or a successor Servicer to service the Receivables and the Other
Conveyed Property. If requested by the Controlling Party, the successor Servicer
shall terminate the Lockbox Agreement and direct the Obligors to make all
payments under the Receivables directly to the successor Servicer (in which
event the successor Servicer shall process such payments in accordance with
Section 4.2(e)), or to a lockbox established by the successor Servicer at the
direction of the Controlling Party, at the terminated Servicer's expense. The
terminated Servicer shall grant the Trust Collateral Agent, the successor
Servicer and the Controlling Party reasonable access to the terminated
Servicer's premises at the terminated Servicer's expense.
SECTION 10.4. Appointment of Successor.
On and after (i) the time the Servicer receives a notice of
termination pursuant to Section 10.2, (ii) upon non-extension of the servicing
term as referred to in Section 4.14, or (iii) upon the resignation of the
Servicer pursuant to Section 9.5, the Back-up Servicer (unless the Insurer shall
have exercised its option pursuant to Section 10.3(b) to appoint an alternate
successor Servicer) shall be the successor in all respects to the Servicer in
its capacity as servicer under this Agreement and the transactions set forth or
provided for in this Agreement, and shall be subject to all the rights,
responsibilities, restrictions, duties, liabilities and termination
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provisions relating thereto placed on the Servicer by the terms and provisions
of this Agreement except as otherwise stated herein. The Trust Collateral Agent
and such successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession. If a successor Servicer is
acting as Servicer hereunder, it shall be subject to term-to-term servicing as
referred to in Section 4.14 and to termination under Section 10.2 upon the
occurrence of any Servicer Termination Event applicable to it as Servicer.
SECTION 10.5. The Insurer, or in the event that an Insurer
Default shall have occurred and be continuing, a Note Majority, may exercise at
any time its right to appoint as successor to the Servicer a Person other than
the Person serving as Trust Collateral Agent at the time, and (without limiting
its obligations under the Note Policy) shall have no liability to the Trust
Collateral Agent, NAFI, the Seller, the Person then serving as successor
servicer, any Noteholders or any other Person if it does so. Notwithstanding the
above, if the Trust Collateral Agent shall be legally unable or unwilling to act
as Servicer, and an Insurer Default shall have occurred and be continuing, a
Note Majority may petition a court of competent jurisdiction to appoint any
Eligible Sub-Servicer as the successor to the Servicer. Pending appointment
pursuant to the preceding sentence, the Trust Collateral Agent shall act as
successor Servicer unless it is legally unable to do so, in which event the
outgoing Servicer shall continue to act as Servicer until a successor has been
appointed and accepted such appointment. Subject to Section 9.6, no provision of
this Agreement shall be construed as relieving the Trust Collateral Agent of its
obligation to succeed as successor Servicer upon the termination of the Servicer
pursuant to Section 10.2, the resignation of the Servicer pursuant to Section
9.6 or the non-extension of the servicing term of the Servicer, as referred to
in Section 4.14. If upon the termination of the Servicer pursuant to Section
10.2 or the resignation of the Servicer pursuant to Section 9.6, the Insurer or
in the event that an Insurer Default shall have occurred and be continuing, a
Note Majority, appoints a third party to serve as Servicer other than the Trust
Collateral Agent, the Trust Collateral Agent shall not be relieved of its duties
as successor Servicer hereunder. If the Back-up Servicer refuses or is unable to
act as successor Servicer hereunder, the Trust Collateral Agent may, if it shall
be unwilling to so act, or shall, if it is unable to so act, appoint, or
petition a court of competent jurisdiction to appoint, any experienced servicer
of motor vehicle installment sales contracts and notes having a net worth of not
less than $10,000,000 as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer hereunder. The Trust Collateral Agent shall obtain the prior
written consent of the Insurer (unless an Insurer Default has occurred and is
continuing) before appointing a successor Servicer other than the Back-up
Servicer, and any successor Servicer other than the Back-up Servicer shall be
satisfactory to the Insurer (unless an Insurer Default has occurred and is
continuing). Pending appointment of a successor to the Servicer hereunder, the
Trust Collateral Agent shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Trust Collateral Agent may
make such arrangements for the compensation of such successor out of payments on
Receivables as it and such successor shall agree; provided however, that no such
compensation to such successor Servicer shall be in excess of that permitted the
Servicer hereunder unless (A) the Trust Collateral Agent and the Insurer (or if
an Insurer Default has occurred and is continuing, holders of Notes evidencing a
majority of the aggregate outstanding Principal Amount of the Notes) agree in
writing to a larger Servicing Fee and (B) each Rating Agency delivers a letter
to the Trust Collateral Agent to the effect that
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such larger Servicing Fee will not result in a reduction or the withdrawal of
the rating assigned by such Rating Agency to the Notes; and provided further,
however, that the Servicing Fee to a successor Servicer, including the Trust
Collateral Agent, shall not exceed a monthly fee equal to 1/12th of the product
of (i) the aggregate amount of the Outstanding Principal Balances of all
Receivables outstanding as of the last day of the related Due Period and (ii)
two percent (2%). The Seller, the Trust Collateral Agent, any Subservicer and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession.
If the Trust Collateral Agent shall succeed to the Servicer's
duties as Servicer of the Receivables as provided herein, it shall do so in its
individual capacity and not in its capacity as Trust Collateral Agent. In the
event that the Trust Collateral Agent shall not seek to appoint a successor
Servicer within three months of its succession to the Servicer's duties as
servicer, it shall resign as Trust Collateral Agent pursuant to Section 9.6 and
the Seller shall, with the written consent of the Insurer (unless an Insurer
Default shall have occurred and be continuing), appoint, or the Trust Collateral
Agent shall petition a court to appoint, a successor trust collateral agent. To
the extent a successor Servicer is appointed, the Trust Collateral Agent shall
not be liable for the acts or omissions of such successor Servicer.
SECTION 10.6. Notification to Noteholders and Rating Agencies.
Upon any termination of, or appointment of a successor to, the Servicer, the
Trust Collateral Agent shall give prompt written notice thereof to each
Noteholder and Rating Agency.
SECTION 10.7. Waiver of Past Defaults. So long as no Insurer
Default shall have occurred and be continuing, the Insurer (or, if an Insurer
Default shall have occurred and be continuing, the Note Majority) may, on behalf
of all Noteholders, waive any default by the Servicer in the performance of its
obligations hereunder and its consequences. Upon any such waiver of a past
default, such default shall cease to exist, and any Servicer Termination Event
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto. Written notice of such waiver shall be
given promptly to each Rating Agency.
SECTION 10.8. Termination of Trust Collateral Agent. If any of
the following events occur and shall be continuing, the Insurer (so long as an
Insurer Default shall not have occurred and be continuing), or, in the event
that an Insurer Default has occurred and is continuing, the Note Majority, upon
notice to the Noteholders, may terminate all of the duties of the Trust
Collateral Agent under this Agreement:
(i) the Trust Collateral Agent shall cease to meet the
eligibility requirements for the Indenture Trustee as set forth in
Section 6.11 of the Indenture and shall fail to resign after written
request therefor by the Insurer, or
(ii) the Trust Collateral Agent shall become incapable of
acting or shall be adjudged a bankrupt or insolvent, or a receiver of
the Trust Collateral Agent or of its property shall be appointed, or
any public officer shall take charge or control of the Trust Collateral
Agent or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation or
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(iii) the Trust Collateral Agent has failed to perform its
duties hereunder.
On or after the receipt by the Trust Collateral Agent of such
written notice, all authority, power, obligations and responsibilities of the
Trust Collateral Agent under this Agreement, whether with respect to the Notes
or the Other Conveyed Property or otherwise, automatically shall pass to, be
vested in and become obligations and responsibilities of such other successor
trust collateral agent appointed by the Controlling Party. Nothing contained
herein shall be deemed to release the Trust Collateral Agent from any
obligation.
The Insurer (or if an Insurer Default shall have occurred and
be continuing, Noteholders holding Notes evidencing in the aggregate a majority
of the outstanding Principal Balance of the Notes) at any time may remove the
Trust Collateral Agent and appoint a successor trust collateral agent by written
instrument or instruments, in triplicate, signed by the Insurer or such Holders,
as the case may be, or their attorneys-in-fact duly authorized, one complete set
of which instruments shall be delivered to the Seller, one complete set to the
Trust Collateral Agent so removed and one complete set to the successor trust
collateral agent so appointed.
SECTION 10.9. Successor to Servicer.
(a) The Trust Collateral Agent, in its capacity as successor
to the Servicer, shall perform such duties and only such duties as are
specifically set forth in this Agreement with respect to the assumption of any
servicing duties, including, without limitation, to supervise, verify, monitor
or administer the performance of the Servicer and no implied covenants or
obligations shall be read into this Agreement against the Trust Collateral
Agent.
(b) In the absence of bad faith or negligence on its part, the
Trust Collateral Agent may conclusively rely as to the truth of the statements
and the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trust Collateral Agent and conforming to the
requirements of this Agreement; but in the ease of any such certificates or
opinions, which by any provision hereof are specifically required to be
furnished to the Trust Collateral Agent, the Trust Collateral Agent shall be
under a duty to examine the same and to determine whether or not they conform to
the requirements of this servicing agreement.
(c) The Trust Collateral Agent shall have no liability for any
actions taken or omitted by the Servicer.
ARTICLE XI
TERMINATION
SECTION 11.1. Optional Purchase of All Receivables.
(a) On the last day of any Due Period as of which the Pool
Balance shall be less than or equal to 10% of the Original Pool Balance plus the
aggregate principal balance of the Subsequent Receivables, if any, sold to the
Trust, as of their respective Cut-off Dates, the Seller
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each shall have the option to purchase the Owner Trust Property, other than the
Trust Accounts (with the consent of the Insurer if such purchase would result in
a claim on either Policy or would result in any amount owing to the Insurer
under the Insurance Agreement remaining unpaid); provided, however, that the
amount to be paid for such purchase (as set forth in the following sentence)
shall be sufficient to pay the full amount of principal, premium, if any, and
interest then due and payable on the Notes. To exercise such option, the Seller
shall (i) deliver written notice of such purchase to the Trust Collateral Agent
and the Servicer not later than the fifteenth day of the month next preceding
the month in which such purchase will occur, and (ii) deposit pursuant to
Section 5.6 in the Collection Account an amount equal to the aggregate Purchase
Amount for the Receivables (including Liquidated Receivables), plus the
appraised value of any other property held by the Trust, such value to be
determined by an appraiser mutually agreed upon by the Servicer, the Insurer and
the Trust Collateral Agent, and shall succeed to all interests in and to the
Trust. Written notice of the exercise of the option to purchase described in
this Section 11.1(a) shall be given to each Rating Agency by the relevant party
exercising such option
(b) Upon any sale of the assets of the Trust pursuant to
Section 9.1 of the Trust Agreement, the Servicer shall instruct the Trust
Collateral Agent to deposit the proceeds from such sale after all payments and
reserves therefrom (including the expenses of such sale) have been made (the
"Insolvency Proceeds") in the Collection Account.
(c) Notice of any termination of the Trust shall be given by
the Servicer to the Owner Trustee, the Trustee, the Trust Collateral Agent, the
Insurer and the Rating Agencies as soon as practicable after the Servicer has
received notice thereof.
ARTICLE XII
ADMINISTRATIVE DUTIES OF THE SERVICER
SECTION 12.1. Administrative Duties.
(a) Duties with Respect to the Indenture. The Servicer shall
perform all its duties and the duties of the Issuer under the Indenture. In
addition, the Servicer shall consult with the Owner Trustee as the Servicer
deems appropriate regarding the duties of the Issuer under the Indenture. The
Servicer shall monitor the performance of the Issuer and shall advise the Owner
Trustee when action is necessary to comply with the Issuer's duties under the
Indenture. The Servicer shall prepare for execution by the Issuer or shall cause
the preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Servicer shall take all necessary action that is the duty of
the Issuer to take pursuant to the Indenture, including, without limitation,
pursuant to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 5.1, 5.4, 7.3, 8.3,
9.2, 9.3, 11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
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(i) In addition to the duties of the Servicer set forth in
this Agreement or any of the Transaction Documents, the Servicer shall
perform such calculations and shall prepare for execution by the Issuer
or the Owner Trustee or shall cause the preparation by other
appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the
Issuer or the Owner Trustee to prepare, file or deliver pursuant to
this Agreement or any of the Transaction Documents or under state and
federal tax and securities laws, and at the request of the Owner
Trustee shall take all appropriate action that it is the duty of the
Issuer to take pursuant to this Agreement or any of the Transaction
Documents, including, without limitation, pursuant to Sections 2.6 and
2.11 of the Trust Agreement. In accordance with the directions of the
Issuer or the Owner Trustee, the Servicer shall administer, perform or
supervise the performance of such other activities in connection with
the Collateral (including the Transaction Documents) as are not covered
by any of the foregoing provisions and as are expressly requested by
the Issuer or the Owner Trustee and are reasonably within the
capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Transaction Documents to the contrary, the Servicer shall be
responsible for promptly notifying the Owner Trustee and the Trust
Collateral Agent in the event that any withholding tax is imposed on
the Issuer's payments (or allocations of income) to an Owner (as
defined in the Trust Agreement) as contemplated by this Agreement. Any
such notice shall be in writing and specify the amount of any
withholding tax required to be withheld by the Owner Trustee or the
Trust Collateral Agent pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the
Transaction Documents to the contrary, the Servicer shall be
responsible for performance of the duties of the Issuer or the Seller
set forth in Section 5.1(a), (b), (c) and (d) of the Trust Agreement
with respect to, among other things, accounting and reports to Owners
(as defined in the Trust Agreement). (iv) The Servicer shall perform
the duties of the Servicer specified in Section 10.2 of the Trust
Agreement required to be performed in connection with the resignation
or removal of the Owner Trustee, and any other duties expressly
required to be performed by the Servicer under this Agreement or any of
the Transaction Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into
transactions with or otherwise deal with any of its Affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer and
shall be, in the Servicer's opinion, no less favorable to the Issuer in
any material respect.
(c) Tax Matters. The Servicer shall prepare and file, on
behalf of the Seller, all tax returns, tax elections, financial statements and
such annual or other reports of the Issuer as are necessary for preparation of
tax reports as provided in Article V of the Trust Agreement, including without
limitation forms 1099 and 1066. All tax returns will be signed by the Seller.
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(d) Non-Ministerial Matters. With respect to matters that in
the reasonable judgment of the Servicer are non-ministerial, the Servicer shall
not take any action pursuant to this Article XII unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee, Trust Collateral Agent and the Insurer of the proposed action and the
Owner Trustee and, with respect to items (A), (B), (C) and (D) below, the
Insurer shall not have withheld consent or provided an alternative direction.
For the purpose of the preceding sentence, "non-ministerial matters" shall
include:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the
Receivables);
(C) the amendment, change or modification of this Agreement or
any of the Transaction Documents;
(D) the appointment of successor Note Registrars, successor
Paying Agents and successor Trustees pursuant to the Indenture or the
appointment of Successor Servicers or the consent to the assignment by
the Note Registrar, Paying Agent or Trustee of its obligations under
the Indenture; and
(E) the removal of the Trustee or the Trust Collateral Agent.
(e) Exceptions. Notwithstanding anything to the contrary in
this Agreement, except as expressly provided herein or in the other Transaction
Documents, the Servicer, in its capacity hereunder, shall not be obligated to,
and shall not, (1) make any payments to the Noteholders under the Transaction
Documents, (2) sell the Indenture Trust Property pursuant to Section 5.5 of the
Indenture, (3) take any other action that the Issuer directs the Servicer not to
take on its behalf or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.
(f) Notwithstanding anything to the contrary in this
Agreement, neither the Trust Collateral Agent nor any successor Servicer shall
be responsible for any obligations or duties of the Servicer under Section 12.1.
SECTION 12.2. Records. The Servicer shall maintain appropriate
books of account and records relating to services performed under this
Agreement, which books of account and records shall be accessible for inspection
by the Issuer and the Trust Collateral Agent at any time during normal business
hours.
SECTION 12.3. Additional Information to be Furnished to the
Issuer. The Servicer shall furnish to the Issuer and the Trust Collateral Agent
from time to time such additional information regarding the Collateral as the
Issuer and the Trust Collateral Agent shall reasonably request.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. Amendment.
(a) This Agreement may be amended from time to time by the
parties hereto, with the consent of the Trustee and the Trust Collateral Agent
(which consent may not be unreasonably withheld), with the prior written consent
of the Insurer (so long as no Insurer Default has occurred and is continuing)
but without the consent of any of the Noteholders, to cure any ambiguity, to
correct or supplement any provisions in this Agreement, to comply with any
changes in the Code, or to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement or the Insurance Agreement; provided, however, that
such action shall not adversely affect in any material respect the interests of
any Noteholder.
This Agreement may also be amended from time to time by the
parties hereto, with the consent of the Insurer, the consent of the Trustee and
the Trust Collateral Agent and the consent of the Holders of Notes evidencing
not less than a majority of the outstanding principal amount of the Notes (which
consent of such Holders of Notes given pursuant to this Section 13.1 or pursuant
to any other provision of this Agreement shall be conclusive and binding on such
Holder and on all future Holders of such securities and of any Security issued
upon the transfer thereof or in exchange thereof or in lieu thereof whether or
not notation of such consent is made upon the security) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders; provided, however, that no such amendment shall (a) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that shall be required
to be made for the benefit of the Noteholders, or (b) reduce the aforesaid
percentage of the outstanding principal amount of the Notes and the Note
Balance, the Holders of which are required to consent to any such amendment,
without the consent of the Holders of all the outstanding Notes.
Promptly after the execution of any such amendment or consent,
the Trust Collateral Agent shall furnish written notification of the substance
of such amendment or consent to each Noteholder and each Rating Agency. In
addition, a copy of the final executed amendment shall be delivered to each
Rating Agency.
It shall not be necessary for the consent of Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents (and any other
consents of Noteholders provided for in this Agreement) and of evidencing the
authorization of any action by Noteholders shall be subject to such reasonable
requirements as the Trustee or the Owner Trustee, as applicable, may prescribe,
including the establishment of record dates.
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The Owner Trustee, the Trust Collateral Agent and the Trustee
may, but shall not be obligated to, enter into any amendment which affects the
Issuer's, the Owner Trustee's, the Trust Collateral Agent's or the Trustee's, as
applicable, own rights, duties or immunities under this Agreement or otherwise.
Prior to the execution of any amendment to this Agreement, the
Trustee and the Trust Collateral Agent shall be entitled to receive and rely
conclusively upon an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement and that all conditions
precedent to the execution and delivery of such amendment have been satisfied.
(b) Notwithstanding anything to the contrary contained in
subsection 13.1(a) above, the provisions of the Agreement relating to (i) the
Spread Account Agreement, the Series 1997-1 Spread Account, the Requisite
Amount, a Trigger Event or any component definition of a Trigger Event and (ii)
any additional sources of funds which may be added to the Series 1997-1 Spread
Account or uses of funds on deposit in the Series 1997-1 Spread Account may be
amended in any respect by the Seller, the Servicer, the Insurer and the
Collateral Agent (the consent of which shall not be withheld or delayed with
respect to any amendment that does not adversely affect the Collateral Agent)
without the consent of, or notice to, the Noteholders.
