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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): January 20, 1998
NATIONAL FINANCIAL AUTO FUNDING TRUST
(Exact name of registrant as specified in its charter)
333-44159
DELAWARE 333-28829 9999
(State of organization) (Commission File No.) (Primary Standard Industrial
Classification Code Number)
One Park Place
621 NW. 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 January 20, 1998 (the "Closing Date"), National Auto Finance 1998-1
Trust (the "98-1 Trust"), a Delaware business trust formed by National Financial
Auto Funding Trust (the "Funding Trust" or the "Registrant") issued $85,200,000
aggregate principal amount of Notes designated the National Auto Finance 1998-1
Trust 5.88% Automobile Receivables-Backed Notes, Series 1998-1 (the "Notes"),
pursuant to an Indenture, dated as of December 15, 1997, between the 98-1 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 December 15, 1997 (the "Cut-off Date") of
approximately $75,504,414.69. The 98-1 Trust may acquire certain additional
Receivables on or prior to April 30, 1998 with funds deposited in a Pre-Funding
Account in the amount of approximately $16,490,982.64, which additional
Receivables will also secure the Notes. As of the Cut-off Date, the Receivables
had the characteristics described in the Prospectus dated January 15, 1998 filed
with the Commission pursuant to Rule 424(b)(2) 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 January 15, 1998, 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 December 15, 1997, between Wilmington
Trust Company, as owner trustee of the National Auto Finance
1998-1 Trust, and Harris Trust and Savings Bank, as Indenture
Trustee and Trust Collateral Agent.
4.2 Trust Agreement, dated as of December 15, 1997, between National
Financial Auto Funding Trust and Wilmington Trust Company, as
Trustee.
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4.3 Sale and Servicing Agreement, dated as of December 15, 1997,
among National Financial Auto Funding Trust, as Seller, National
Auto Finance 1998-1 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 January 20, 1998 and
delivered by Financial Security Assurance Inc.
10.1 The Purchase and Contribution Agreement, dated as of December 15,
1997, between National Auto Finance Company, Inc. and National
Financial Auto Funding Trust.
10.2 The Sale Agreement, dated as of December 15, 1997, between
National Financial Auto Funding Trust II and National Financial
Auto Funding Trust.
10.3 Imdemnification Agreement, dated as of January 20, 1998, 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: February 5,1998
NATIONAL FINANCIAL AUTO FUNDING TRUST
By: /s/ Keith B. Stein
-----------------------------------
Name: Keith B. Stein
Title: Secretary
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INDEX TO EXHIBITS
Exhibit No. Description
1.1 Underwriting Agreement, dated as of January 20, 1998, 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 December 15, 1997, between Wilmington
Trust Company, as owner trustee of the National Auto Finance
1998-1 Trust, and Harris Trust and Savings Bank, as Indenture
Trustee and Trust Collateral Agent.
4.2 Trust Agreement, dated as of December 15, 1997, between National
Financial Auto Funding Trust and Wilmington Trust Company, as
Trustee.
4.3 Sale and Servicing Agreement, dated as of December 15, 1997,
among National Financial Auto Funding Trust, as Seller, National
Auto Finance 1998-1 Trust, National Auto Finance Company, Inc.,
as Servicer, and Harris Trust and Savings Bank, as Tnist
Collateral and Backup Servicer.
4.4 Note Guaranty Surety Bond, dated as of January 20, 1998 and
delivered by Financial Security Assurance Inc.
10.1 The Purchase and Contribution Agreement, dated as of December 15,
1997, between National Auto Finance Company, Inc. and National
Financial Auto Funding Trust.
10.2 The Sale Agreement, dated as of December 15, 1997, between
National Financial Auto Funding Trust II and National Financial
Auto Funding Trust.
10.3 Imdemnification Agreement, dated as of January 20, 1998, among
Financial Security Assurance Inc., National Financial Auto
Funding Trust and First Union Capital Markets Corp.
Execution Copy
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$85,200,000
NATIONAL AUTO FINANCE 1998-1 TRUST
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UNDERWRITING AGREEMENT
Dated as of January 15, 1998
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$85,200,000
NATIONAL AUTO FINANCE 1998-1 TRUST
UNDERWRITING AGREEMENT
January 15, 1998
First Union Capital Markets Corp.