SECTION 13.2. Protection of Title to Trust.
(a) The Seller shall execute and file such financing
statements and cause to be executed and filed such continuation statements, all
in such manner and in such places as may be required by law fully to preserve,
maintain and protect the interest of the Issuer and the interests of the Trust
Collateral Agent and the Insurer in the Receivables and the Other Conveyed
Property and in the proceeds thereof. The Seller shall deliver (or cause to be
delivered) to the Insurer, the Owner Trustee and the Trust Collateral Agent
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of Section 9-402(7)
of the UCC, unless it shall have given the Insurer, the Owner Trustee, the Trust
Collateral Agent and the Trustee at least thirty days' prior written notice
thereof and shall have promptly filed appropriate amendments to all previously
filed financing statements or continuation statements. Promptly upon such
filing, the Seller or the Servicer, as the case may be, shall deliver an Opinion
of Counsel in form and substance reasonably satisfactory to the Insurer, the
Trust Collateral Agent and the Trustee, stating either (A) all financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Issuer and the Trust
Collateral Agent in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or (B)
no such action shall be necessary to preserve and protect such interest.
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(c) Each of the Seller and the Servicer shall have an
obligation to give the Insurer, the Owner Trustee, the Trust Collateral Agent
and the Trustee at least 60 days' prior written notice of any relocation of its
principal executive office if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall promptly file any such amendment. The Servicer shall at all
times maintain each office from which it shall service Receivables, and its
principal executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to
each Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain or cause to be maintained, a
computer systems so that, from and after the time of sale under this Agreement
of the Receivables to the Issuer, such master computer records (including any
backup archives) that refer to a Receivable shall indicate clearly the interest
of the Trust in such Receivable and that such Receivable is owned by the Trust.
Indication of the Trust's interest in a Receivable shall be deleted from or
modified on such computer systems when, and only when, the related Receivable
shall have been paid in full or repurchased by NAFI or the Seller.
(f) If at any time the Seller or NAFI shall propose to sell,
grant a security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Trust unless such Receivable has been paid in full or repurchased by NAFI or the
Seller.
(g) Upon request, the Servicer shall furnish or cause to be
furnished to the Insurer, the Owner Trustee or to the Trustee, at any time upon
request, a list of all Receivables (by contract number and name of Obligor) then
held as part of the Trust, together with a reconciliation of such list to the
Receivables Schedule and to each of the Servicer's Certificates furnished before
such request indicating removal of Receivables from the Trust. The Trustee shall
hold any such list and Receivables Schedule for examination by interested
parties during normal business hours at the Corporate Trust Office upon
reasonable notice by such Persons of their desire to conduct an examination.
(h) The Servicer shall deliver to the Insurer, the Owner
Trustee, the Trust Collateral Agent and the Trustee:
(1) simultaneously with the execution and delivery of the
Agreement and, if required pursuant to Section 13.1, of each amendment,
an Opinion of
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Counsel stating that, in the opinion of such Counsel, in form and
substance reasonably satisfactory to the Insurer, either (A) all
financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of
the Trust and the Trustee in the Receivables, and reciting the details
of such filings or referring to prior Opinions of Counsel in which such
details are given, or (B) no such action shall be necessary to preserve
and protect such interest or (C) any action which is necessary to
preserve and protect such interest during the following 12-month
period; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cut-off Date, an Opinion of Counsel, dated as of a date
during such 90-day period, stating that, in the opinion of such
counsel, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Trust and the Trustee in the
Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no
such action shall be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.
(i) The Servicer shall permit the Trustee, the Trust
Collateral Agent, the Insurer and their respective agents, during regular
business hours and upon reasonable advance notice, to inspect and make copies of
the records regarding any Receivables or any other portion of the Receivables.
SECTION 13.3. Notices. All demands, notices and communications
upon or to the Seller, the Servicer, the Owner Trustee, the Trustee, the Insurer
or the Rating Agencies under this Agreement shall be in writing, personally
delivered, or mailed by certified mail, or sent by confirmed telecopier
transmission and shall be deemed to have been duly given upon receipt (a) in the
case of the Seller to National Financial Auto Funding Trust, One Park Place, 621
N.W. 53rd Street, Boca Raton, Florida 33487, (b) in the case of the Servicer to
National Auto Finance Company, Inc., One Park Place, 621 N.W. 53rd Street, Suite
200, Boca Raton, Florida 33487, (c) in the case of the Issuer or the Owner
Trustee, at 1100 North Market Street, Rodney Square North, Wilmington, Delaware
19890; Attention: Corporate Trust Administration, (d) in the case of the Trustee
or the Trust Collateral Agent, at 311 West Monroe Street, Chicago, Illinois
60606, (e) in the case of the Insurer, to Financial Security Assurance Inc., 350
Park Avenue, New York, New York 10022; Attention: Senior Vice President,
Surveillance (in each case in which notice or other communication to the Insurer
refers to a Servicer Termination Event, a claim on a Policy, a Deficiency Notice
pursuant to Section 5.5 of this Agreement or with respect to which failure on
the part of the Insurer to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication should also be
sent to the attention of each of the General Counsel and the Head -Financial
Guaranty Group and shall
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be marked to indicate "URGENT MATERIAL ENCLOSED") Telecopier # 212-339-3518, (f)
in the case of Moody's, to Moody's Investors Service, Inc., ABS Monitoring
Department, 99 Church Street, New York, New York 10007, Telecopier #
212-553-0344, and (g) in the case of Standard & Poor's, to Standard & Poor's
Ratings Group, 25 Broadway - 15th Floor, New York, New York 10004, Attention:
Asset Backed Surveillance Department, Telecopier # 212-208-1582. Any notice
required or permitted to be mailed to a Noteholder shall be given by first class
mail, postage prepaid, at the address of such Holder as shown in the Note
Register, as applicable. Any notice so mailed within the time prescribed in the
Agreement shall be conclusively presumed to have been duly given, whether or not
the Noteholder shall receive such notice.
SECTION 13.4. Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 8.4 and 9.3 and as provided in
the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Seller or the Servicer without the
prior written consent of the Owner Trustee, the Trust Collateral Agent, the
Trustee and the Insurer (or if an Insurer Default shall have occurred and be
continuing the Holders of Notes evidencing not less than 66% of the principal
amount of the outstanding Notes).
SECTION 13.5. Limitations on Rights of Others. The provisions
of this Agreement are solely for the benefit of the parties hereto and for the
benefit of the Trustee and the Noteholders, as third-party beneficiaries. The
Insurer and its successors and assigns shall be a third-party beneficiary to the
provisions of this Agreement, and shall be entitled to rely upon and directly
enforce such provisions of this Agreement so long as no Insurer Default shall
have occurred and be continuing. Except as expressly stated otherwise herein,
any right of the Insurer to direct, appoint, consent to, approve of, or take any
action under this Agreement, shall be a right exercised by the Insurer in its
sole and absolute discretion. The Insurer may disclaim any of its rights and
powers under this Agreement (but not its duties and obligations under the Note
Policy) upon delivery of a written notice to the Owner Trustee. Nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Owner Trust Property
or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 13.6. Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 13.7. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
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SECTION 13.8. Headings. The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 13.9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 13.10. Assignment to Trustee. The Seller hereby
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by the Issuer to the Trustee pursuant to the Indenture for the
benefit of the Noteholders and the Insurer of all right, title and interest of
the Issuer in, to and under the Receivables and/or the assignment of any or all
of the Issuer's rights and obligations hereunder to the Trustee.
SECTION 13.11. Nonpetition Covenants. (a) Notwithstanding any
prior termination of this Agreement, the Servicer and the Seller shall not,
prior to the date which is one year and one day after the termination of this
Agreement with respect to the Issuer, acquiesce, petition or otherwise invoke or
cause the Issuer to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Issuer under any
federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement,
the Servicer shall not, prior to the date that is one year and one day after the
termination of this Agreement with respect to the Seller, acquiesce to, petition
or otherwise invoke or cause the Seller to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Seller under any federal or state bankruptcy, insolvency or similar law,
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator,
or other similar official of the Seller or any substantial part of its property,
or ordering the winding up or liquidation of the affairs of the Seller.
SECTION 13.12. Limitation of Liability of Owner Trustee and
Trustee.
(a) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Owner Trustee shall be
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subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Chase Manhattan Bank Delaware not in
its individual capacity but solely in its capacity as Trustee of the Seller and
in no event shall Chase Manhattan Bank Delaware in its individual capacity have
any liability for the representations, warranties, covenants, agreements or
other obligations of the Seller hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Seller.
(c) Notwithstanding anything contained herein to the contrary,
this Agreement has been executed and delivered by Harris Trust and Savings Bank
not in its individual capacity but solely as Trust Collateral Agent and in no
event shall Harris Trust and Savings Bank, have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.
(d) In no event shall Wilmington Trust Company, in any of its
capacities hereunder, be deemed to have assumed any duties of the Owner Trustee
under the Delaware Business Trust Statute, common law, or the Trust Agreement.
SECTION 13.13. Independence of the Servicer. For all purposes
of this Agreement, the Servicer shall be an independent contractor and shall not
be subject to the supervision of the Issuer, the Trust Collateral Agent or the
Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized by this
Agreement, the Servicer shall have no authority to act for or represent the
Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.
SECTION 13.14. No Joint Venture. Nothing contained in this
Agreement (i) shall constitute the Servicer and either of the Issuer or the
Owner Trustee as members of any partnership, joint venture, association,
syndicate, unincorporated business or other separate entity, (ii) shall be
construed to impose any liability as such on any of them or (iii) shall be
deemed to confer on any of them any express, implied or apparent authority to
incur any obligation or liability on behalf of the others.
SECTION 13.15. Financial Security as Controlling Party. Each
Noteholder by purchase of the Notes held by it acknowledges that as partial
consideration of the issuance of the Note Policy, the Insurer shall have certain
rights hereunder for so long as no Insurer Default shall have occurred and be
continuing. So long as an Insurer Default has occurred and is continuing, any
provision giving the Insurer the right to direct, appoint or consent to, approve
of, or take any action under this Agreement shall be inoperative during the
period of such Insurer Default and such right shall instead vest in the Trust
Collateral Agent acting at the written direction of the Holders of Notes. The
Insurer may disclaim any of its rights and powers under this Agreement (but not
its duties and obligations under the Note Policy) upon delivery of a written
notice to the
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Trust Collateral Agent. The Insurer may give or withhold any consent hereunder
in its sole and absolute discretion.
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IN WITNESS WHEREOF, the parties hereto have caused this Sale
and Servicing Agreement to be duly executed and delivered by their respective
duly authorized officers as of the day and the year first above written.
NATIONAL AUTO FINANCE 1997-1 TRUST,
by the Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee on behalf of the Trust,
By:
------------------------------------
Name:
Title:
NATIONAL FINANCIAL AUTO FUNDING TRUST, Seller,
by Chase Manhattan Bank Delaware, not in its
individual capacity but solely as Trustee of
National Financial Auto Funding Trust,
By:
------------------------------------
Name:
Title:
NATIONAL AUTO FINANCE COMPANY, INC.,
in its individual capacity and as Servicer,
By:
------------------------------------
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity but solely as
Trust Collateral Agent,
By:
------------------------------------
Name:
Title:
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SCHEDULE A
SCHEDULE OF RECEIVABLES
<PAGE> 91
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Trust Collateral Agent
on behalf of the Noteholders and the Insurer as of the Closing Date with respect
to the Initial Receivables transferred to the Trust on the Closing Date and as
of each Subsequent Transfer Date with respect to the Subsequent Receivables
transferred to the Trust on such Subsequent Transfer Date (unless another date
or time period is otherwise specified or indicated in the particular
representation or warranty):
1. immediately prior to the Closing Date or the Subsequent Transfer
Date, as the case may be, the Seller had a valid and enforceable security
interest in the related Financed Vehicle, and such security interest had been
duly perfected and was prior to all other present and future liens and security
interests (except future tax liens and liens that, by statute, may be granted
priority over previously perfected security interests) that now exist or may
hereafter arise, and the Seller had the full right to assign such security
interest to the Trust Collateral Agent;
2. on and after the Closing Date or the Subsequent Transfer Date, as
the case may be, there shall exist under the Receivable a valid, subsisting and
enforceable first priority perfected security interest in the Financed Vehicle
securing such Receivable (other than, as to the priority of such security
interest, any statutory lien arising by operation of law after the Closing Date
or the Subsequent Transfer Date, as the case may be, which is prior to such
interest) and at such time as enforcement of such security interest is sought
there shall exist a valid, subsisting and enforceable first priority perfected
security interest in such Financed Vehicle in favor of the Trust Collateral
Agent (other than, as to the priority of such security interest, any statutory
lien arising by operation of law after the Closing Date or the Subsequent
Transfer Date, as the case may be, which is prior to such interest);
3. no Receivable has been sold, assigned or pledged to any other Person
other than an endorsement to the Servicer for purposes of servicing or any such
pledge has been released; immediately prior to the transfer and assignment
herein contemplated, the Seller has good and marketable title thereto free and
clear of any lien, encumbrance, equity, pledge, charge, claim or security
interest and is the sole owner thereof and has full right to transfer such
Receivable to the Trust Collateral Agent. No Dealer has a participation in, or
other right to receive, proceeds of any Receivable. None of NAFI, Funding Trust
II nor the Seller has taken any action to convey any right to any Person that
would result in such Person having a right to payments received under the
related insurance policies or Dealer Agreements or to payments due under such
Receivable;
4. upon the transfers pursuant to Sections 2.1 and 2.2, the Trust
Collateral Agent will have a first priority ownership or security interest in
each such Receivable free and clear of any encumbrance, lien, pledge, charge,
claim, security interest or rights of others; the purchase of each such
Receivable by NAFI from a Dealer was not an extension of financing to such
Dealer;
<PAGE> 92
5. no such Receivable is delinquent for more than thirty days in
payment as to any scheduled payment;
6. there is no lien against any related Financed Vehicle for delinquent
taxes;
7. there is no right of rescission, offset, defense or counterclaim to
the obligation of the related Obligor to pay the unpaid principal or interest
due under such Receivable; the operation of the terms of such Receivable or the
exercise of any right thereunder will not render such Receivable unenforceable
in whole or in part or subject to any right of rescission, offset, defense or
counterclaim, and no such right of rescission, offset, defense or counterclaim
has been asserted;
8. no Receivable is assumable by another Person in a manner which would
release the Obligor thereon from such Obligor's obligations to the Seller with
respect to such Receivable;
9. there are no prior liens or claims for work, labor or material
affecting any related Financed Vehicle which are or may become a lien prior to
or equal with the security interest granted by such Receivable;
10. each such Receivable, and the sale of the Financed Vehicle securing
such Receivable, where applicable, complied, at the time it was made and as of
the Closing Date or related Subsequent Transfer Date, as applicable, in all
material respects with applicable state and federal laws (and regulations
thereunder), including, without limitation, usury, disclosure and consumer
protection laws, equal credit opportunity, fair credit reporting,
truth-in-lending or other similar law, the Federal Trade Commission Act, and
applicable state laws regulating retail installment sales contracts and loans in
general and motor vehicle retail installment sales contracts and loans in
particular, and the transfer of such Receivable to the Trust will not violate
any such laws;
11. each such Receivable is a legal, valid and binding obligation of
the Obligor thereunder and is enforceable in accordance with its terms, except
only as such enforcement may be limited by laws affecting the enforcement of
creditors' rights generally whether enforcement is sought in a proceeding in
equity or at law, and all parties to such Receivable had full legal capacity to
execute such Receivable and all documents related thereto and to grant the
security interest purported to be granted thereby at the time of execution and
grant;
12. as of the Closing Date or such Subsequent Transfer Date, as the
case may be, the terms of each such Receivable have not been impaired, waived,
altered or modified in any respect, except by written instruments that are part
of the Receivable Documents, and no such Receivable has been satisfied,
subordinated or rescinded;
13. at the time of origination of each such Receivable, the proceeds of
such Receivable were fully disbursed, there is no requirement for future
advances thereunder, and all fees and expenses in connection with the
origination of such Receivable have been paid;
<PAGE> 93
14. there is no default, breach, violation or event of acceleration
existing under any such Receivable (except payment delinquencies permitted by
paragraph 5 above) and no event which, with the passage of time or with notice
or with both, would constitute a default, breach, violation or event of
acceleration under any such Receivable or would otherwise affect the value or
marketability of such contract; NAFI and the Seller have not waived any such
default, breach, violation or event of acceleration; and as of the applicable
Cut-off Date, the related Financed Vehicle has not been repossessed;
15. at the origination date of each such Receivable, the related
Financed Vehicle was covered by a comprehensive and collision insurance policy
(a) in an amount at least equal to the lesser of (i) the actual cash value of
the related Financed Vehicle or (ii) the unpaid balance owing of such
Receivable, less the related Unearned Finance Charge, (b) naming NAFI as a loss
payee and (c) insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by comprehensive and
collision coverage; each Receivable requires the Obligor to maintain physical
loss and damage insurance, naming NAFI as an additional insured party;
16. each such Receivable was acquired by NAFI from a Dealer with which
it ordinarily does business; such Dealer had full right to assign to NAFI such
Receivable and the security interest in the related Financed Vehicle and the
Dealer's assignment thereof to NAFI is legal, valid and binding and NAFI had
full right to assign to the Seller such Receivable and the respective security
interest in the related Financed Vehicle and NAFI's respective assignment
thereof to the Seller is legal, valid and binding;
17. each such Receivable contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate for the
realization against the related Financed Vehicle of the benefits of the
security;
18. scheduled payments under each such Receivable are due monthly (or,
in the case of the first payment, no later than the forty-fifth day after the
date of the Receivable) in substantially equal amounts to maturity (other than
with respect to those Receivables designated as balloon contracts on the related
Receivable Schedule), and will be sufficient to fully amortize such Receivable
at maturity, assuming that each scheduled payment is made on its Due Date; such
scheduled payments are applicable only to payment of principal and interest on
such Receivable and not to the payment of any insurance premiums (although the
proceeds of the extension of credit on such Receivable may have been used to pay
insurance premiums); and the original term to maturity of each such Receivable
was not more than 60 months;
19. the collection practices used with respect to each such Receivable
have been in all material respects legal, proper, prudent and customary in the
automobile installment sales contract or installment loan servicing business;
20. there is only one original of each such Receivable, the Servicer or
a Sub-Servicer is currently in possession of the Receivable Documents for such
Receivable and there are no custodial agreements in effect adversely affecting
the rights of the Seller to make the deliveries required hereunder on the
Closing Date or the Subsequent Transfer Date, as the case may be;
<PAGE> 94
21. as of the Cut-off Date or Subsequent Cut-off Date, as applicable,
no Obligor was the subject of a current bankruptcy proceeding;
22. with respect to each Due Period, the aggregate of the interest due
on all the Receivables in such Due Period from scheduled payments is in excess
of the sum of (i) the Servicing Fee due and any fees due to the Trust Collateral
Agent and the Insurer, each with respect to such Due Period and (ii) the amount
of interest payable on the Notes with respect to such Due Period, in each case
assuming that each scheduled payment is made on its Due Date;
23. the Receivables constitute "chattel paper" within the meaning of
the UCC as in effect in the applicable jurisdiction and all filings (including
without limitation, UCC filings) required to be made and all actions required to
be taken or performed by any Person in any jurisdiction to give the Trust
Collateral Agent a first priority perfected lien on, or ownership interest in,
the Receivables and the proceeds thereof and the remaining Trust Property have
been made, taken or performed;
24. the information regarding such Receivables set forth in the
applicable Receivable Schedule is true and correct in all material respects at
the applicable Cut-off Date and the Closing Date or Subsequent Closing Date, as
applicable; each Receivable was originated in the United States of America and
at the time of origination, materially conformed to all requirements of the NAFI
underwriting policies and guidelines then in effect; and no Obligor is the
United States of America or any state or any agency, department, subdivision or
instrumentality thereof;
25. by the Closing Date and prior to each Subsequent Transfer Date, as
applicable, NAFI will have caused the portions of NAFI's servicing records
relating to the Receivables to be clearly and unambiguously marked to show that
the Receivables constitute part of the Trust Property and are owned by the Trust
in accordance with the terms of this Agreement;
26. the computer tape or listing made available by NAFI to the Trust
Collateral Agent on the Closing Date and on each Subsequent Transfer Date was
complete and accurate as of the applicable Cut-off Date, and includes a
description of the same Receivables that are described in the applicable
Receivable Schedule;
27. no Receivable was originated in, or is subject to the laws of, any
jurisdiction, the laws of which would make unlawful, void or voidable the sale,
transfer and assignment of such Receivable under this Agreement or the
Subsequent Transfer Agreement, as applicable, or pursuant to transfers of the
Notes. The Seller has not entered into any agreement with any account debtor
that prohibits, restricts or conditions the assignment of any portion of the
Receivables;
28. no selection procedures adverse to the Noteholders or to the
Insurer have been utilized in selecting such Receivable from all other similar
Receivables originated by NAFI;
29. as of the Initial Cut-off Date, the APR of the Initial Receivables
was approximately 19.38% and the weighted average remaining scheduled maturity
on the Initial
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Receivables was approximately 50.31 months and the percentage of the aggregate
outstanding balance of the Initial Receivables relating to the financing of used
Financed Vehicles was 80.45%. The final scheduled payment date on the Initial
Receivable with the latest maturity is June 29, 2002. Each Receivable amortizes
based on a Simple Interest Method or Actuarial Method; and
30. no Receivable provides for a prepayment penalty.
<PAGE> 96
EXHIBIT 5.10
FORM OF STATEMENT TO NOTEHOLDERS
<PAGE> 97
EXHIBIT A
SUBSEQUENT TRANSFER AGREEMENT
TRANSFER No. ___ OF SUBSEQUENT Receivables pursuant to a Sale and
Servicing Agreement dated as of July __, 1997 (the "Sale and Servicing
Agreement"), among NATIONAL AUTO FINANCE 1997-1 TRUST, a Delaware business trust
(the "Issuer"), NATIONAL FINANCIAL AUTO FUNDING TRUST, a Delaware business trust
(the "Seller"), NATIONAL AUTO FINANCE COMPANY, INC., a Delaware corporation (the
"Servicer"), and HARRIS TRUST AND SAVINGS BANK, an Illinois banking corporation,
not in its individual capacity, but solely as Trust Collateral Agent (the "Trust
Collateral Agent").
W I T N E S S E T H:
WHEREAS pursuant to the Sale and Servicing Agreement, the Seller wishes
to convey the Subsequent Receivables to the Issuer; and
WHEREAS, the Issuer is willing to accept such conveyance subject to the
terms and conditions hereof.
NOW, THEREFORE, the Issuer, the Seller, the Servicer and the Trust
Collateral Agent hereby agree as follows:
1. Defined Terms. Capitalized terms used herein shall have the meanings
ascribed to them in the Sale and Servicing Agreement unless otherwise defined
herein.
"Subsequent Cut-off Date" shall mean, with respect to the Subsequent
Receivables conveyed hereby, _______________, 1997.
"Subsequent Transfer Date" shall mean. with respect to the Subsequent
Receivables conveyed hereby, _____________, 1997.
2. Receivables Schedule. Annexed hereto is a supplement to Schedule A
to the Sale and Servicing Agreement listing the Receivables that constitute the
Subsequent Receivables to be conveyed pursuant to this Agreement on the
Subsequent Transfer Date and is hereby incorporated in and made a part of this
Transfer Agreement and the Sale and Servicing Agreement.
3. Conveyance of Subsequent Receivables. In consideration of the
Issuer's delivery to or upon the order of the Seller of $____________, the
Seller does hereby sell, transfer, assign, set over and otherwise convey to the
Issuer, without recourse (except as expressly provided in the Sale and Servicing
Agreement) and does hereby grant to the Trustee, in trust for exclusive use and
benefit of all present and future Noteholders and the Insurer, all right, title
and interest of the Seller in and to the following, whether now owned or
hereafter acquired:
<PAGE> 98
(a) the Subsequent Receivables and all moneys received thereon, on and
after the related Subsequent Cut-off Date (including amounts due on or before
the Subsequent Cut-off Date but received by NAFI, the Seller or the Issuer on or
after the Subsequent Cut-off Date);
(b) any proceeds and the right to receive proceeds with respect to the
Subsequent Receivables from claim and the right to receive proceeds on any
physical damage, credit life or disability insurance policies or other policies
covering Financed Vehicles or Obligors, including rebating of insurance premiums
relating to the Receivables, and any proceeds from the liquidation of the
Subsequent Receivables;
(c) all rights of the Seller against the Dealers pursuant to Dealer
Agreements or against Originators pursuant to Originator Agreements;
(d) the related Receivables Files; and any and all other documents that
NAFI keeps on file in accordance with its customary procedures relating to the
Receivables, the Obligors or the Financed Vehicles;
(e) its rights and benefits, but none of its obligations or burdens,
under the Subsequent Transfer Agreement, including the delivery requirements,
representations and warranties and the cure and repurchase obligations of NAFI
under the Subsequent Purchase Agreement, on or after the Subsequent Cut-off
Date; and
(f) the proceeds of any and all of the foregoing.
4. Representations and Warranties of the Seller. The Seller hereby
represents and warrants to the Issuer as of the date of this Agreement and as of
the Subsequent Transfer Date that:
(a) Schedule of Representations. The representations and warranties set
forth on the Schedule of Representations attached hereto as Schedule B are true
and correct.
(b) Organization and Good Standing. The Seller is a Delaware business
trust duly organized, validly existing, and in good standing under the laws of
the State of Delaware, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Receivables and the Other
Conveyed Property transferred to the Trust.
(c) Due Qualification. The Seller has obtained all necessary licenses
and approvals in all jurisdictions where the failure to do so would materially
and adversely affect Seller's ability to transfer the Receivables and the Other
Conveyed Property to the Trust pursuant to this Agreement, or the validity or
enforceability of the Receivables and the Other Conveyed Property or to perform
Seller's obligations hereunder and under the Seller's Transaction Documents.
<PAGE> 99
(d) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and its Transaction Documents and to carry
out its terms and their terms, respectively; the Seller has full power and
authority to sell and assign the Receivables and the Other Conveyed Property to
be sold and assigned to and deposited with the Trust by it and has duly
authorized such sale and assignment to the Trust; and the execution, delivery
and performance of this Agreement and the Seller's Transaction Documents have
been duly authorized by the Seller.
(e) Valid Sale, Binding Obligations. This Agreement effects a valid
sale, transfer and assignment of the Receivables and the Other Conveyed
Property, enforceable against the Seller and creditors of and purchasers from
the Seller; and this Agreement and the Seller's Transaction Documents, when duly
executed and delivered, shall constitute legal, valid and binding obligations of
the Seller enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(f) No Violation. The consummation of the transactions contemplated by
this Agreement and the Transaction Documents and the fulfillment of the terms of
this Agreement and the Transaction Documents shall not conflict with, result in
any breach of any of the terms and provisions of or constitute (with or without
notice, lapse of time or both) a default under the certificate of incorporation
or by-laws of the Seller, or any indenture, agreement, mortgage, deed of trust
or other instrument to which the Seller is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than this Agreement, or violate any law, order, rule
or regulation applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Seller or any of its properties.
(g) No Proceedings. There are no proceedings or investigations pending
or, to the Seller's knowledge, threatened against the Seller, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Seller or its properties (A)
asserting the invalidity of this Agreement or any of the Transaction Documents,
(B) seeking to prevent the issuance of the Securities or the consummation of any
of the transactions contemplated by this Agreement or any of the Transaction
Documents, (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Seller of its obligations under, or the
validity or enforceability of, this Agreement or any of the Transaction
Documents, or (D) seeking to adversely affect the federal income tax or other
federal, state or local tax attributes of the Securities.
(h) Approvals. All approvals, authorizations, consents, order or other
actions of any person, corporation or other organization, or of any court,
governmental agency or body or official, required in connection with the
execution and delivery by the Seller of this
<PAGE> 100
Agreement and the consummation of the transactions contemplated hereby have been
or will be taken or obtained on or prior to the Closing Date.
(i) No Consents. The Seller is not required to obtain the consent of
any other party or any consent, license, approval or authorization, or
registration or declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement which has not already been obtained.
(j) Chief Executive Office. The chief executive office of the Seller is
at One Park Place, 621 N.W. 53rd Street, Boca Raton, Florida, 33487.
(k) Principal Balance. The aggregate Principal Balance of the
Receivables listed on the supplement to Schedule A annexed hereto and conveyed
to the Issuer pursuant to this Agreement as of the Subsequent Cut-off Date is
$____________.
(l) Contract Files. The Seller does hereby deliver to the Custodian the
original motor vehicle retail installment sale contracts and Receivables Files
for each Receivable identified in the Receivable Schedule.
5. Conditions Precedent. The obligation of the Issuer to acquire the
Receivables hereunder is subject to the satisfaction, on or prior to the
Subsequent Transfer Date, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Seller in Section 4 of this Agreement and in Section 6.1
of the Sale and Servicing Agreement shall be true and correct as of the date of
this Agreement and as of the Subsequent Transfer Date.
(b) Sale and Servicing Agreement Conditions. Each of the conditions set
forth in Section 2.2(b) to the Sale and Servicing Agreement shall have been
satisfied.
(c) Additional Information. The Seller shall have delivered to the
Issuer such information as was reasonably requested by the Issuer to satisfy
itself as to (i) the accuracy of the representations and warranties set forth in
Section 4 of this Agreement and in Section 6.1 of the Sale and Servicing
Agreement and (ii) the satisfaction of the conditions set forth in this Section
5.
6. Ratification of Agreement. As supplemented by this Agreement, the
Sale and Servicing Agreement is in all respects ratified and confirmed and the
Sale and Servicing Agreement as so supplemented by this Agreement shall be read,
taken and construed as one and the same instrument.
7. Counterparts. This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.
<PAGE> 101
8. 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.
9. Third-Party Beneficiaries. This Agreement shall incur to the
benefit of and be binding upon the parties hereto and their respective successor
and permitted assigns. Except as otherwise provided in this Section 9, no other
person shall have any right or obligation hereunder. The Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Agreement, and shall be entitled to rely upon and directly enforce such
provisions of this Agreement so long as no Insurer Default shall have occurred
and be continuing. Except as expressly stated otherwise herein or in the
Transaction Documents, any right of the Insurer to direct, appoint, consent to,
approve of, or take any action under this Agreement, shall be a right exercised
by the Insurer to direct, appoint, consent to, approve of, or take any action
under this Agreement, shall be a right exercised by the Insurer in its sole and
absolute discretion. The Insurer may disclaim any of its rights and powers under
this Agreement (but not its duties and obligations under the Policy) upon
delivery of a written notice to the Trustee.
IN WITNESS WHEREOF, the Issuer, the Seller and the Servicer have caused
this Agreement to be duly executed and delivered by their respective duly
authorized officers as of day and the year first above written.
NATIONAL AUTO FINANCE 1997-1 TRUST
by Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee on behalf of the Trust,
by
------------------------------------
Title:
NATIONAL FINANCIAL AUTO FUNDING TRUST, Seller,
by Chase Manhattan Bank Delaware, not in
its individual capacity, but solely as
Trustee of National Financial Auto Funding
Trust,
by
------------------------------------
Title:
<PAGE> 102
NATIONAL AUTO FINANCE COMPANY, INC., Servicer,
by
------------------------------------
Title:
Acknowledged and Accepted:
HARRIS TRUST AND SAVINGS BANK, not in its
individual capacity but solely as Trust
Collateral Agent and Backup Servicer
by
------------------------------------
Title:
<PAGE> 103
EXHIBIT B
FORM OF SERVICER'S CERTIFICATE
<PAGE> 104
EXHIBIT C
FORM OF DEFICIENCY CLAIM NOTICE
[Date]
Harris Trust and Savings Bank, as Collateral Agent
311 West Monroe Street
Chicago, Illinois 60606
Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
National Auto Finance Company, Inc., as Servicer
One Park Place
621 N.W. 53rd Street
Suite 200
Boca Raton, Florida 33487
Fiscal Agent [if any]
[Address]
Re: Sale and Servicing Agreement, dated as of June 29,
1997 (the "Agreement") among National Auto Finance
1997-1 Trust, (the "Issuer"), National Financial Auto
Funding Trust, (the "Seller"), and National Auto
Finance Company, Inc. (the "Servicer"), and Harris
Trust and Savings Bank, in its capacity as Trust
Collateral Agent.
Ladies and Gentlemen:
Reference is hereby made to Section 5.5(a) of the Agreement.
Capitalized terms not defined herein shall have the meanings ascribed thereto in
the Agreement.
Pursuant to Section 5.5(a) of the Agreement, please note the following
information with respect to the Distribution Date which is to occur on
_______________:
<PAGE> 105
Deficiency Claim Amount: $
-------------------
Note Policy Claim Amount: $
-------------------
The Collateral Agent shall remit Deficiency Claim Amount specified
above to the Trust Collateral Agent for deposit by the Trust Collateral Agent
into the Collection Account pursuant to Section 5.6 of the Agreement on the next
Draw Date which is to occur on _________________.
Sincerely,
HARRIS TRUST AND SAVINGS BANK,
as Trust Collateral Agent
By:
-----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.4
FINANCIAL GUARANTY
INSURANCE POLICY
Obligor: National Auto Finance 1997-1 Trust
Obligations: $66,891,200 6.35% Automobile Receivables-Backed Notes
Policy No.: 50609-N
Date of Issuance: 7/23/97
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of Scheduled
Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees :
(a) payment of the amount of any distribution of principal of,
or interest on, the Obligations made during the Term Of This Policy to
such Holder that is subsequently avoided in whole or in part as a
preference payment under applicable law (such payment to be made by
Financial Security in accordance with Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this
Policy by Financial Security following Financial Security's receipt of
notice as described in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive payments under the Obligations to the extent of any payment by Financial
Security hereunder.
Except to the extent expressly modified by an endorsement hereto, the
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Obligation as indicated on
the registration books maintained by or on behalf of the Obligor for such
purpose or, if the Obligation is in bearer form, the holder of the Obligation.
"Scheduled Payments" means payments which are scheduled to be made during the
Term Of This Policy in accordance with the original terms of the Obligations
when issued and without regard to any amendment or modification of such
Obligations thereafter; payments which become due on an accelerated basis as a
result of (a) a default by the Obligor, (b) an election by the Obligor to pay
principal on an accelerated basis or (c) any other cause, shall not constitute
"Scheduled Payments" unless Financial Security shall elect, in its sole
discretion, to pay such principal due upon such acceleration together with any
accrued interest to the date of acceleration. "Term Of This Policy" shall have
the meaning set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto, or by the merger,
consolidation or dissolution of the Obligor. Except to the extent expressly
modified by an endorsement hereto, the premiums paid in respect of this Policy
are nonrefundable for any reason whatsoever, including payment, or provision
being made for payment, of the Obligations prior to maturity. This Policy may
not be canceled or revoked during the Term Of This Policy. THIS POLICY IS NOT
COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76
OF THE NEW YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By________________________________
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 100NY (5/89)
<PAGE> 2
ENDORSEMENT NO. 1 TO FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY 350 Park Avenue
ASSURANCE INC. New York, New York 10022
OBLIGOR: NATIONAL AUTO FINANCE 1997-1 TRUST
OBLIGATIONS: $66,891,200 6.35% Automobile Receivables-Backed Notes
Policy No.: 50609-N
Date of Issuance: July 23, 1997
1. Definitions. For all purposes of this Policy, the terms specified
below shall have the meanings or constructions provided below. Capitalized terms
used herein and not otherwise defined herein shall have the meanings provided in
the Indenture unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in New York, New York, Chicago,
Illinois, Wilmington, Delaware or any other location of any successor Servicer,
successor Owner Trustee, successor Indenture Trustee or successor Trust
Collateral Agent are authorized or obligated by law, executive order or
government decree to be closed.
"Financial Security" means Financial Security Assurance Inc., a New
York stock insurance company.
"Indenture" means the Indenture, dated as of June 29, 1997, between
National Auto Finance 1997-1 Trust and Harris Trust and Savings Bank, as
Indenture Trustee and Trust Collateral Agent, as amended from time to time in
accordance with its terms.
"Policy" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"Receipt" and "Received" mean actual delivery to Financial Security and
to its Fiscal Agent (as defined below), if any, prior to 12:00 noon, New York
City time, on a Business Day; delivery either on a day that is not a Business
Day, or after 12:00 noon, New York City time, shall be deemed to be "Receipt" on
the next succeeding Business Day. If any notice or certificate given hereunder
by the Trust Collateral Agent is not in proper form or is not properly
completed, executed or delivered, it shall be deemed not to
<PAGE> 3
Policy No.: 50609-N Date of Issuance: July 23, 1997
have been Received, and Financial Security or its Fiscal Agent shall promptly so
advise the Trust Collateral Agent and the Trust Collateral Agent may submit an
amended notice.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of June 29, 1997, among National Auto Finance 1997-1 Trust, National
Financial Auto Funding Trust, as Seller, National Auto Finance Company, Inc., as
Servicer, and Harris Trust and Savings Bank, as Trust Collateral Agent and
Back-up Servicer, as amended from time to time in accordance with its terms.