One First Union Center, TW-10
Charlotte, NC 28288-06 10
Ladies and Gentlemen:
NATIONAL FINANCIAL AUTO FUNDING TRUST, a Delaware business trust (the
"Seller"), hereby agrees with you as follows:
Section I. Authorization of Notes. The Seller has authorized the issuance
by National Auto Finance 1998-1 Trust (the "Trust") of $85,200,000 of 5.88%
Class A Automobile Receivables-Backed Notes, Series 1998-1 (the "Notes"). The
Notes will evidence indebtedness of the Trust to be formed pursuant to a Trust
Agreement, dated as of January 20, 1998 (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 December 15, 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 January 20, 1998 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. 333-28829) and on
Form 5-3-MEF filing (File No. 333-44159), 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 $84,923,909.40.
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 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
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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 December 15, 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 December
15, 1997 (the "Purchase Agreement"), by and between the Seller and National
Auto Finance Company, Inc. ("NAFI"), the Insurance and Indemnity Agreement,
dated as of January 20, 1998 (the "Insurance and Indemnity Agreement"), by
and among NAFI, the Seller and FSA, the Spread Account Agreement, dated as
of January 20, 1998 (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 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
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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 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
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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 September 30, 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, as assigned and amended
(the "Amended and Restated Servicing Agreement") by and between NAFI, World
Omni and OFSA, as the case may be, 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.
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
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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 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
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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 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 and the Amended and Restated Servicing
Agreement, 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
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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.
(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.
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(f) You shall have received from Dewey Ballantine LLP, 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 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.
(1) 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
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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 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 LLP, 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
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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 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
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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 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.
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(b) This Agreement may not be terminated by the Seller without the written
consent of the Underwriter until after December 31, 1998.
(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 CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS (AS OPPOSED TO
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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.
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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:
================================================================================
NATIONAL AUTO FINANCE 1998-1 TRUST
5.88% Automobile Receivables-Backed Notes
--------------------------------------------
INDENTURE
Dated as of December 15, 1997
--------------------------------------------
HARRIS TRUST AND SAVINGS BANK
Indenture Trustee and Trust Collateral Agent
================================================================================
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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................................................11
SECTION 2.3 Temporary Notes.......................................................................11
SECTION 2.4 Registration; Registration of Transfer and Exchange...................................12
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.................................................................16
SECTION 2.10 Book-Entry Notes......................................................................16
SECTION 2.11 Notices to Clearing Agency............................................................17
SECTION 2.12 Definitive Notes......................................................................17
ARTICLE III
Covenants
SECTION 3.1 Payment of Principal and Interest.....................................................18
SECTION 3.2 Maintenance of Office or Agency.......................................................18
SECTION 3.3 Money for Payments to be Held in Trust................................................18
SECTION 3.4 Existence.............................................................................20
SECTION 3.5 Protection of Trust Property..........................................................20
SECTION 3.6 Opinions as to Trust Property.........................................................21
SECTION 3.7 Performance of Obligations; Servicing of Receivables..................................21
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SECTION 3.8 Negative Covenants....................................................................22
SECTION 3.9 Annual Statement as to Compliance.....................................................23
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..........................................................................24
SECTION 3.14 Servicer's Obligations................................................................24
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities.....................................24
SECTION 3.16 Capital Expenditures..................................................................24
SECTION 3.17 Compliance with Laws..................................................................24
SECTION 3.18 Restricted Payments...................................................................24
SECTION 3.19 Notice of Events of Default...........................................................25
SECTION 3.20 Further Instruments and Acts..........................................................25
SECTION 3.21 Amendments of Sale and Servicing Agreement and Trust Agreement........................25
SECTION 3.22 Income Tax Characterization...........................................................25
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1 Satisfaction and Discharge of Indenture...............................................25
SECTION 4.2 Application of Trust Money............................................................26
SECTION 4.3 Repayment of Monies Held by Note Paying Agent.........................................27
ARTICLE V
Remedies
SECTION 5.1 Events of Default.....................................................................27
SECTION 5.2 Rights Upon Event of Default..........................................................29
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Indenture Trustee.............30
SECTION 5.4 Remedies..............................................................................33