"Scheduled Payments" means, with respect to (i) each Distribution Date,
the Noteholders' Monthly Interest Distributable Amount payable on such
Distribution Date, and (ii) the Final Scheduled Distribution Date, any principal
of the Obligations remaining unpaid on such Final Scheduled Distribution Date,
in each case in accordance with the original terms of the Obligations when
issued and without regard to any amendment or modification of the Obligations,
the Indenture or the Sale and Servicing Agreement, except amendments or
modifications to which Financial Security has given its prior written consent;
provided, however, Scheduled Payments do not include payments that become due on
an accelerated basis as a result of (a) a default by the Obligor, (b) an
election by the Obligor to pay principal on an accelerated basis, (c) the
occurrence of an Event of Default under the Indenture or (d) any other cause,
unless Financial Security elects, in its sole discretion, to pay in whole or in
part such principal due upon acceleration, together with any accrued interest to
the date of acceleration. Scheduled Payments shall not include, nor shall
coverage be provided under this Policy in respect of, (x) any portion of the
Noteholders' Monthly Interest Distributable Amount due to Noteholders because
the appropriate notice and certificate for payment in proper form was not timely
Received by Financial Security, (y) any portion of the Noteholders' Monthly
Interest Distributable Amount due to Noteholders representing interest on any
Noteholders' Interest Carryover Shortfall or (z) any Note Prepayment Amounts,
unless, in each case, Financial Security elects, in its sole discretion, to pay
such amounts in whole or in part. Scheduled Payments shall not include, nor
shall coverage be provided under the Policy in respect of, any amounts due in
respect of the Obligations attributable to any increase in interest rate,
penalty or other sum payable by the Obligor by reason of any default or event of
default in respect of the Obligations, or by reason of any deterioration of the
creditworthiness of the Obligor, nor shall Scheduled Payments include, nor shall
coverage be provided under the Policy in respect of, any taxes, withholding or
other charge imposed by any governmental authority due in connection with the
payment of any Scheduled Payment to a Holder.
"Term Of This Policy" means the period from and including the Date of
Issuance to and including the latest of the date on which (i) the outstanding
principal amount of the Obligations has been reduced to zero and all
distributions of the Noteholders' Monthly Interest Distributable Amount (other
than any portion of the Noteholders' Monthly Interest Distributable Amount
constituting interest on any Noteholders' Interest Carryover Shortfall) have
been paid on the Obligations, (ii) any period during which any payment on the
Obligations could have been avoided in whole or in part as a preference payment
under applicable bankruptcy, insolvency, receivership or similar law has
expired, and (iii) if any proceedings requisite to avoidance as a preference
payment have been commenced prior to
2
<PAGE> 4
Policy No.: 50609-N Date of Issuance: July 23, 1997
the occurrence of (i) and (ii), a final and nonappealable order in resolution of
each such proceeding has been entered.
"Trust Collateral Agent" means Harris Trust and Savings Bank, an
Illinois banking corporation, in its capacity as Trust Collateral Agent under
the Sale and Servicing Agreement and any successor in such capacity.
2. Notices and Conditions to Payment in Respect of Scheduled Payments.
Following Receipt by Financial Security of a notice and certificate from the
Trust Collateral Agent in the form attached as Exhibit A to this Endorsement,
Financial Security will pay any amount payable hereunder in respect of Scheduled
Payments on the Obligations out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the third Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the
Distribution Date to which such claim relates. Payments due hereunder in respect
of Scheduled Payments will be disbursed by wire transfer of immediately
available funds to the Trust Collateral Agent.
Financial Security shall be entitled to pay any amount hereunder in
respect of Scheduled Payments on the Obligations, including any amount due on
the Obligations on an accelerated basis, whether or not any notice and
certificate shall have been Received by Financial Security as provided above.
Financial Security shall be entitled to pay hereunder any amount due on the
Obligations on an accelerated basis at any time or from time to time, in whole
or in part, prior to the scheduled date of payment thereof; Scheduled Payments
insured hereunder shall not include interest, in respect of principal paid
hereunder on an accelerated basis, accruing from and after the date of such
payment of principal. Financial Security's obligations hereunder in respect of
Scheduled Payments shall be discharged to the extent funds are disbursed by
Financial Security as provided herein whether or not such funds are properly
applied by the Trust Collateral Agent.
3. Notices and Conditions to Payment in Respect of Scheduled Payments
Avoided as Preference Payments. If any Scheduled Payment is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order (as defined below) or (b) the first to occur of (i) the fourth
Business Day following Receipt by Financial Security from the Trust Collateral
Agent of (A) a certified copy of the order (the "Order") of the court or other
governmental body which exercised jurisdiction to the effect that the Noteholder
is required to return the amount of any Scheduled Payment distributed with
respect to the Obligations during the Term Of This Policy because such
distributions were avoidable as preference payments under applicable bankruptcy
law, (B) a certificate of the Noteholder that the Order has been entered and is
not subject to any stay and (C) an assignment duly executed and delivered by the
Noteholder, in such form as is reasonably required by Financial Security and
provided to the Noteholder by Financial Security, irrevocably assigning to
Financial Security all rights and claims of the Noteholder relating to or
arising under the Obligations against the debtor which made such preference
payment or otherwise with respect to such preference payment, or (ii) the date
of Receipt by Financial
3
<PAGE> 5
Policy No.: 50609-N Date of Issuance: July 23, 1997
Security from the Trust Collateral Agent of the items referred to in clauses
(A), (B) and (C) above if, at least four Business Days prior to such date of
Receipt, Financial Security shall have Received written notice from the Trust
Collateral Agent that such items were to be delivered on such date and such date
was specified in such notice. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
and not to the Trust Collateral Agent or any Noteholder directly (unless a
Noteholder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Trust Collateral Agent for distribution
to such Noteholder upon proof of such payment reasonably satisfactory to
Financial Security). In connection with the foregoing, Financial Security shall
have the rights provided pursuant to the Sale and Servicing Agreement and the
Indenture.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term Of This Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trust Collateral Agent at the notice address
specified in the Sale and Servicing Agreement specifying the name and notice
address of the Fiscal Agent. From and after the date of receipt of such notice
by the Trust Collateral Agent, (i) copies of all notices and documents required
to be delivered to Financial Security pursuant to this Policy shall be
simultaneously delivered to the Fiscal Agent and to Financial Security and shall
not be deemed Received until Received by both and (ii) all payments required to
be made by Financial Security under this Policy may be made directly by
Financial Security or by the Fiscal Agent on behalf of Financial Security. The
Fiscal Agent is the agent of Financial Security only and the Fiscal Agent shall
in no event be liable to any Noteholder for any acts of the Fiscal Agent or any
failure of Financial Security to deposit, or cause to be deposited, sufficient
funds to make payments due under this Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the benefit
of each Noteholder, all rights (whether by counterclaim, setoff or otherwise)
and defenses (including, without limitation, the defense of fraud), whether
acquired by subrogation, assignment or otherwise, to the extent that such rights
and defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notices. All notices to be given hereunder shall be in writing
(except as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to Financial Security as
follows:
4
<PAGE> 6
Policy No.: 50609-N Date of Issuance: July 23, 1997
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President - Surveillance
Re: National Auto Finance 1997-1 Trust,
6.35% Automobile Receivables-Backed Notes
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trust Collateral Agent.
8. Priorities. In the event any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered
by the Property/Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law. This Policy is not covered by the Florida Insurance
Guaranty Association created under Part II of Chapter 631 of the Florida
Insurance Code. In the event Financial Security were to become insolvent, any
claims arising under this Policy are excluded from coverage by the California
Insurance Guaranty Association, established pursuant to Article 14.2 of Chapter
1 of Part 2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Holder shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term Of This Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By__________________________________________
Authorized Officer
5
<PAGE> 7
Policy No.: 50609-N Date of Issuance: July 23, 1997
EXHIBIT A TO ENDORSEMENT NO. 1
NOTICE OF CLAIM AND CERTIFICATE
[Letterhead of Trust Collateral Agent]
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Re: National Auto Finance 1997-1 Trust
$66,891,200 6.35% Automobile Receivables-Backed Notes
The undersigned, a duly authorized officer of Harris Trust and Savings
Bank (the "Trust Collateral Agent"), hereby certifies to Financial Security
Assurance Inc. ("Financial Security"), with reference to Financial Guaranty
Insurance Policy No. 50609-N dated July 23, 1997 (the "Policy") issued by
Financial Security in respect of the National Auto Finance 1997-1 Trust, 6.35%
Automobile Receivables-Backed Notes (the "Obligations"), that:
(i) The Trust Collateral Agent is the Trust Collateral Agent
under the Sale and Servicing Agreement and the Indenture for the
Noteholders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Collection Account, the Distribution Account and the
Note Distribution Account and available for distribution to the Holders
pursuant to the Sale and Servicing Agreement will be $ ____ (the
"Shortfall") less than the Scheduled Payments with respect to the
Distribution Date occurring ________________, 19 .
(iii) The Trust Collateral Agent is making a claim under the
Policy for the Shortfall to be applied to distributions of Scheduled
Payments with respect to the Obligations.
(iv) The Trust Collateral Agent agrees that, following receipt
of funds from Financial Security, it shall (a) hold such amounts in
trust and apply the same directly to the payment of Scheduled Payments
on the Obligations when due; (b) not apply such funds for any other
purpose; (c) not commingle such funds with other funds held by the
Trust Collateral Agent; and (d) maintain an accurate record of such
payments with respect to each Obligation and the corresponding claim on
the Policy and proceeds thereof and, if the Obligation is required to
be surrendered or presented for such payment, shall stamp on each such
Obligation the legend "$[insert applicable
A-1
<PAGE> 8
Policy No.: 50609-N Date of Issuance: July 23, 1997
amount] paid by Financial Security and the balance hereof has been
canceled and reissued" and then shall deliver such Obligation to
Financial Security.
(v) The Trust Collateral Agent, on behalf of the Holders,
hereby assigns to Financial Security the rights of the Holders with
respect to the Obligations to the extent of any payments under the
Policy, including, without limitation, any amounts due to the Holders
in respect of securities law violations arising from the offer and sale
of the Obligations. The foregoing assignment is in addition to, and not
in limitation of, rights of subrogation otherwise available to
Financial Security in respect of such payments. The Trust Collateral
Agent shall take such action and deliver such instruments as may be
reasonably requested or required by Financial Security to effectuate
the purpose or provisions of this clause (v).
(vi) The Trust Collateral Agent, on its behalf and on behalf
of the Holders, hereby appoints Financial Security as agent and
attorney-in-fact for the Trust Collateral Agent and each such Holder in
any legal proceeding with respect to the Obligations. The Trust
Collateral Agent hereby agrees that Financial Security may at any time
during the continuation of any proceeding by or against any debtor with
respect to which a Preference Claim (as defined below) or other claim
with respect to the Obligations is asserted under the United States
Bankruptcy Code or any other applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (an "Insolvency
Proceeding") direct all matters relating to such Insolvency Proceeding,
including without limitation, (A) all matters relating to any claim in
connection with an Insolvency Proceeding seeking the avoidance as a
preferential transfer of any payment made with respect to the
Obligations (a "Preference Claim"), (B) the direction of any appeal of
any order relating to any Preference Claim at the expense of Financial
Security but subject to reimbursement as provided in the Insurance
Agreement and (C) the posting of any surety, supersedeas or performance
bond pending any such appeal. In addition, the Trust Collateral Agent
hereby agrees that Financial Security shall be subrogated to, and the
Trust Collateral Agent on its behalf and on behalf of each Holder,
hereby delegates and assigns, to the fullest extent permitted by law,
the rights of the Trust Collateral Agent and each Holder in the conduct
of any Insolvency Proceeding, including, without limitation, all rights
of any party to an adversary proceeding or action with respect to any
court order issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to
[Specify Account].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
A-2
<PAGE> 9
Policy No.: 50609-N Date of Issuance: July 23, 1997
IN WITNESS WHEREOF, the Trust Collateral Agent has executed and delivered
this Notice of Claim and Certificate as of the ____ day of _________, _____.
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity but solely
as Trust Collateral Agent
By____________________________________
Title:
- --------------------------------------------------------------
For Financial Security or Fiscal Agent Use Only
Wire transfer sent on ________________ by __________________________
Confirmation Number ________________
A-3
<PAGE> 1
EXHIBIT 10.1
================================================================================
PURCHASE AND CONTRIBUTION AGREEMENT
BETWEEN
NATIONAL AUTO FINANCE COMPANY, INC.
AND
NATIONAL FINANCIAL AUTO FUNDING TRUST
------------------------------
DATED AS OF JUNE 29, 1997
================================================================================
<PAGE> 2
PURCHASE AND CONTRIBUTION AGREEMENT
PURCHASE AND CONTRIBUTION AGREEMENT, dated as of June 29, 1997, by and
between National Auto Finance Company Inc., a Delaware corporation ("NAFI"), and
National Financial Auto Funding Trust, a Delaware business trust ("National
Financial").
W I T N E S S E T H :
In consideration of the mutual covenants herein contained, NAFI and
National Financial agree as follows:
ARTICLE I
DEFINITIONS
1.1. Incorporation of Definitions. Capitalized terms used but not
defined herein have the meanings ascribed to them in the Sale and Servicing
Agreement (as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, the "Sale and Servicing Agreement"), dated as
of June 29, 1997, by and among National Financial, as Seller, NAFI, as Servicer,
Wilmington Trust Company, in its capacity as owner trustee of the National Auto
Finance 1997-1 Trust (the "1997-1 Trust"), and Harris Trust and Savings Bank,
not in its individual capacity, but solely as Trust Collateral Agent and Backup
Servicer (the "Trust Collateral Agent").
Other Definitions. When used in this Agreement, the following words and
phrases shall have the following meanings:
Bankruptcy Event: The occurrence of either of the following with
respect to either NAFI or National Financial:
(a) a case or other proceeding shall be commenced, without the
application or consent of NAFI or National Financial, as applicable,, in any
court, seeking the liquidation, reorganization, debt arrangement, dissolution,
winding up, or composition or readjustment of debts of NAFI or National
Financial, as applicable,, the appointment of a trustee, receiver, custodian,
liquidator, assignee, sequestrator or the like for NAFI or National Financial,
as applicable, or for any substantial part of its assets, or any similar action
with respect to NAFI or National Financial, as applicable, under any law
(foreign or domestic) relating to bankruptcy, insolvency, receivership,
reorganization, winding up or composition or adjustment of debts, and such case
or proceeding shall continue undismissed, or unstayed and in effect, for a
period of 60 (sixty) days or an order for relief in respect of NAFI or National
Financial, as applicable, shall be entered in an involuntary case under the
federal bankruptcy laws or other similar laws (foreign or domestic) now or
hereafter in effect; or
(b) NAFI or National Financial, as applicable, shall commence a
voluntary case or other proceeding under any applicable bankruptcy, insolvency,
receivership,
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<PAGE> 3
reorganization, debt arrangement, dissolution or other similar law now or
hereafter in effect, or shall consent to the appointment of or taking possession
by a trustee, receiver, custodian, liquidator, assignee, sequestrator or the
like for NAFI or National Financial, as applicable, or for any substantial part
of its assets, or shall make any general assignment for the benefit of
creditors, or shall fail to, or admit in writing its inability to, pay its debts
generally as they become due.
Collection Date: With respect to a Receivable, the date in each Due
Period on which a scheduled payment on such Receivable is due.
Conveyance: As defined in Section 2.3(b).
Cut-off Date: With respect to an Initial Receivable, the Initial
Cut-off Date, and with respect to any Subsequent Receivable, the related
Subsequent Cut-off Date.
Individual Sold Balance: With respect to any Receivable, the original
principal balance of such Receivable reduced by the portion of each payment
received thereon before the applicable Cut-off Date that would represent
principal if such payments were allocated to the principal of and interest on
such Receivable based on the amortization method provided in the Contract.
Insurance Proceeds: Proceeds paid by any insurer pursuant to any
insurance policy covering a Financed Vehicle or the related Obligor.
Liquidation Proceeds: With respect to a Liquidated Receivable, all
amounts (including without limitation, Insurance Proceeds) realized with respect
to such Receivable net of amounts that are required to be refunded to the
Obligor on such Receivable; provided however, that the Liquidation Proceeds with
respect to any Receivable shall in no event be less than zero.
Master Trust: National Financial Auto Receivables Master Trust.
Purchase Price: As defined in Section 2.1.
Receivable: Each motor vehicle retail installment sale contract and
security agreement (including any and all rights to receive payments thereunder
on and after the applicable Cut-off Date and security interests in the Financed
Vehicle securing such contract or note) assigned and transferred to National
Financial hereunder as of the Closing Date or a Subsequent Transfer Date and not
reassigned, retransferred or otherwise released in accordance herewith, each
such Receivable being identified in the Receivable Schedule attached hereto as
Schedule 1 or a Receivable Schedule attached to a Transfer Agreement, as
applicable.
Receivable Assets: The assets sold, transferred, conveyed and assigned
by NAFI to National Financial pursuant to this Agreement, which consist of (i)
all Receivables identified in the Receivable Schedules attached to the
Conveyances delivered hereunder on each Subsequent Transfer Date and all monies
received thereon on or after the related Cut-off Date (including amounts due on
or before the Cut-off Date but received by NAFI on or after such Cut-off Date);
(ii) any proceeds and the right to receive proceeds with respect to the the
Receivables from claims on any physical damage, credit life or disability
insurance policies covering Financed Vehicles or
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<PAGE> 4
Obligors, including rebates of insurance premiums relating to the Receivables
and any proceeds from the liquidation of the Receivables; (iii) all rights
against Dealers pursuant to Dealer Agreements or against Originators pursuant to
Originator Agreements; (iv) the related Receivables Files and any and all other
documents that NAFI keeps on file in accordance with its customary procedures
relating to the Receivables, the Obligors or the Financed Vehicles; (v) property
(including the right to receive future Liquidation Proceeds) that secures a
Receivable and that has been acquired by or on behalf of the Trust pursuant to
liquidation of such Receivable; (vi) all funds on deposit from time to time in
the Trust Accounts (less all investments and proceeds thereof), and all rights
of the Issuer therein; and (vii) the proceeds of any and all of the foregoing.
Receivable Documents: With respect to a Receivable, all Receivable
papers and documents (including those contained in the Receivable File) and all
other papers and records (including computerized data) of whatever size or
description, whether developed or originated by NAFI, a Dealer, Originator or
another Person, required to document the Receivable or to service the
Receivable.
Receivable File: With respect to a Receivable, the fully executed
original of such Receivable; the assignment of such Receivable by a Dealer or
Originator to NAFI, the original Title Document or UCC financing statement
evidencing that the security interest in a Financed Vehicle granted to NAFI
under such Receivable has been perfected under applicable public state law
(except for any Title Documents or UCC financing statements not returned from
the applicable records office, in which case NAFI will deliver to National
Financial, on the Closing Date or the Subsequent Transfer Date, as the case may
be, an Officer's Certificate of NAFI indicating that the original of such Title
Document has been applied for at, or the original of such UCC financing
statement was delivered to, such public office and shows NAFI as the lienholder
or secured party and that NAFI will deliver the originals thereof when returned
from such office); the original of any assumption agreement or any modification,
extension or refinancing agreement; and the original application of the related
Obligor to obtain the financing extended by such Receivable.
Receivable Schedule: The schedule of Receivables attached hereto as
Schedule 1 or attached as Schedule 1 to any Conveyance delivered hereunder, such
schedule identifying each Receivable by name of the Obligor and setting forth as
to each Receivable its Individual Sold Balance as of the Cut-off-Date, loan
number, Receivable Rate, scheduled monthly payment of principal and interest,
final maturity date and original principal amount.
Unearned Financing Charge: With respect to any Receivable, the amount
of the add-on finance charge that, under the term of the Receivable, would be
required to be refunded or credited to the related Obligor in accordance with
such Receivable if such Receivable were then prepaid in full.
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<PAGE> 5
ARTICLE II
PURCHASE SALE AND CONTRIBUTION
2.1. Purchase and Contribution. (a) Subject to and on the terms and
conditions set forth herein, NAFI hereby transfers, conveys and assigns, without
recourse except as expressly set forth herein, as a contribution of capital to
National Financial, all of its right, title and interest in and to (i) the
Receivables identified on the Receivables Schedule attached hereto as Schedule 1
and all monies received thereon on or after the Initial Cut-off Date (including
amounts due on or before the Initial Cut-off Date but received by NAFI on or
after the Initial Cut-off Date) and (ii) the other Receivable Assets related
thereto.
(b) Pursuant to and in connection with the transfer of certain retail
installment sale contracts or promissory notes or other financing documents for
a new or used motor vehicles and certain other property related thereto by
Bankers Trust Company ("Bankers Trust"), as trustee of the National Financial
Auto Receivables Master Trust (the "Master Trust") to National Financial Auto
Funding Trust II, a Delaware business trust ("Funding Trust II"), under the
Assignment Agreement dated as of June 29, 1997 (the "Assignment Agreement"),
between Bankers Trust and Funding Trust II, and by Funding Trust II to National
Financial under the Sale Agreement dated as of June 29, 1997 (the "Sale
Agreement"), between Funding Trust II and National Financial, NAFI hereby
transfers, conveys and assigns, without recourse except as expressly set forth
herein, all of NAFI's rights against Dealers under the Dealer Agreements and
Originators under the Originator Agreements with respect to such retail
installment sales contracts, promissory notes or other financing documents, to
the extent such rights have not been previously conveyed by NAFI to Funding
Trust II and by Funding Trust II to the Master Trust.
(c) Subject to and on the terms and conditions set forth herein, NAFI
hereby agrees to sell, transfer, convey and assign, without recourse except as
expressly provided herein, all of its right, title and interest in and to the
Receivable Assets to National Financial on each Subsequent Transfer Date.
National Financial agrees to pay to NAFI on each Subsequent Transfer Date as the
purchase price (the "Purchase Price") for the Receivable Assets sold hereunder
on such date an amount equal to 100% of the Aggregate Principal Balance of the
Receivables included in such Receivable Assets as of the related Cut-off Date.
(d) NAFI may from time to time during the term of this Agreement and in
its sole discretion, elect to contribute capital to National Financial in the
form of Receivables and Receivable Assets conveyed hereunder, in an amount equal
to the excess of (i) the Principal Balance of Receivables included in Receivable
Assets conveyed on any Subsequent Transfer Date over (ii) the amount of the cash
Purchase Price paid by National Financial to NAFI on such Subsequent Transfer
Date.
2.2. Filings. On or prior to the Closing Date, NAFI shall have filed in
the office of the Secretary of State of Florida a UCC financing statement,
appropriate under the applicable UCC, to reflect the transfer of the Receivables
identified on the Receivable Schedule attached hereto as Schedule 1 and the
other Related Assets related thereto by NAFI to National Financial on the
Closing Date and the Receivable Assets to be transferred from NAFI to National
Financial on any
4
<PAGE> 6
Subsequent Transfer Date and to protect National Financial's interest in the
Receivable Assets against all other Persons. NAFI shall thereafter file any
appropriate continuation statements in respect thereof.
Sales. (a) During the Pre-Funding Period, National Financial shall, to
the extent permitted by the Sale and Servicing Agreement, use funds on deposit
in the Pre-Funding Account established under the Sale and Servicing Agreement to
purchase Subsequent Receivables and other Receivable Assets from NAFI. On or
prior to each Subsequent Transfer Date, NAFI shall notify National Financial in
writing of the outstanding principal amount of eligible Receivables included in
Receivable Assets available to be sold and conveyed by NAFI to National
Financial on such Subsequent Transfer Date pursuant to this Agreement, and
subject to the terms and conditions of this Agreement, NAFI shall, on the
applicable Subsequent Transfer Date, sell and convey to National Financial
eligible Receivables and other Receivable Assets having an aggregate outstanding
principal amount equal to the amount specified in such written notice. Each
Subsequent Transfer Date shall be on the date and at the time and place mutually
agreed upon by National Financial and NAFI with the prior written consent of the
Insurer. Payment of the Purchase Price for the Subsequent Receivables and other
Receivable Assets sold and conveyed on a Subsequent Transfer Date shall be made
by National Financial to NAFI. National Financial's obligation to purchase
Subsequent Receivables and other Receivable Assets shall be limited by the
amount of funds available for such purchase in the Pre-Funding Account pursuant
to the Sale and Servicing Agreement and shall be subject to the satisfaction of
the conditions in the Sale and Servicing Agreement.
(b) On or prior to the Closing Date, NAFI shall (i) deliver to National
Financial or such other Person as National shall direct the original motor
vehicle retail installment sale contracts, duly endorsed by NAFI and the
Receivable Files with respect to each Initial Receivable included in the
Receivable Assets then being sold to National Financial, (ii) deliver to
National Financial or such other Person as National Financial shall direct cash
equal to all payments received by NAFI on such Initial Receivables on or after
the Initial Cut-off Date and on or before two Business Days prior to such
Initial Transfer Date. Within two Business Days after such Initial Transfer
Date, NAFI shall deliver to National Financial or such other Person as National
Financial shall direct all other payments received by NAFI on such Initial
Receivables on or after the applicable Cut-off Date and on or before the Closing
Date. National Financial hereby directs NAFI to deliver the materials referenced
in the preceding clause (i) of the second preceding sentence to OFSA, as
Custodian, and hereby directs NAFI to remit any payments received by NAFI and
referenced in the preceding sentence or in clause (ii) of the second preceding
sentence to the Collection Account.
(c) On or prior to any Subsequent Transfer Date, NAFI shall (i) deliver
to National Financial a conveyance instrument substantially in the form attached
hereto as Exhibit A (a "Conveyance") with respect to the Receivable Assets sold
and conveyed hereunder on such Subsequent Transfer Date, (ii) deliver to
National Financial or such other Person as National Financial shall direct the
original motor vehicle retail installment sale contracts, duly endorsed by NAFI
and the Receivable Files with respect to each Subsequent Receivable included in
the Receivable Assets then being sold to National Financial, (iii) deliver to
National Financial or such other Person as National Financial shall direct cash
equal to all payments received by NAFI on
5
<PAGE> 7
such Subsequent Receivables on or after the applicable Cut-off Date and on or
before two Business Days prior to such Subsequent Transfer Date. Within two
Business Days after such Subsequent Transfer Date, NAFI shall deliver to
National Financial or such other Person as National Financial shall direct all
other payments received by NAFI on such Subsequent Receivables on or after the
applicable Cut-off Date and on or before such Subsequent Transfer Date. National
Financial hereby directs NAFI to deliver the materials referenced in the
preceding clause (ii) of the second preceding sentence to OFSA, as Custodian,
and hereby directs NAFI to remit any payments received by NAFI and referenced in
the preceding sentence or in clause (iii) of the second preceding sentence to
the Collection Account.
2.3. No Recourse. Except as specifically provided in this Agreement,
the sale and purchase of Receivables and other Receivable Assets under this
Agreement shall be without recourse to NAFI; provided that NAFI shall be liable
to National Financial for all representations, warranties and covenants made by
NAFI pursuant to the terms of this Agreement, it being understood that such
obligations of NAFI do not constitute recourse for the credit risk of the
Obligors.
2.4. True Sales. NAFI and National Financial intend that the
transactions contemplated hereby be true sales of Receivables and other
Receivable Assets by NAFI to National Financial providing National Financial
with the full benefits of ownership of the Receivables and other Receivable
Assets free and clear of any Liens, and neither NAFI nor National Financial
intends the transactions contemplated hereby to be, or for a purpose to be
characterized as, a loan from National Financial to NAFI. NAFI shall reflect
sales of the Receivable Assets hereunder on its balance sheet and other
financial statements as sales of assets, and shall treat such sales as sales for
all purposes. NAFI will respond to third party inquiries by indicating that the
Receivables have been sold.
2.5. Receipt of Payments after Closing Date and Subsequent Transfer
Dates. National Financial shall be entitled to all payments received or
receivable with respect to any Receivable or Subsequent Receivable sold and
conveyed by NAFI to National Financial hereunder that are received on and after
the applicable Cut-off Date. If NAFI receives any payment on a Receivable
belonging to the Trust, NAFI promptly shall turn such payment over to the Trust
Collateral Agent not later than two Business Days after receipt for deposit in
the Collection Account.
2.6. Servicing of Receivables. Consistent with National Financial's
ownership of the Receivable Assets, National Financial shall have the sole right
to service, administer and collect the Receivables, to assign such right and to
delegate such right to others. In consideration of National Financial's purchase
of the Receivable Assets, NAFI agrees to cooperate fully with National Financial
to facilitate the full and proper performance of such duties and obligations for
the benefit of National Financial.
2.7. Other Sales. Prior to the end of the Pre-Funding Period, NAFI
shall not sell, transfer, convey or assign any motor vehicle retail installment
sale contract originated or purchased by it, except as follows: (i) NAFI may
sell, transfer, convey and assign any such motor vehicle retail installment sale
contract to National Financial pursuant to this Agreement; (ii) NAFI may sell,
transfer, convey and assign to any Person, without limitation, any such motor
vehicle retail installment sale contract that does not comply with the
representations and warranties set
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<PAGE> 8
forth in Section 4.1(b) or, if included in the Trust, would result in a
violation of clause (v) of Article III; and (iii) NAFI may sell, transfer,
assign and convey such motor vehicle retail installment sale contract to any
Person, without limitation, pursuant to a warehouse lending, repurchase or other
similar arrangement for the financing of the Receivable Assets pending transfer
to NAFI hereunder on the next Subsequent Transfer Date.
2.8. Protection of Title to Interest.
(a) NAFI shall execute and file such financing statements and cause to
be executed and filed such continuation and other statements, all in such manner
and in such places as may be required by law fully to preserve, maintain and
protect the interest of National Financial, the 1997-1 Trust, the Trust
Collateral Agent and the Insurer under this Agreement in the Trust Property and
in the proceeds thereof. NAFI shall deliver (or cause to be delivered) to
National Financial and the Insurer file-stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following such
filing.
(b) NAFI shall not change its name, identity or corporate structure in
any manner that would, could or might make any financing statement or
continuation statement filed by National Financial in accordance with paragraph
(a) above seriously misleading within the meaning of Section 9-402(7) of the
UCC, unless it shall have given the Trust Collateral Agent and the Insurer (so
long as an Insurer Default shall not have occurred and be continuing) at least
60 days prior written notice thereof, and shall promptly file appropriate
amendments to all previously filed financing statements and continuation
statements as may be required to preserve and protect National Financial's
interest in the Receivable Assets, which filings shall be made no later than 30
days after the effective date of any such change.
(c) NAFI shall give National Financial, the Trust Collateral Agent and
the Insurer 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 appropriate amendments to all previously
filed financing statements and continuation statements as may be required to
preserve and protect National Financial's interest in the Receivable Assets,
which filings shall be made no later than 30 days after the effective date of
any such change. NAFI shall at all times maintain each office from which it
services Receivables and its principal executive office within the United States
of America.
(d) If at any time NAFI proposes to sell, grant a security interest in,
or otherwise transfer any interest in automotive receivables to any prospective
purchaser, lender or other transferee, NAFI shall give to such prospective
purchaser, lender or other transferee computer tapes, records or printouts
(including any restored from backup archives) that, if they refer in any manner
whatsoever to any Receivable, indicate clearly that such contract has been sold
and is owned by the 1997-1 Trust unless such Receivable has been paid in full or
repurchased by NAFI, National Financial or the Servicer.
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<PAGE> 9
(e) NAFI shall permit National Financial, the Trust Collateral Agent,
the Insurer and their respective agents, at any time to inspect, audit and make
copies of and abstracts from NAFI's records regarding any Receivables or any
other portion of the Trust Property.
(f) NAFI shall furnish to National Financial, the Trust Collateral
Agent and the Insurer at any time upon request a list of all Receivables then
held as part of the Trust, together with a reconciliation of such list to the
Receivable Schedules and to each of the Servicer's statements furnished before
such request indicating removal of Receivables from the Trust. The Trust
Collateral Agent shall hold any such list and Receivable Schedules for
examination by interested parties during normal business hours at the Corporate
Trust Office upon reasonable notice by such Persons of their desire to conduct
an examination.
ARTICLE III
CONDITIONS PRECEDENT
National Financial's obligation to purchase Receivable Assets
hereunder on each Subsequent Transfer Date shall be subject to the execution,
delivery and effectiveness of the Sale and Servicing Agreement and the Indenture
and the delivery of the purchase price for the Notes to National Financial by
the initial purchasers thereof. In addition, the obligation of National
Financial to purchase Receivable Assets hereunder on each Subsequent Transfer
Date shall be further subject to the satisfaction of the following conditions on
or before the Closing Date or such Subsequent Transfer Date, as the case may be:
(i) all representations and warranties of NAFI contained in
Section 4.1(a) shall be true and correct and all representations and
warranties of NAFI in Section 4.1(b) shall be true and correct with
respect to the Receivables sold, transferred, conveyed and assigned to
National Financial on the Subsequent Transfer Date, in each case, on
and as of such Subsequent Transfer Date, as the case may be;
(ii) on such Subsequent Transfer Date, NAFI shall have duly
completed and executed to National Financial a Conveyance conforming to
the requirements of Section 2.03(b) or 2.4(b), as applicable;
(iii) on or before such Subsequent Transfer Date, (a) NAFI
shall have delivered to National Financial or such other Person as
National Financial shall direct the original motor vehicle retail
installment sale contract, duly endorsed by NAFI to National Financial,
and the Receivable Files that relate to each Receivable included in the
Receivable Assets then being sold by NAFI to National Financial and (b)
NAFI shall have performed all other obligations then required to be
performed by it pursuant to this Agreement, including, without
limitation, Sections 2.2 and 2.3 (b) or 2.4(b), as applicable;
(iv) no Bankruptcy Event or Servicer Termination Event shall
have occurred and be continuing on and as of such Subsequent Transfer
Date;
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(v) as of such Subsequent Transfer Date, the Receivables then
in the Trust, together with the Subsequent Receivables to be
transferred to National Financial on such Subsequent Transfer Date,
shall meet the following criteria (computed based on the
characteristics of the Subsequent Receivables as of the applicable
Subsequent Cut-off Date): (A) the weighted average Interest Rate of the
Receivables shall not be less than 18.0%, (B) the weighted average
remaining term of the Receivables shall not be greater than 55 months,
and (C) not more than 80% of the Aggregate Principal Balance
Receivables shall represent loans to finance the purchase of used
Financed Vehicles and (D) the final scheduled payment date on the
Receivable with the latest maturity shall not be later than October 30,
2002; and
(vi) all conditions precedent in Section 2.2 of the Sale and
Servicing Agreement to the transfer and assignment of such Subsequent
Receivables to the Trust pursuant to the Sale and Servicing Agreement
shall have been satisfied.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 (a) NAFI hereby represents, warrants and covenants to National
Financial on and as of the Closing Date and each Subsequent Transfer Date that:
(i) NAFI is a Delaware corporation duly organized, validly
existing, and in good standing under the laws of the state of its
incorporation and has all licenses necessary to carry on its business
as now being conducted and shall appoint and employ agents or attorneys
in each jurisdiction where it shall be necessary to take action under
this Agreement; NAFI has the full power and authority to own its
property, to carry on its business as presently conducted, and to
execute, deliver and perform this Agreement (including all instruments
of transfer to be delivered pursuant to this Agreement) by NAFI and the
consummation of the transaction contemplated hereby have been duly and
validly authorized; this Agreement evidences the valid, binding and
enforceable obligation of NAFI (subject to applicable bankruptcy and
insolvency laws and other similar laws affecting the enforcement of
creditors' rights generally); and all requisite corporate action has
been taken by NAFI to make this Agreement valid and binding upon NAFI;
(ii) NAFI is not required to obtain the consent of any other
party or obtain the consent, license, approval or authorization of, or
make any registration or declaration with, any governmental authority,
bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement except for
those which have been obtained;
(iii) the consummation of the transactions contemplated by
this Agreement will not result in the breach of any term or provision
of the bylaws of NAFI or result in the breach of any term or provision
of, or conflict with or constitute a default (with or without notice,
lapse of time, or both) under or result in the acceleration of any
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<PAGE> 11
obligation under, any material agreement, indenture or loan or credit
agreement or other instrument to which NAFI or its property is subject,
or result in the violation of any law (including, without limitation,
any bulk transfer or similar law), rule, regulation, order, judgment or
decree to which NAFI or its property or the Receivables are subject;
(iv) no statement, report or other document furnished or to be
furnished pursuant to this Agreement or in connection with the
transaction contemplated hereby contains or will, when furnished,
contain any untrue statement of a material fact or omits or will, when
furnished, omit to state a material fact necessary to make the
statements contained therein not misleading, in light of the
circumstances under which they were made;
(v) neither NAFI nor any of its subsidiaries or affiliates is
a party to, bound by or in breach or violation of any indenture or
other agreement or instrument, or is subject to or in violation of any
statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction over it,
which materially and adversely affects, or may in the future materially
and adversely affect, the ability of NAFI to perform its obligations
under this Agreement;
(vi) there are no actions, suits or proceedings pending or, to
the knowledge of NAFI, threatened against NAFI, before or by any court,
regulatory body, administrative agency, arbitrator or governmental body
with respect to any of the transactions contemplated by this Agreement,
which will, if determined adversely to NAFI, affect the validity or
enforceability hereof or materially and adversely affect NAFI's ability
to perform its obligations under this Agreement;
(vii) NAFI has obtained or made all necessary consents,
approvals, waivers and notifications of creditors, lessors and other
non-governmental persons, in each case, in connection with the
execution and delivery of this Agreement, and the consummation of all
the transactions herein contemplated;
(viii) NAFI shall not take any action to impair National
Financial's rights in any Receivable; and
(ix) NAFI is solvent and will not become insolvent after
giving effect to the transactions contemplated hereunder and under the
Basic Documents; NAFI is paying its debts as they become due; NAFI,
after giving effect to the contemplated transactions, will have
adequate capital to conduct its business.
NAFI shall indemnify National Financial and the Insurer and hold
National Financial and the Insurer harmless against any loss and damages
resulting from a breach of the representations and warranties set forth in
Section 4.1(a).