SECTION 5.5 Optional Preservation of the Receivables..............................................34
SECTION 5.6 Priorities............................................................................35
SECTION 5.7 Limitation of Suits...................................................................36
SECTION 5.8 Unconditional Rights of Noteholders To Receive Principal and Interest.................36
SECTION 5.9 Restoration of Rights and Remedies....................................................37
SECTION 5.10 Rights and Remedies Cumulative........................................................37
SECTION 5.11 Delay or Omission Not a Waiver........................................................37
SECTION 5.12 Control by Noteholders................................................................37
SECTION 5.13 Waiver of Past Defaults...............................................................38
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SECTION 5.14 Undertaking for Costs.................................................................38
SECTION 5.15 Waiver of Stay or Extension Laws......................................................38
SECTION 5.16 Action on Notes.......................................................................39
SECTION 5.17 Performance and Enforcement of Certain Obligations....................................39
SECTION 5.18 Subrogation...........................................................................39
SECTION 5.19 Preference Claims.....................................................................40
ARTICLE VI
The Indenture Trustee and the Trust Collateral Agent
SECTION 6.1 Duties of Indenture Trustee...........................................................41
SECTION 6.2 Rights of Indenture Trustee and the Trust Collateral Agent............................43
SECTION 6.3 Individual Rights of Indenture Trustee................................................44
SECTION 6.4 Indenture Trustee's Disclaimer........................................................44
SECTION 6.5 Notice of Defaults....................................................................45
SECTION 6.6 Reports by Indenture Trustee to Holders...............................................45
SECTION 6.7 Compensation and Indemnity............................................................45
SECTION 6.8 Replacement of Indenture Trustee......................................................46
SECTION 6.9 Successor Indenture Trustee by Merger.................................................47
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture Trustee.....................48
SECTION 6.11 Eligibility: Disqualification.........................................................49
SECTION 6.12 Preferential Collection of Claims Against Trust.......................................49
SECTION 6.13 Appointment and Powers................................................................49
SECTION 6.14 Performance of Duties.................................................................50
SECTION 6.15 Limitation on Liability...............................................................50
SECTION 6.16 Reliance Upon Documents...............................................................51
SECTION 6.17 Successor Trust Collateral Agent......................................................51
SECTION 6.18 Compensation..........................................................................52
SECTION 6.19 Representations and Warranties of the Indenture Trustee and the Trust
Collateral Agent....................................................................52
SECTION 6.20 Waiver of Setoffs.....................................................................53
SECTION 6.21 Control by the Controlling Party......................................................51
SECTION 6.22 Compensation..........................................................................52
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1 Trust To Furnish To Indenture Trustee Names and Addresses of Noteholders..............54
SECTION 7.2 Preservation of Information; Communications to Noteholders............................54
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SECTION 7.3 Reports by Trust......................................................................54
SECTION 7.4 Reports by Indenture Trustee..........................................................55
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.1 Collection of Money...................................................................55
SECTION 8.2 Release of Collateral.................................................................56
SECTION 8.3 Opinion of Counsel....................................................................56
ARTICLE IX
Supplemental Indentures
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders................................56
SECTION 9.2 Supplemental Indentures With Consent of Noteholders...................................58
SECTION 9.3 Execution of Supplemental Indentures..................................................59
SECTION 9.4 Effect of Supplemental Indenture......................................................59
SECTION 9.5 Conformity With Trust Indenture Act...................................................60
SECTION 9.6 Reference in Notes to Supplemental Indentures.........................................60
ARTICLE X
Redemption of Notes........
SECTION 10.1 Redemption............................................................................60
SECTION 10.2 Form of Redemption Notice.............................................................61
SECTION 10.3 Notes Payable on Redemption Date......................................................61
ARTICLE XI
Miscellaneous
SECTION 11.1 Compliance Certificates and Opinions, etc.............................................62
SECTION 11.2 Form of Documents Delivered to Indenture Trustee......................................64
SECTION 11.3 Acts of Noteholders...................................................................64
SECTION 11.4 Notices, etc. to Indenture Trustee, Trust and Rating Agencies.........................65
SECTION 11.5 Notices to Noteholders; Waiver........................................................66
SECTION 11.6 Alternate Payment and Notice Provisions...............................................67
SECTION 11.7 Conflict with Trust Indenture Act.....................................................67
SECTION 11.8 Effect of Headings and Table of Contents..............................................67
SECTION 11.9 Successors and Assigns................................................................67
SECTION 11.10 Separability..........................................................................67
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SECTION 11.11 Benefits of Indenture.................................................................67
SECTION 11.12 Legal Holidays........................................................................68
SECTION 11.13 Governing Law.........................................................................68
SECTION 11.14 Counterparts..........................................................................68
SECTION 11.15 Recording of Indenture................................................................68
SECTION 11.16 Trust Obligation......................................................................68
SECTION 11.17 No Petition...........................................................................69
SECTION 11.18 Inspection............................................................................69
SECTION 11.19 Limitation of Liability...............................................................69
EXHIBIT
Exhibit A -- Form of Note
</TABLE>
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INDENTURE dated as of December 15, 1997, between NATIONAL AUTO FINANCE
1998-1 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 5.88% 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 (the "Scheduled Payments").