(b) NAFI hereby represents and warrants to National Financial as of the
Closing Date with respect to the Initial Receivables contributed and conveyed to
National Financial on the Closing Date by NAFI pursuant to this Agreement and
the Initial Receivables sold and conveyed to National Financial on the Closing
Date by National Financial Auto Funding
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<PAGE> 12
Trust II ("Funding Trust II") and as of each Subsequent Transfer Date with
respect to the Subsequent Receivables sold and conveyed to National Financial on
such Subsequent Transfer Date by NAFI (unless another date or time period is
otherwise specified or indicated in the particular representation or warranty):
(i) the information regarding such Receivables set forth in
the applicable Receivable Schedule or Receivables Schedule is true and
correct in all material respects at the applicable Cut-off Date; each
Receivable was originated in the United States of America and at the
time of origination, materially conformed to all requirements of the
NAFI underwriting policies and guidelines then in effect; and no
Obligor is the United States of America or any state or any agency,
department, subdivision or instrumentality thereof;
(ii) immediately prior to the Closing Date or such Subsequent
Transfer Date, as the case may be, Funding Trust II or NAFI, as the
case may be, had a valid and enforceable security interest in the
related Financed Vehicle, and such security interest had been duly
perfected and was prior to all other present and future liens and
security interests (except future tax liens and liens that, by statute,
may be granted priority over previously perfected security interests)
that exist or may hereafter arise, and Funding Trust II or NAFI, as
applicable, had the full right to assign such security interest to
National Financial;
(iii) on and after the Closing Date or such Subsequent
Transfer Date, as the case may be, there shall exist under the
Receivable a valid, subsisting and enforceable first priority perfected
security interest in the Financed Vehicle security under such
Receivable (other than, as to the priority of such security interest,
any statutory lien arising by operation of law after the Closing Date
or the Subsequent Transfer Date, as the case may be, which is prior to
such interest) and at such time as enforcement of such security
interest is sought there shall exist a valid, subsisting and
enforceable first priority perfected security interest in such Financed
Vehicle in favor of National Financial or its assigns (other than, as
to the priority of such security interest, any statutory lien arising
by operation of law after the Closing Date or such Subsequent Transfer
Date which is prior to such interest);
(iv) as of the Closing Date or such Subsequent Transfer Date,
as the case may be, each such Receivable has not been sold, assigned or
pledged to any other Person other than an endorsement to the Servicer
for purposes of servicing or any such pledge has been released, and
immediately prior to the transfer and assignment contemplated by this
Agreement or the Sale Agreement, NAFI or National Financial Auto
Funding Trust II, as applicable, has good and marketable title to each
such Receivable free and clear of any encumbrance, equity, pledge,
charge, claim or security interest and is the sole owner thereof and
has full right to transfer each such Receivable to National Financial
and, upon the transfers pursuant to Article II or the Sale Agreement,
as applicable, National Financial will have good and marketable title
to each such clear of any encumbrance, lien, pledge, charge, claim,
security interest or rights of others; the purchase of each such
Receivable by NAFI from a Dealer or Originator was not an extension of
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<PAGE> 13
financing to such Dealer or Originator. No Dealer or Originator has a
participation in, or other right to receive, proceeds of any
Receivable. NAFI, Funding Trust II, the Master Trust, National
Financial and the Originators have not taken any action to convey any
right to any Person that would result in such Person having a right to
payments received under the related insurance policies, Dealer
Agreement or Originator Agreement or to payments due under such
Receivable;
(v) as of the Closing Date or such Subsequent Transfer Date,
as the case may be, no such Receivable is delinquent for more than
thirty days in payment as to any scheduled payment;
(vi) as of the Closing Date or such Subsequent Transfer Date,
as the case may be, there is no lien against any related Financed
Vehicle for delinquent taxes;
(vii) as of the Closing Date or such Subsequent Transfer Date,
as the case may be, there is no right of rescission, offset, defense or
counterclaim to the obligation of the related Obligor to pay the unpaid
principal or interest due under such Receivable; the operation of the
terms of such Receivable or the exercise of any right thereunder will
not render such Receivable unenforceable in whole or in part or subject
to any right of rescission, offset, defense or counterclaim, and no
such right of rescission, offset, defense or counterclaim has been
asserted;
(viii) as of the Closing Date or such Subsequent Transfer
Date, as the case may be, each such Receivable is not assumable by
another Person in a manner which would release the Obligor thereon from
such Obligor's obligations to National Financial with respect to such
Receivable;
(ix) as of the Closing Date or such Subsequent Transfer Date,
as the case may be, there are no prior liens or claims for work, labor
or material affecting any related Financed Vehicle which are or may
become a lien prior to or equal with the security interest granted by
such Receivable;
(x) each such Receivable, and the sale of the Financed Vehicle
securing such Receivable, where applicable, complied, at the time it
was made and as of the Closing Date or related Subsequent Transfer
Date, as applicable, in all material respects with applicable state and
federal laws (and regulations thereunder), including, without
limitation, usury, disclosure and consumer protection laws, equal
credit opportunity, fair-credit reporting, truth-in-lending or other
similar laws, the Federal Trade Commission Act, and applicable state
laws regulating retail installment sales contracts and loans in general
and motor vehicle retail installment sales contracts and loans in
particular, and the receipt of interest on, and the ownership of, such
Receivable by National Financial will not violate any such laws;
(xi) each such Receivable is a legal, valid and binding
obligation of the Obligor thereunder and is enforceable in accordance
with its terms, except only as such enforcement of creditors' rights
generally whether enforcement is sought in a proceeding in equity or at
law, and all parties to such Receivable had full legal capacity to
execute
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<PAGE> 14
such Receivable and all documents related thereto and to grant the
security interest purported to be granted thereby at the time of
execution and grant;
(xii) as of the Closing Date or such Subsequent Transfer Date,
as the case may be, the terms of each such Receivable have not been
impaired, waived, altered or modified in any respect, except by written
instruments that are part of the Receivable Documents, and no such
Receivable has been satisfied, subordinated or rescinded;
(xiii) at the time of origination of each such Receivable, the
proceeds of such Receivable were fully disbursed, there is no
requirement for future advances thereunder, and all fees and expenses
in connection with the origination of such Receivable have been paid;
(xiv) as of the Closing Date or such Subsequent Transfer Date,
as the case may be, there is no default, breach, violation or event of
acceleration existing under any such Receivable (except payment
delinquencies permitted by subparagraph (v) above) and no event which,
with the passage of time or with notice or with both, would constitute
a default, breach, violation or event of acceleration under any such
Receivable or would otherwise affect the value or marketability of such
contract; and NAFI, Funding Trust II or the Master Trust have not
waived any such default, breach, violation or event of acceleration and
as of the applicable Cut-off Date, the related Finance Vehicle has not
been repossessed;
(xv) at the origination date of each such Receivable, the
related Financed Vehicle was covered by a comprehensive and collision
insurance policy (i) in an amount at least equal to the lesser of (a)
and actual cash value of the related Financed Vehicle or (b) the unpaid
balance owing on such Receivable, less the related Unearned Financing
Charge, (ii) naming NAFI as a loss payee and (iii) insuring against
loss and damage due to fire, theft, transportation, collision and other
risks generally covered by comprehensive and collision coverage; each
Receivable requires the Obligor to maintain physical loss and damage
insurance, naming NAFI as an additional insured party;
(xvi) each such Receivable was acquired by NAFI from a Dealer
or Originator with which it ordinarily does business; such Dealer or
Originator had full right to assign to NAFI such Receivable and the
security interest in the related Financed Vehicle (and the Dealer that
assigned any such Receivable to any such Originator had full right to
assign to such Originator such Receivable and the security interest in
the related Financed Vehicle) and the Dealer's or Originator's
assignment thereof to NAFI is legal, valid and binding (and any such
assignment by any Dealer to any Originator is legal, valid and binding)
and the Master Trust had full right to assign to NAFI or Funding Trust
II, as the case may be, such Receivable and the security interest in
the related Financed Vehicle and NAFI or Funding Trust II, as the case
may be, had full right to assign to National Financial such Receivable
and the security interest in the related Financed Vehicle and NAFI's or
Funding Trust II's assignment thereof to National Financial is legal,
valid and binding;
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<PAGE> 15
(xvii) each such Receivable contains customary and enforceable
provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the related Financed
Vehicle of the benefits of the security;
(xviii) scheduled payments under each such Receivable are due
monthly (or, in the case of the first payment, no later than the
forty-fifth day after the date of the Receivable) in substantially
equal amounts to maturity (other than with respect to those Receivables
designated as balloon contracts on the related Receivable Schedule),
and will be sufficient to fully amortize such Receivable at maturity,
assuming that each scheduled payment is made on its Due Date; such
scheduled payments are applicable only to payment of principal and
interest on such Receivable and not to the payment of any insurance
premiums (although the proceeds of the extension of credit on such
Receivable may have been used to pay insurance premiums); the original
term to maturity of such Receivable was not more than 60 months;
(xix) the collection practices used with respect to each such
Receivable have been in all material respects legal, proper, prudent
and customary in the automobile installment sales contract or
installment loan servicing business;
(xx) there is only one original of each such Receivable, the
Servicer is currently in possession of the Receivable Documents for
such Receivable and there are no custodial agreements in effect
adversely affecting the right of NAFI to make the deliveries required
hereunder on the Closing Date or such Subsequent Transfer Date;
(xxi) as of the Cut-off Date or Subsequent Cut-off Date, as
applicable, no Obligor was the subject of a current bankruptcy
proceeding;
(xxii) with respect to each Due Period, the aggregate of the
interest due on all the Receivables in such Due Period from scheduled
payments is in excess of the sum of (i) Servicing Fee due and any fees
due to the Trust Collateral Agent and the Insurer, each in such Due
Period and (ii) the amount of interest payable on the Notes with
respect to such Due Period, in each case assuming that each scheduled
payment is made on its Due Date;
(xxiii) the Receivables constitute "chattel paper" within the
meaning of the UCC as in effect in the applicable jurisdiction, and all
filings (including without limitation, UCC filings) required to be made
and all actions required to be taken or performed by any Person in any
jurisdiction to give National Financial a first priority perfected lien
on, or an ownership interest in the Receivables and the proceeds
thereof and the remaining Trust Property have been made, taken or
performed;
(xxiv) by the Closing Date and prior to each Subsequent
Transfer Date, as applicable, NAFI will have caused the portions of
NAFI's servicing records relating to the Receivables to constitute part
of the Trust Property and to be owned by the Trust in accordance with
the terms of this Agreement;
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<PAGE> 16
(xxv) the computer tape or listing made available by NAFI to
the Trust Collateral Agent on the Closing Date and on each Subsequent
Transfer Date was complete and accurate as of the applicable Cut-off
Date, and includes a description of the same Receivables that are
described in the applicable Receivable Schedule;
(xxvi) no Receivable was originated in, or is subject to the
laws of, any jurisdiction the laws of which would make unlawful, void
or voidable the sale, transfer and assignment of such contract under
this Agreement or the Transfer Agreement, as applicable, or pursuant to
transfers of the Notes. National Financial has not entered into any
agreement with any account debtor that prohibits, restricts or
conditions the assignment of any portion of the Receivables;
(xxvii) no selection procedures adverse to the Noteholders or
to the Insurer have been utilized in selecting such Receivable from all
other similar Receivables originated by NAFI; and
(xxviii) as of the Initial Cut-off Date, the weighted average
annual percentage rate, as such term is used with respect to the
Federal Truth-in Lending Act ("APR") of the Initial Receivables was
approximately 19.38% and the weighted average remaining scheduled
maturity on the Initial Receivables was approximately 50.31 months and
the percentage of the aggregate outstanding balance of the Initial
Receivables relating to the financing of used Financed Vehicles was
80.45%. The final scheduled payment date on the Initial Receivable with
the latest maturity is June 29, 2002. Each Receivable is a Simple
Interest or Actuarial Receivable.
In the event NAFI has breached any of the foregoing representations and
warranties and National Financial has accepted a retransfer or is required to
accept a retransfer of the affected Receivable pursuant to the Sale and
Servicing Agreement, NAFI shall, upon demand, repurchase such Receivable from
National Financial. In addition, with respect to any Receivable in respect of
which the Title Document was being applied for on the Closing Date or the
applicable Subsequent Transfer Date, as the case may be, if such Title Document
has not been received by National Financial or its transferee within 180 days
after the Closing Date or such Subsequent Transfer Date, as the case may be, and
National Financial is required to accept a retransfer of such Receivable
pursuant to the Sale and Servicing Agreement, NAFI shall, upon demand by
National Financial, repurchase such Receivable. Any such repurchases by NAFI
shall be at a repurchase price equal to the Purchase Amount determined in the
manner provided in the Sale and Servicing Agreement. Such repurchase price shall
be paid by NAFI at the direction of National Financial and upon receipt of such
repurchase price, National Financial shall release, or cause to be released, to
NAFI the related Receivable File and National Financial or its transferee shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as shall be necessary to vest in NAFI or its designee any
Receivable released pursuant thereof. Except as expressly provided in the next
sentence, it is understood and agreed that the obligation of NAFI to purchase
any Receivable as to which such a breach has occurred and is continuing as
described above shall constitute the sole remedy respecting such breach
available to National Financial. NAFI shall indemnify, defend and hold National
Financial harmless from and
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<PAGE> 17
against any and all losses, damages, claims, expenses and liabilities arising
out of or relating to a breach by NAFI of its representations and warranties in
clauses (vii) and (x) of this Section 4.1(b).
Notwithstanding Section 5.1, it is understood and agreed that the
representations, warranties and covenants set forth in this Section 4.1 shall
survive until the date upon which the Trust terminates pursuant to Section 11.1
of the Sale and Servicing Agreement.
ARTICLE V
DEFINITIONS
5.1. Term. This Agreement shall commence as of the Closing Date and
shall continue in full force and effect until the close of business on October
30, 1997.
5.2. Notices. All notices, demands and requests that may be given or
that are required to be given hereunder shall be sent by United States certified
mail, postage prepaid, return receipt requested, to the parties at their
respective addresses as follows:
IF TO NAFI: National Auto Finance Company, Inc.
One Park Place
Suite 200
Boca Raton, Florida 33487
Attention: President
Telecopy No.: (800) 787-6232
Confirmation: (800) 999-7535
IF TO NATIONAL FINANCIAL National Financial Auto
Funding Trust
One Park Place
Suite 200
Boca Raton, Florida 33487
Attention:
Telecopy No.:
Confirmation: (407) 997-2747
WITH A COPY TO Chase Manhattan Bank Delaware
1201 North Market Street
Wilmington, Delaware 19801
Attn: Corporate Trust
Administration Department
IF TO THE TRUST COLLATERAL AGENT: Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
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<PAGE> 18
Chicago, Illinois 60606
Attention: Indenture Trust Division
Telecopy No.: (312) 461-3525
Confirmation: (312) 461-4662
IF TO THE INSURER: Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Re: NAFI Auto Finance 1997-1 Trust,
6.35% Automobile Receivables-
Backed Notes
Telecopier No.: (212) 339-3518
(212) 339-3529
Confirmation: (212) 836-0100
5.3. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
5.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.
5.5. Amendment. This Agreement may be amended from time to time by NAFI
and National Financial to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other provisions herein or
therein, or to make any other provisions with respect to matters or questions
arising under this Agreement which shall not be materially inconsistent with the
provisions of this Agreement, provided that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Trust Collateral Agent, adversely
affect in any material respect the interests of the Noteholders and provided
further that such action shall be consented to in writing by the Insurer (unless
an Insurer default shall have occurred and be continuing).
5.6. Severability of Provisions. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
5.7. Assignment. This Agreement may not be assigned by NAFI or National
Financial except as contemplated by this Section and the Sale and Servicing
Agreement; provided however,
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<PAGE> 19
that simultaneously with the execution and delivery of this Agreement, National
Financial shall assign all of its right, title and interest under Section 4.1 to
the 1997-1 Trust to which NAFI hereby expressly consents. NAFI agrees to perform
its obligations hereunder for the benefit of the Trust and further agrees that
the Trust Collateral Agent or the Insurer may (but shall have no obligation to)
enforce the provisions of Section 4.1 and exercise the rights of National
Financial to enforce the obligations of NAFI under Section 4.1 on behalf of the
Trust Collateral Agent and the Noteholders without the consent of National
Financial.
5.8. Third-Party Beneficiaries. This Agreement will inure to the
benefit of and be binding upon the parties hereto, and shall also be for the
benefit of the Trust Collateral Agent (for the benefit of the Noteholders) and
the Insurer, each of which shall be considered to be third-party beneficiaries
and shall be entitled to rely on and directly enforce the provisions of this
Agreement. Except as otherwise provided in this Agreement, no other Person will
have any right or obligation hereunder. The Insurer may disclaim any of its
rights and powers under this Agreement upon delivery of a written notice to the
Trust Collateral Agent and NAFI.
5.9. No Petition: NAFI hereby agrees that it will not institute against
National Financial, or join any other Person instituting against National
Financial, any bankruptcy or insolvency proceeding under any applicable state or
federal law so long as any Note issued pursuant to the Indenture remains
outstanding or there shall have not elapsed one year plus one day since the date
of the final payment on the Notes issued pursuant to the Indenture. The
foregoing shall not limit the right of NAFI to file any claim in or otherwise
take any action with respect to any bankruptcy or insolvency proceeding that was
instituted against National Financial by any Person other than NAFI.
5.10. Limitation of Liability of National Financial Trustee:
Notwithstanding anything contained herein to the contrary, this Agreement has
been executed and delivered by Chase Manhattan Bank Delaware not in its
individual capacity but solely as Trustee and in no event shall Chase Manhattan
Bank Delaware, have any liability for the representations, warranties,
covenants, agreements or other obligations of National Financial 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 National Financial.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Purchase and
Contribution Agreement as of the day and year first written above.
NATIONAL FINANCIAL AUTO FUNDING TRUST
By: Chase Manhattan Bank Delaware, not in its
individual capacity but solely as Trustee
of National Financial Auto Funding Trust,
By: ____________________________________
Name:
Title:
NATIONAL AUTO FINANCE COMPANY, INC.
By: ____________________________________
Name:
Title:
19
<PAGE> 21
EXHIBIT A
FORM OF CONVEYANCE
CONVEYANCE No. ___, dated as of _______________, 19__, by National Auto
Finance Company, Inc., a Delaware corporation ("Originator"), to National
Financial Auto Funding Trust, a Delaware business trust ("National Financial"),
pursuant to the Purchase and Contribution Agreement referred to below.
WITNESSETH:
WHEREAS, Originator and National Financial are parties to the Purchase
and Contribution Agreement, dated as of July __, 1997 (as such agreement may
have been, or may from time to time be, amended, supplemented or otherwise
modified, the "Purchase Agreement"); and
WHEREAS, pursuant to the Purchase Agreement, Originator wishes to sell,
transfer, convey and assign Receivable Assets (as defined in the Purchase
Agreement) to National Financial;
NOW THEREFORE, Originator and National Financial hereby agree as
follows:
1. Defined Terms. All capitalized terms used but not defined herein
shall have meanings ascribed to them in the Purchase Agreement.
"Subsequent Transfer Date" shall mean, with respect to the Receivable
Assets sold hereby, ____________________, 199[ ].
2. Transfer of Receivables. For value received, Originator hereby
sells, transfers, assigns, sets-over and conveys to National Financial, without
recourse except as set forth in the Purchase Agreement, and with the
representations, warranties and covenants set forth in the Purchase Agreement,
on and after the Subsequent Transfer Date, all right, title and interest of
National Financial in, to and under all Subsequent Receivables listed in
Schedule 1 hereto and the Receivable Assets related thereto.
3. Delivery of Receivable Schedule. Originator does hereby deliver
National Financial herewith a Receivable Schedule containing a true and complete
list of each Subsequent Receivable being sold hereby as of the Subsequent
Transfer Date. Such Receivable Schedule is marked as Schedule 1 to this
Conveyance and is hereby incorporated in and made a part of this Conveyance and
the Purchase Agreement.
4. Receivable Files. Originator does hereby deliver to National
Financial or such other Person designated by National Financial the original
motor vehicle retail installment sale contracts and Receivable Files for each
Receivable identified in the Receivable Schedule.
5. Acceptance and Acknowledgment. National Financial hereby
acknowledges its acceptance of all right, title and interest of Originator in,
to and under the Receivables and the other Receivable Assets sold hereby.
Originator further acknowledges that, prior to or
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<PAGE> 22
simultaneously with the execution and delivery of this Conveyance the conditions
precedent to such sale set forth in Article III of the Purchase Agreement have
been satisfied.
6. Certification; Representations and Warranties. Originator hereby
certifies to National Financial that all applicable requirements of Article III
of the Purchase Agreement have been fully satisfied and that all representations
and warranties of Originator set forth in Section 4.1(a) of the Purchase
Agreement are true and correct on and as of the date hereof and all
representations and warranties of Originator set forth in Section 4.1(b) of the
Purchase Agreement are true and correct on and as of the date hereof with
respect to the Subsequent Receivables sold hereby. The aggregate outstanding
principal balance of the Subsequent Receivables sold hereby as of the applicable
Cut-off Date is $__________________.
7. The Purchase Agreement. The Purchase Agreement shall continue to be,
and shall remain, in full force and effect in accordance with its terms, and
hereby is ratified and confirmed in all respects.
8. Counterparts. This Conveyance may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
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SCHEDULE 1
SCHEDULE OF RECEIVABLES
22
<PAGE> 1
EXHIBIT 10.2
================================================================================
SALE AGREEMENT
BETWEEN
NATIONAL FINANCIAL AUTO FUNDING TRUST II
AND
NATIONAL FINANCIAL AUTO FUNDING TRUST
----------------------
DATED AS OF JUNE 29, 1997
================================================================================
<PAGE> 2
SALE AGREEMENT
SALE AGREEMENT, dated as of June 29, 1997, by and between NATIONAL
FINANCIAL AUTO FUNDING TRUST, a Delaware business trust ("Funding Trust I"), and
NATIONAL FINANCIAL AUTO FUNDING TRUST II, a Delaware business trust ("Funding
Trust II").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained, Funding
Trust I and Funding Trust II agree as follows:
ARTICLE I
DEFINITIONS
1.1. Incorporation of Definitions. Capitalized terms used but not
defined herein have the meanings ascribed to them in the Pooling and
Administration Agreement dated as of December 8, 1994 (the "Pooling and
Administration Agreement"), among Funding Trust II, as transferor, National Auto
Finance Company, Inc. ("NAFI") (as successor to National Auto Finance Company
L.P.), as Administrator, and Bankers Trust Company, as Trustee, or the
Assignment Agreement, dated as of June 29, 1997, between Funding Trust II and
the Trustee.
1.2. Other Definitions. When used in this Agreement, the following
words and phrases shall have the following meanings:
Cut-Off Date: As defined in Section 2.1.
Closing Date: means July 23, 1997.
Originator Agreement: An agreement pursuant to which NAFI acquired
Receivables from an Originator.
Outstanding Principal Balance: As of any date and with respect to any
Receivable, the outstanding principal balance of such Receivable as of such
date, which shall be computed by reducing the original principal balance of such
Receivable by the portion of each payment received and processed by the Servicer
on or before such date that would represent principal if such payments were
allocated to the principal of and interest on such Receivable based on the
amortization method provided in such Receivable.
Purchase Price: As defined in Section 2.1.
Receivable Assets: The assets described in clauses (i) through (ix),
inclusive, of subsection 2.1 hereof.
<PAGE> 3
Related Security: means, with respect to any Receivable, the interest
of the Seller in (i) the security interest in the Financed Vehicles granted by
the Obligors or the Receivables and any accessions thereto and (ii) physical
damage, credit life, credit disability or other insurance policies covering
Financed Vehicles or Obligors (including any blanket vendor's single interest
insurance policy).
Receivables Schedule: The schedule of Receivables attached as Schedule
1 hereto, such schedule identifying each Receivable by name of the Obligor and
setting forth as to each Receivable its Outstanding Principal Balance as of the
Cut-off Date, loan number, interest rate, scheduled monthly payment of principal
and interest, final maturity date and original principal amount.
ARTICLE II
PURCHASE AND SALE
2.1. Purchase. Subject to and on the terms and conditions set forth
herein, Funding Trust II hereby sells, transfers, conveys and assigns, without
representation, warranty or recourse, except as specifically set forth herein,
all of its right, title and interest in and to (i) the Receivables identified on
the Receivables Schedule attached hereto as Schedule I, (ii) all monies paid or
payable thereunder on or after June 29, 1997 (the "Cut-off Date"), (iii) the
Related Security with respect to each such Receivable, (iv) all proceeds of the
foregoing, including all Collections or Related Security with respect to such
Receivables, or other recoveries applied to repay or discharge any such
Receivable received on or after the Cut-off Date (including net proceeds of sale
or other disposition of repossessed Financed Vehicles that were the subject of
any such Receivable) or other collateral or property of any Obligor or any other
party directly or indirectly liable for payment of such Receivables, (v) the
Seller Transaction Documents and the Assignment Agreement, dated as of June 29,
1997 between Funding Trust II and Bankers Trust Company, as Trustee of the
National Financial Auto Receivables Master Trust (the "Assignment Agreement"),
(vi) all records relating to any of the foregoing, (vii) all rights of Funding
Trust II assigned to Funding Trust II against Dealers under the Dealer
Agreements and against Originators under the Originator Agreements, (viii) any
other Trust Assets relating to the Receivables Assets and (ix) the proceeds of
the foregoing. Funding Trust I agrees to pay to Funding II on the Closing Date
as the purchase price (the "Purchase Price") for the Receivable Assets sold
hereunder on such date an amount equal to $57,461,207.08 in immediately
available funds to an account at a bank designated by Funding Trust II to
Funding Trust I.
2.2. Filings. (a) On or prior to the Closing Date, Funding Trust II
shall have filed in the office of the Secretary of State of Delaware and the
Office of the Secretary of State of Florida UCC financing statements,
appropriate under the Uniform Commercial Code in effect in Delaware and Florida
to reflect the transfer of the Receivables Assets from Funding Trust II to
Funding Trust I and to protect Funding Trust I's interest in the Receivables
Assets against all other Persons, naming Funding Trust II as debtor, Funding
Trust I as secured party and Harris Trust and Savings Bank ("Harris Trust") as
assignee. During the term of this Agreement, Funding Trust II shall not change
its name, identity or structure or relocate its chief executive office or
principal place of business without first giving 60 days prior written notice to
Funding Trust I and Financial
2
<PAGE> 4
Security Assurance Inc. ("Financial Security") (for so long as any policy issued
Financial Security Assurance Inc. is in effect with respect to any securities
issued by Funding Trust I or any trust of which Funding Trust I is depositor or
transferor); provided, however, that Funding Trust I has no right or power to
prohibit a change in Funding Trust II's name, identity or structure or, subject
to the last sentence of this paragraph, a relocation of, its chief executive
office. If any change in Funding Trust II's name, identity or structure or the
relocation of its chief executive office or principal place of business would
make any financing or continuation statement or notice of lien filed in
connection with this Agreement seriously misleading within the meaning of
applicable provisions of the UCC or any title statute, Funding Trust II, shall
after the effective date of such change, promptly file or cause to be filed such
amendments as may be required to preserve and protect Funding Trust I's interest
in the Receivables Assets.
(b) On or prior to the Closing Date, Funding Trust II shall deliver to
Funding Trust I or such other Person as Funding Trust I shall direct cash equal
to all payments received on such Receivables on or after the Cut-off Date and on
or before two Business days prior to the Closing Date. Within two Business Days
after the Closing Date, Funding Trust II shall deliver to Funding Trust I or
such other Person as Funding Trust I shall direct all other payments received on
such Receivables on or after the Cut-off Date and on or before the Closing Date.
Funding Trust hereby directs Funding Trust II to deliver cash equal to all such
payments described in this Section 2.2(b) to be delivered to Harris Trust and
Savings Bank ("Harris Trust") in its capacity as Trust Collateral Agent under
the Sale and Servicing Agreement (as defined herein).
2.3. No Recourse. The sale and purchase of Receivables and the other
Receivables Assets under this Agreement shall be without recourse to Funding
Trust II.
2.4. True Sales. Funding Trust II and Funding Trust I intend that the
transactions contemplated hereby be true sales of the Receivables and other
Receivables Assets by Funding Trust II to Funding Trust I providing Funding
Trust I with the full benefits of ownership of the Receivables and other
Receivables Assets free and clear of any liens, and neither Funding Trust II nor
Funding Trust I intends the transactions contemplated hereby to be, or for any
purpose to be characterized as, a loan from Funding Trust I to Funding Trust II.
Funding Trust II shall reflect sales of the Receivables Assets hereunder on the
books and records maintained by Funding Trust II as sales of assets, and shall
treat such sales as sales for all purposes.
2.5. Receipt of Payments after Closing Date. Funding Trust I shall be
entitled to all payments received or receivable with respect to any Receivable
sold and conveyed by Funding Trust II to Funding Trust I hereunder that are
received on and after the Cut-off Date. If Funding Trust II receives any payment
on a Receivable belonging to Funding Trust I, Funding Trust II promptly shall
turn such payment over to Harris Trust, as trustee under the Sale and Servicing
Agreement, dated as of June 29, 1997 (the "Sale and Servicing Agreement"), among
National Auto Finance 1997-1 Trust, Funding Trust I, NAFI and Harris Trust.
ARTICLE III
MISCELLANEOUS
3
<PAGE> 5
3.1. Notices. All notices, demands and requests that may be given or
that are required to be given hereunder shall be sent by United States certified
mail, postage prepaid, return receipt requested, to the parties at their
respective addresses as follows:
If to Funding Trust II:
National Financial Auto Funding Trust II
c/o Chase Manhattan Bank Delaware, as Trustee
1201 N. Market Street
Wilmington, Delaware 19801
Attention: Corporate Administration Trust Department
Telecopier No.: (302) 575-5467
Confirmation: (302) 428-3375
If to Funding Trust I:
National Financial Auto Funding Trust I
c/o Chase Manhattan Bank Delaware, as Trustee
1201 N. Market Street
Wilmington, Delaware 19801
Attention: Corporate Administration Trust Department
Telecopier No.: (302) 575-5467
Confirmation: (302) 428-3375
If to Financial Security Assurance Inc.:
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Re: National Auto Finance 1997-1 Trust, 6.35%
Automobile Receivables Backed Notes
Telecopier No: (212) 339-3518,
(212) 339-3529
Confirmation: (212) 826-0100
If to Harris Trust:
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Division
Telecopier No.: (312) 461-3525
Confirmation: (312) 461-4662
4
<PAGE> 6
3.2. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
3.3. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.
3.4. Assignment. This Agreement may not be assigned by Funding Trust II
or Funding Trust I except as contemplated by this Section; provided, however,
that simultaneously with the execution and delivery of this Agreement, Funding
Trust I shall assign all of its right, title and interest hereunder to National
Auto Finance 1997-1 Trust pursuant to the Sale and Servicing Agreement, as
provided in Section 2.1 of the Sale and Servicing Agreement.
3.5. Third-Party Beneficiaries. This Agreement will inure to the
benefit of and be binding upon the parties hereto and shall also be for the
benefit of Harris Trust (for the benefit of the Noteholders) and Financial
Security, each of which shall be considered to be third-party beneficiaries of
this Agreement and shall be entitled to rely upon and directly enforce the
provisions of this Agreement. Except as otherwise provided in this Agreement, no
other Person will have any right or obligation hereunder. Financial Security may
disclaim any of its rights and powers under this Agreement upon delivery of a
written notice to Funding Trust II and Funding Trust I.
3.6. No Petition. Funding Trust II hereby agrees not to cause the
filing of a petition in bankruptcy against Funding Trust I until one year and
one day after the maturity of any securities securities evidencing a beneficial
interest in or secured by Receivable Assets sold, transferred or otherwise
conveyed by the Trustee to Funding Trust II, NAFI or any affiliate of either.
3.7. Further Assurances. It is Funding Trust II's intention to convey
its entire rights, title and interest in the Receivables Assets or other assets
related thereto acquired from National Financial Auto Receivables Master Trust
pursuant to the Assignment Agreement.
3.8. Limitation of Liability of Funding Trust I Trustee:
Notwithstanding anything contained herein to the contrary, this Agreement has
been executed and delivered by Chase Manhattan Bank Delaware not in its
individual capacity but solely as Trustee and in no event shall Chase Manhattan
Bank Delaware, have any liability for the representations, warranties,
covenants, agreements or other obligations of Funding Trust I 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 Funding Trust I.
3.9. Limitation of Liability of Funding Trust II Trustee:
Notwithstanding anything contained herein to the contrary, this Agreement has
been executed and delivered by Chase Manhattan Bank Delaware not in its
individual capacity but solely as Trustee and in no event shall Chase Manhattan
Bank Delaware, have any liability for the representations, warranties,
covenants, agreements or other obligations of Funding Trust II 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 Funding Trust II.
5
<PAGE> 7
3.10. Amendment. This Agreement may be amended in writing by the
parties hereto with the prior written consent of Financial Security, to cure any
ambiguity or to correct any provisions in this Agreement.
6
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
NATIONAL FINANCIAL AUTO FUNDING TRUST II
By: Chase Manhattan Bank Delaware,
not in its individual capacity,
but solely as Trustee of
National Financial Auto Funding
Trust II,
By:
-------------------------------------------
Name:
Title:
NATIONAL FINANCIAL AUTO FUNDING TRUST
By: Chase Manhattan Bank Delaware,
not in its individual capacity,
but solely as Trustee of
National Financial Auto Funding
Trust,
By:
-------------------------------------------
Name:
Title:
7
<PAGE> 1
EXHIBIT 10.3
EXECUTION COPY
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
NATIONAL FINANCIAL AUTO FUNDING TRUST
and
FIRST UNION CAPITAL MARKETS CORP.
Dated as of July 23, 1997
National Auto Finance 1997-1 Trust
6.35% Automobile Receivables-Backed Notes
$66,891,200
<PAGE> 2
TABLE OF CONTENTS
Page
Section 1. Definitions 1
Section 2. Representations, Warranties and Agreements of
Financial Security 4
Section 3. Representations, Warranties and Agreements of
the Underwriter 7
Section 4. Indemnification 8
Section 5. Indemnification Procedures 9
Section 6. Contribution 10
Section 7. Miscellaneous 11
EXHIBIT A Opinion of Assistant General Counsel
<PAGE> 3
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of July 23, 1997, among FINANCIAL
SECURITY ASSURANCE INC. ("Financial Security"), NATIONAL FINANCIAL AUTO FUNDING
TRUST (the "Company") and FIRST UNION CAPITAL MARKETS CORP. (the "Underwriter"):
Section 1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as the same may be
amended, supplemented, or otherwise modified from time to time in accordance
with the terms hereof.
"Commission" means the SEC Commission.
"Company Party" means any of the Company, its subsidiaries and
affiliates and any trustee, holder of beneficial ownership interest, director,
officer, employee, agent or "controlling person" (as such term is used in the
Securities Act) of any of the foregoing.
"Federal Securities Laws" means the Securities Act, the Securities
Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company
Act of 1940, the Investment Advisers Act of 1940 and the Public Utility Holding
Company Act of 1935, each as amended from time to time, and the rules and
regulations in effect from time to time under such Acts.
"Financial Security Agreements" means this Agreement, the Spread
Account Agreement and the Insurance Agreement.
"Financial Security Information" has the meaning provided in Section
2(g) hereof.
"Financial Security Party" means any of Financial Security, its parent,
subsidiaries and affiliates, and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
<PAGE> 4
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 4 hereof.
"Indenture" means the Indenture dated as of June 29, 1997, between
National Auto Finance 1997-1 Trust and Harris Trust and Savings Bank, as
Indenture Trustee and Trust Collateral Agent.
"Insurance Agreement" means the Insurance and Indemnity Agreement,
dated as of July 23, 1997, among Financial Security, the Trust, the Company and
NAFI, as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
"Losses" means (a) any actual out-of-pocket damages incurred by the
party entitled to indemnification or contribution hereunder, (b) any actual
out-of-pocket costs or expenses incurred by such party, including reasonable
fees or expenses of its counsel and other expenses incurred in connection with
investigating or defending any claim, action or other proceeding which entitle
such party to be indemnified hereunder (subject to the limitations set forth in
Section 5 hereof), to the extent not paid, satisfied or reimbursed from funds
provided by any other Person other than an affiliate of such party (provided
that the foregoing shall not create or imply any obligation to pursue recourse
against any such other Person), plus (c) interest on the amount paid by the
party entitled to indemnification or contribution from the date of such payment
to the date of payment by the party who is obligated to indemnify or contribute
hereunder at the statutory rate applicable to judgments for breach of contract.
"NAFI" means National Auto Finance Company, Inc., a Delaware
corporation.
"Offering Document" means the Prospectus and any other material or
documents delivered by the Underwriter or any Underwriter Party to any Person in
connection with the offer or sale of the Securities.
"Person" means any individual, partnership, joint venture, corporation,
limited liability company, limited liability partnership, trust, unincorporated
organization
<PAGE> 5
or other organization or entity (whether governmental or private).
"Policy" means the financial guaranty insurance policy delivered by
Financial Security with respect to the Securities.
"Prospectus" means any prospectus or preliminary prospectus relating to
the Securities included in the Registration Statement or filed with the
Commission (including all documents, if any, incorporated by reference therein
and the information, if any, deemed to be part thereof pursuant to the Rules and
Regulations), as the same may be amended or supplemented from time to time;
provided, however, that if any revised prospectus shall be provided by the
Company for use in connection with the offering of the Securities which differs
from the Prospectus filed with the Commission pursuant to Rule 424 of the
Securities Act (whether or not such revised prospectus is required to be filed
by the Seller pursuant to Rule 424 of the Securities Act), the term "Prospectus"
shall refer to such revised Prospectus from and after the time it is first
provided to the Underwriter or any Underwriter Party for such use.
"Registration Statement" means the registration statement on Form S-3
(No. 333-28829) including a prospectus and any amendments thereto relating to
the Securities, and any registration statement required to be filed under the
Securities Act or the Rules and Regulations (including all documents, if any,
incorporated by reference therein and the information, if any, deemed to be part
thereof pursuant to the Rules and Regulations), as the same may be amended or
supplemented from time to time.