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 January 20, 1998 (as amended, supplemented, restated or
otherwise modified 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 Receivables and all monies received thereon on or
after the applicable Cut-off Date (including amounts due on or before the
applicable Cut-off Date but received by NAFI, the Seller or the Issuer on or
after the applicable Cut-off Date); (b) any proceeds and the right to receive
proceeds with respect to the 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
Receivables; (c) all rights against Dealers pursuant to Dealer Agreements or
against Originators pursuant to Originator Agreements; (d) the related
Receivables Files and any and all other documents that NAFI keeps on file in
accordance with its customary procedures relating to the Receivables, the
Obligors or the Financed Vehicles; (e) property (including the right to receive
future Liquidation Proceeds) that secures a Receivable and that has been
acquired by or on behalf
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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
SECTION 1.1. 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.
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.
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.
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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: January 20, 1998.
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 May,
2004.
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 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,
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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 do
or 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 read the definition of "Independent" in this Indenture and
that the signer is Independent within the meaning thereof.
Initial Cut-off Date: December 15, 1997.
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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: 5.88% 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 5.88% 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 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 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
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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 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.
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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 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.
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Sale and Servicing Agreement: The Sale and Servicing Agreement dated as of
December 15, 1997, among National Financial Auto Funding Trust, as Seller,
National Auto Finance Company, Inc., as Servicer, the Trust and the Trust
Collateral Agent, as the same may be amended, supplemented, restated or
otherwise modified 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, as more fully set forth in the Granting Clause hereof.
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.
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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.
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
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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.
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.
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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 $85,200,000. 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.
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
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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 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.
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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 2.5 Mutilated, Destroyed, lost or Stolen Notes. 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 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
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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 Insurer, the Indenture Trustee and any
agent of the Trust or the Indenture Trustee 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 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
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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 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 Indenture Trustee, as custodian for The Depository Trust
Company, the initial Clearing Agency,
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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 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
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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 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
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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.
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
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(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:
(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;
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(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 as 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 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
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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.
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;
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(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.
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.
(b) 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].
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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 and 4.13 of the Sale and Servicing Agreement.
SECTION 3.15 Guarantees, Loans, Advances and Other Obligations. 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 personalty).
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 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.
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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
(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
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(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, to 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.
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
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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 "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
(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
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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
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
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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, shall, 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 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
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(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
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
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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:
(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;
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(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 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):
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(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 5.1(i) or (ii), or
(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
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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:
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
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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;
and
FIFTH: to the Collateral Agent to be applied as provided in
the Spread Account Agreement; and
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 FIFTH 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;
(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;
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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
Interst. 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.
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
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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.
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.
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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 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.
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(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.
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
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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, 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 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
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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.
(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 Days' 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,
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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.
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.
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(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) 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.
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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 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.
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(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 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
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(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.
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
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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:
(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
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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 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
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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 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.
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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.
(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. 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
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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 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.
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(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.
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 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
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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 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, 1998, 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.
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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 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
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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;
(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
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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 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;
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(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.
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
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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 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 immediately following the last day of
the Pre-Funding Period,
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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;
(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
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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:
(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.
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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 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.
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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.
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
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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
(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 1998-1 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 1998-1 Trust, 5.88%
Automobile Receivables-Backed Notes
Telex No.: (212) 688-3101
Confirmation: (212) 826-3518
Telecopy Nos.: (212) 339-3518 or
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(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) 553-0355 and (ii) in the case of S&P, at the following
address: Standard & Poor's Ratings Group, 25 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 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
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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 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.
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<PAGE>
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 Recordings 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 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
65
<PAGE>
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 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.