"Rules and Regulations" means the rules and regulations of the
Commission under the Securities Act.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of June 29, 1997, among the Trust, the Company, NAFI, as Servicer, and
Harris Trust and Savings Bank, not in its individual capacity but solely as
Trust Collateral Agent.
"Securities" means the National Auto Finance 1997-1 Trust $66,891,200
6.35% Automobile Receivables-Backed Notes, described in the Offering Document
and issued pursuant to the Indenture and covered by the Policy.
<PAGE> 6
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and any rule or regulation in effect from time to time under such Act.
"Spread Account Agreement" means the Master Spread Account Agreement
dated as of July 23, 1997, by and among the Company, Financial Security, the
Collateral Agent and the Trustee specified therein, as the same may be amended,
amended and restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"Trust" means the National Auto Finance 1997-1 Trust, a Delaware
business trust.
"Underwriter Information" has the meaning provided in Section 3(c)
hereof.
"Underwriter Party" means any of the Underwriter, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Underwriting Agreement" means the Underwriting Agreement dated as of
July 17, 1997, between the Company and the Underwriter, with respect to the
offer and sale of the Securities, as the same may be amended, amended and
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof.
Section 2. Representations, Warranties and Agreements of Financial
Security. Financial Security represents, warrants and agrees with the parties
hereto as follows:
A. Organization, Etc. Financial Security is a stock insurance
company duly organized, validly existing and authorized to
transact financial guaranty insurance business under the laws
of the State of New York.
B. Authorization, Etc. The Policy and the Financial Security
Agreements have been duly authorized, executed and delivered
by Financial Security.
C. Validity, Etc. The Policy and the Financial Security
Agreements constitute valid and
<PAGE> 7
binding obligations of Financial Security, enforceable against
Financial Security in accordance with their terms, subject, as
to the enforcement of remedies, to bankruptcy, insolvency,
reorganization, rehabilitation, moratorium and other similar
laws affecting the enforceability of creditors' rights
generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of
general principles of equity and subject, in the case of this
Agreement, to principles of public policy limiting the right
to enforce the indemnification provisions contained herein.
D. Exemption From Registration. The Policy is exempt from
registration under the Securities Act.
E. No Conflicts. Neither the execution or delivery by Financial
Security of the Policy or the Financial Security Agreements,
nor the performance by Financial Security of its obligations
thereunder, will conflict with any provision of the
certificate of incorporation or the bylaws of Financial
Security nor result in a breach of, or constitute a default
under, any material agreement or other instrument to which
Financial Security is a party or by which any of its property
is bound nor violate any judgment, order or decree applicable
to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction
over Financial Security (except that, in the published opinion
of the Commission, the indemnification provisions of this
Agreement, insofar as they relate to indemnification for
liabilities arising under the Securities Act, are against
public policy as expressed in the Securities Act and are
therefore unenforceable).
F. Financial Information. The consolidated balance sheets of
Financial Security as of December 31, 1995 and December 31,
1996 and the related consolidated statements of income,
changes in shareholder's equity and cash flows for the fiscal
years then ended and the interim consolidated balance sheet of
Financial Security as of March 31, 1997, and the related
statements of income, changes in shareholder's equity and cash
flows for the interim period then ended, furnished by
Financial Security to the Underwriter, fairly present in all
material respects the financial condition of Financial
<PAGE> 8
Security as of such dates and for such periods in accordance
with generally accepted accounting principles consistently
applied (subject as to interim statements to normal year-end
adjustments) and since the date of the most current interim
consolidated balance sheet referred to above there has been no
change in the financial condition of Financial Security which
would materially and adversely affect its ability to perform
its obligations under the Policy.
G. Financial Security Information. The information in the
Prospectus set forth under the caption "The Insurer", or such
additional information as may be deemed to be included in the
Prospectus pursuant to the second paragraph under the heading
"Incorporation of Certain Documents By Reference" on page S-3
of the Prospectus (as revised from time to time in accordance
with the provisions hereof, the "Financial Security
Information") is limited and does not purport to provide the
scope of disclosure required to be included in a prospectus
with respect to a registrant in connection with the offer and
sale of securities of such registrant registered under the
Securities Act. Within such limited scope of disclosure,
however, as of the date of the Prospectus and as of the date
hereof, the Financial Security Information does not contain
any untrue statement of a material fact, or omit to state a
material fact necessary to make the statements contained
therein, in the light of the circumstances under which they
were made, not misleading.
H. Additional Information. Financial Security will furnish to the
Underwriter or the Company, upon request of the Underwriter or
the Company, as the case may be, copies of Financial
Security's most recent financial statements (annual or
interim, as the case may be) which fairly present in all
material respects the financial condition of Financial
Security as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles
consistently applied except as noted therein (subject, as to
interim statements, to normal year-end adjustments). In
addition, if the delivery of a Prospectus relating to the
Securities is required at any time prior to the expiration of
nine months after the time of issuance of the Prospectus in
connection with the offering or
<PAGE> 9
sale of the Securities, the Company or the Underwriter will
notify Financial Security of such requirement to deliver a
Prospectus and Financial Security will promptly provide the
Underwriter and the Company with any revisions to the
Financial Security Information that are in the judgment of
Financial Security necessary to prepare an amended Prospectus
or a supplement to the Prospectus.
I. Opinion of Counsel. Financial Security will furnish to the
Underwriter and the Company on the closing date for the sale
of the Securities an opinion of its Assistant General Counsel,
to the effect set forth in Exhibit A attached hereto, dated
such closing date and addressed to the Company and the
Underwriter.
J. Consents and Reports of Independent Accountants. Financial
Security will furnish to the Underwriter and the Company, upon
request, as comfort from its independent accountants in
respect of its financial condition, (i) at the expense of the
Person specified in the Insurance Agreement, a copy of the
Prospectus, including either a manually signed consent or a
manually signed report of Financial Security's independent
accountants, and (ii) the quarterly review letter by Financial
Security's independent accountants in respect of the most
recent interim financial statements of Financial Security.
Nothing in this Agreement shall be construed as a representation or warranty by
Financial Security concerning the rating of its claims-paying ability by Moody's
Investors Service, Inc. or Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, or any other rating agency (collectively, the "Rating
Agencies"). The Rating Agencies, in assigning such ratings, take into account
facts and assumptions not described in the Prospectus and the facts and
assumptions considered by the Rating Agencies, and the ratings issued thereby,
are subject to change over time.
Section 3. Representations, Warranties and Agreements of the
Underwriter. The Underwriter represents, warrants and agrees with the parties
hereto as follows:
A. Compliance With Laws. The Underwriter will comply in all
material respects with all legal
<PAGE> 10
requirements in connection with offers and sales of the
Securities and make such offers and sales in the manner
provided in the Offering Document.
B. Offering Document. The Underwriter will not use, or distribute
to other broker-dealers for use, any Offering Document in
connection with the offer and sale of the Securities unless
such Offering Document includes such information as has been
furnished by Financial Security for inclusion therein and the
information therein concerning Financial Security has been
approved by Financial Security in writing. Financial Security
hereby consents to the information in respect of Financial
Security included in the Prospectus. Each Offering Document
will include the following statement:
"The Policy is not covered by the property/casualty
insurance security fund specified in Article 76 of
the New York Insurance Law".
Each Offering Document including financial information with
respect to Financial Security prepared in accordance with
generally accepted accounting principles will include the
following statement immediately preceding such financial
information:
"The New York State Insurance Department recognizes
only statutory accounting practices for determining
and reporting the financial condition and results of
operations of an insurance company, for determining
its solvency under the New York Insurance Law, and
for determining whether its financial condition
warrants the payment of a dividend to its
stockholders. No consideration is given by the New
York State Insurance Department to financial
statements prepared in accordance with generally
accepted accounting principles in making such
determinations."
C. Underwriter Information. All material provided by the
Underwriter for inclusion in the Offering Document (as revised
from time to time, the "Underwriter Information"), insofar as
such information relates to the Underwriter and the manner
<PAGE> 11
of offer and sale of the Securities, is true and correct in
all material respects. In respect of the Prospectus, the
parties hereto acknowledge and agree that the Underwriter
Information is limited to the following: (i) the fifth
paragraph on the front cover page of the Offering Document
concerning market making activities; (ii) the first sentence
of the last paragraph on the front cover page of the Offering
Document concerning the terms of the offering; (iii) the first
paragraph on page S-2 of the Offering Document concerning
market making activities; (iv) the third paragraph on page S-2
of the Offering Document concerning stabilization activities;
and (v) the information under the caption "Underwriting" in
the Offering Document.
Section 4. Indemnification.
A. Financial Security agrees, upon the terms and subject to the conditions
provided herein, to indemnify, defend and hold harmless each Company
Party and each Underwriter Party against (i) any and all Losses
incurred by them with respect to the offer and sale of the Securities
and resulting from Financial Security's breach of any of its
representations, warranties or agreements set forth in Section 2 hereof
and (ii) any and all Losses to which any Company Party or Underwriter
Party may become subject, under the Securities Act or otherwise,
insofar as such Losses arise out of or result from an untrue statement
of a material fact contained in any Offering Document or the omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or
omission was made in the Financial Security Information included
therein in accordance with the provisions hereof.
B. The Underwriter agrees, upon the terms and subject to the conditions
provided herein, to indemnify, defend and hold harmless each Financial
Security Party and each Company Party against (i) any and all Losses
incurred by them with respect to the offer and sale of the Securities
and resulting from the Underwriter's breach of any of its
representations, warranties or agreements set forth in Section 3 hereof
and (ii) any and all Losses to which any Financial Security Party or
Company Party may become subject, under the Securities Act or
otherwise, insofar as such Losses arise out of or result from an untrue
statement of a material fact contained in any
<PAGE> 12
Offering Document or the omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or omission was made in the
Underwriter Information included therein.
C. Upon the incurrence of any Losses for which a party is entitled to
indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party
to the Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided below in
Section 6 with respect to contribution, the indemnification provided herein by
an Indemnifying Party shall be the exclusive remedy of any and all Indemnified
Parties for the breach of a representation, warranty or agreement hereunder by
an Indemnifying Party; provided, however, that each Indemnified Party shall be
entitled to pursue any other remedy at law or in equity for any such breach so
long as the damages sought to be recovered shall not exceed the Losses incurred
thereby resulting from such breach. In the event that any action or regulatory
proceeding shall be commenced or claim asserted which may entitle an Indemnified
Party to be indemnified under this Agreement, such party shall give the
Indemnifying Party written or telegraphic notice of such action or claim
reasonably promptly after receipt of written notice thereof. The Indemnifying
Party shall be entitled to participate in and, upon notice to the Indemnified
Party, assume the defense of any such action or claim in reasonable cooperation
with, and with the reasonable cooperation of, the Indemnified Party. The
Indemnified Party shall have the right to employ its own counsel in any such
action in addition to the counsel of the Indemnifying Party, but the fees and
expenses of such separate counsel shall be at the expense of the Indemnified
Party unless (i) the employment of counsel by the Indemnified Party at its
expense have been authorized in writing by the Indemnifying Party, (ii) the
Indemnifying Party has not in fact employed counsel to assume the defense of
such action or proceeding within a reasonable time after receiving notice of the
commencement of the action or proceeding or (iii) the named parties to any such
action or proceeding (including any impleaded parties) include both the
Indemnifying Party and one or more Indemnified Parties, and the Indemnified
Parties shall have been advised by counsel that there may be one
<PAGE> 13
or more legal defenses available to them which are different from or additional
to those available to the Indemnifying Party (it being understood, however, that
the Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for all Company Parties, one such
firm for all Underwriter Parties and one such firm for all Financial Security
Parties, as the case may be, which firm shall be designated in writing by the
Company in respect of the Company Parties, by the Underwriter in respect of the
Underwriter Parties and by Financial Security in respect of the Financial
Security Parties), in each of which cases the fees and expenses of counsel will
be at the expense of the Indemnifying Party and all such fees and expenses will
be reimbursed promptly as they are incurred. The Indemnifying Party shall not be
liable for any settlement of any such claim or action unless the Indemnifying
Party shall have consented thereto or be in default in its obligations
hereunder. Any failure by an Indemnified Party to comply with the provisions of
this Section shall relieve the Indemnifying Party of liability only if such
failure is prejudicial to the position of the Indemnifying Party and then only
to the extent of such prejudice.
Section 6. Contribution.
A. To provide for just and equitable contribution if the indemnification
provided by any Indemnifying Party is determined to be unavailable for
any Indemnified Party (other than due to application of this Section
6), each Indemnifying Party shall contribute to the Losses arising from
any breach of any of its representations, warranties or agreements
contained in this Agreement on the basis of the relative fault of each
of the parties as set forth in Section 6(b) below; provided, however,
that an Indemnifying Party shall in no event be required to contribute
to all Indemnified Parties an aggregate amount in excess of the Losses
incurred by such Indemnified Parties resulting from the breach of
representations, warranties or agreements contained in this Agreement.
B. The relative fault of each Indemnifying Party, on the one hand, and of
each Indemnified Party, on the other, shall be determined by reference
to, among
<PAGE> 14
other things, whether the breach of, or alleged breach of, any
representations, warranties or agreements contained in this Agreement
relates to information supplied by, or action within the control of,
the Indemnifying Party or the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such breach.
C. The parties agree that Financial Security shall be solely responsible
for the Financial Security Information, the Underwriter shall be solely
responsible for the Underwriter Information and that the balance of
each Offering Document shall be the responsibility of the Company.
D. Notwithstanding anything in this Section 6 to the contrary, the
Underwriter shall not be required to contribute an amount in excess of
the amount by which the total offering price of the Securities
purchased by the Underwriter exceeds the amount of any damages that
such Underwriter has otherwise been required to pay in respect of any
breach by the Underwriter of its representations or warranties
contained in Section 3 hereof.
E. No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent
misrepresentation.
F. Upon the incurrence of any Losses entitled to contribution hereunder,
the contributor shall reimburse the party entitled to contribution
promptly upon establishment by the party entitled to contribution to
the contributor of the Losses incurred.
Section 7. Miscellaneous.
A. Notices. All notices and other communications provided for under this
Agreement shall be delivered to the address set forth below or to such
other address as shall be designated by the recipient in a written
notice to the other party or parties hereto:
<PAGE> 15
If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President --
Surveillance Department (with a copy to the
attention of the General Counsel)
Re: National Auto Finance 1997-1 Trust,
6.35% Automobile Receivables-Backed Notes
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518,
(212) 339-3529
(in each case in which notice or
other communication to Financial
Security refers to an Event of
Default, a claim on the Policy or
with respect to which failure on the
part of Financial Security to
respond shall be deemed to
constitute consent or acceptance,
then a copy of such notice or other
communication should also be sent to
the attention of each of the General
Counsel and the Head-Financial
Guaranty Group and each such notice
shall be marked to indicate "URGENT
MATERIAL ENCLOSED.")
If to the Company:
National Financial Auto Funding Trust
c/o Chase Manhattan Bank Delaware
802 Delaware Avenue
Wilmington, Delaware 19801
Attention: Corporate Trust Administration
Telecopy No.: (302) 575-5467
Confirmation: (302) 575-5099
<PAGE> 16
with a copy to:
Chase Manhattan Bank Delaware
c/o The Chase Manhattan Bank, N.A.
4 Chase Metrotech Center
Brooklyn, New York 11242
Attention: Corporate Trust Administration
Telecopy No.: (718) 242-3529
Confirmation: (718) 242-7283
If to the Underwriter:
First Union Capital Market Corp.
One First Union Center
Charlotte, North Carolina 28288-0610
Attention: Reginald H. Imamura
Telecopy No.: (704) 374-3254
Confirm No.: (704) 374-6501
B. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
C. Assignments. This Agreement may not be assigned by any party without
the express written consent of each other party. Any assignment made in
violation of this Agreement shall be null and void.
D. Amendments. Amendments of this Agreement shall be in writing signed by
each party hereto.
E. Survival, Etc. The indemnity and contribution agreements contained in
this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any
Indemnifying Party, (ii) the issuance of the Securities or (iii) any
termination of this Agreement or the Policy. The indemnification
provided in this Agreement will be in addition to any liability which
the parties may otherwise have and shall in no way limit any
obligations of the Company under the Underwriting Agreement or the
Insurance Agreement.
F. Counterparts. This Agreement may be executed in counterparts by the
parties hereto, and all
<PAGE> 17
such counterparts shall constitute one and the same instrument.
[Remainder of Page Intentionally Blank]
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
FIRST UNION CAPITAL MARKETS CORP.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
NATIONAL FINANCIAL AUTO FUNDING TRUST
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
of Chase Manhattan Bank Delaware,
not in its individual capacity,
but solely in its capacity as
trustee for National Financial
Auto Funding Trust
<PAGE> 19
EXHIBIT A
OPINION OF ASSISTANT GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
I. Financial Security is a stock insurance company duly organized, validly
existing and authorized to transact financial guaranty insurance
business under the laws of the State of New York.
II. The Policy and the Financial Security Agreements have been duly
authorized, executed and delivered by Financial Security.
III. The Policy and the Financial Security Agreements constitute valid and
binding obligations of Financial Security, enforceable against
Financial Security in accordance with their terms, subject, as to the
enforcement of remedies, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event
of the bankruptcy or insolvency of Financial Security and to the
application of general principles of equity and subject, in the case of
the Indemnification Agreement, to principles of public policy limiting
the right to enforce the indemnification provisions contained therein
insofar as they relate to indemnification for liabilities arising under
applicable securities laws.
IV. The Policy is exempt from registration under the Securities Act of
1933, as amended (the "Act").
V. Neither the execution or delivery by Financial Security of the Policy
or the Financial Security Agreements, nor the performance by Financial
Security of its obligations thereunder, will conflict with any
provision of the certificate of incorporation or the bylaws of
Financial Security or, to the best of my knowledge, result in a breach
of, or constitute a default under, any agreement or other instrument to
which Financial Security is a party or by which it or any of its
property is bound or, to the best of my knowledge, violate any
judgment, order or decree applicable to Financial Security of any
governmental or regulatory body, administrative agency, court or
arbitrator having
A-1
<PAGE> 20
jurisdiction over Financial Security (except that in the published
opinion of the Securities and Exchange Commission the indemnification
provisions of the Indemnification Agreement, insofar as they relate to
indemnification for liabilities arising under the Act, are against
public policy as expressed in the Act and are therefore unenforceable).
In addition, please be advised that I have reviewed the description of
Financial Security under the caption "The Insurer" in the Prospectus Supplement
dated July 17, 1997, which supplements the Base Prospectus dated July 17, 1997
(the "Offering Document") of the Company with respect to the Securities. The
information provided in the Offering Document with respect to Financial Security
is limited and does not purport to provide the scope of disclosure required to
be included in a prospectus with respect to a registrant under the Act in
connection with the public offer and sale of securities of such registrant.
Within such limited scope of disclosure, however, there has not come to my
attention any information which would cause me to believe that the description
of Financial Security referred to above, as of the date of the Offering
Document, contained any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except that no opinion
is rendered with respect to any financial statements or other financial
information contained or referred to therein).
A-2