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<PAGE>
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 1998-1 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:
67
<PAGE>
EXHIBIT A
Form of Note
REGISTERED $ [_________]
No. A-1
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. ____________
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), 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 is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), 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.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANYTIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
NATIONAL AUTO FINANCE 1998-1 TRUST
5.88% AUTOMOBILE RECEIVABLES-BACKED NOTES, SERIES 1998-1
National Auto Finance 1998-1 Trust, a business trust organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
the principal sum of EIGHTY FIVE MILLION TWO HUNDRED THOUSAND DOLLARS ($
85,200,000), such amount payable on each Distribution Date in an amount equal to
the aggregate amount, if any, payable from the Note Distribution Account in
respect of principal on the Notes pursuant to Section 3.1 of the Indenture;
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the May 21, 2004 Distribution Date (the "Final Scheduled
Distribution Date"). The Issuer will pay interest on this Note at the rate per
annum shown above on each Distribution Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on this
Note will accrue for each Distribution Date from the most recent Distribution
Date on which interest has been paid, to, but excluding such Distribution Date
or, if no interest has yet been paid, from
1
<PAGE>
January 20, 1998. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Such principal of and interest on this Note
shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed the
Scheduled Payments (as defined in the Note Policy) with respect to the Notes.
For purposes of federal income, state and local income and franchise and
any other income taxes, the Issuer will treat the Notes as indebtedness of the
Issuer and hereby instructs the Indenture Trustee to treat the Notes as
indebtedness of the Issuer for federal and state tax reporting purposes.
Each Noteholder or Note Owner, by acceptance of this Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Seller, the Servicer, the Indenture Trustee, the
Trust Collateral Agent or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any owner, beneficiary,
agent, officer, director or employee of the Seller, the Servicer, the Indenture
Trustee, the Trust Collateral Agent or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Seller, the
Servicer, the Trust Collateral Agent, the Owner Trustee or the Indenture Trustee
or of any successor or assign of the Seller, the Servicer, the Indenture
Trustee, the Trust Collateral Agent 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.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
NATIONAL AUTO FINANCE 1998-1 TRUST
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By:
----------------------------------------
Name:
Title:
3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: HARRIS TRUST AND SAVINGS BANK, not in its
individual capacity but solely as Indenture
Trustee,
By:
----------------------------------------
Name:
Title:
1
<PAGE>
REVERSE OF NOTE
This Note is a duly authorized Note of the Issuer, designated as its 5.88%
Automobile Receivables-Backed Notes, Series 1998-1 (herein called the "Notes"),
issued under an Indenture dated as of December 15, 1997 (such indenture, as
supplemented or amended, is herein called the "Indenture"), between the Issuer
and Harris Trust and Savings Bank, as trustee (the "Indenture Trustee", which
term includes any successor Indenture Trustee under the Indenture, and the
"Trust Collateral Agent", which term includes any successor Trust Collateral
Agent under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee, the Trust
Collateral Agent and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Notes are and will be equally and ratably secured by the Trust Property
pledged as security therefor as provided in the Indenture.
Principal of the Notes will be payable on each Distribution Date in an
amount described on the face hereof. "Distribution Date" means the twenty-first
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing January 21, 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Final Scheduled Distribution Date and
the Redemption Date, if any, pursuant to Section 10.1(a) or 10.1(c) of the
Indenture. As described above, a portion of the unpaid principal balance of this
Note shall be due and payable on the Redemption Date, if any, pursuant to
Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable (i) on the date on
which an Event of Default shall have occurred and be continuing so long as an
Insurer Default shall not have occurred and be continuing or (ii) if an Insurer
Default shall have occurred and be continuing, on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee or the
Holders of the Notes representing at least 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 of the Indenture. All principal payments on the
Notes shall be made pro rata to the Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Holder of this Note (or one or more Predecessor Notes) on
the Note Register as of the close of business on each Record Date, except that
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.), payments will
be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
1
<PAGE>
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) effected by any payments made on any Distribution
Date shall be binding upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Holder hereof as of the Record Date preceding such Distribution Date by
notice mailed prior to such Distribution Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Indenture Trustee's principal Corporate Trust Office or at the office of the
Indenture Trustee's agent appointed for such purposes located in The City of New
York.
The Issuer shall pay interest on overdue installments of interest at the
Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed (a) pursuant to
Section 10.1(a) of the Indenture, in whole, but not in part, at the option of
the Seller or the Servicer (with the consent of the Insurer under certain
circumstances), on any Distribution Date on or after the date on which the Pool
Balance is less than or equal to 10% of the Original Pool Balance, and (b)
pursuant to Section 10.1(b) of the Indenture, in part, on the Distribution Date
on or immediately following the last day of the Pre-Funding Period in the event
that any Pre-Funded Amount remains on deposit in the Pre-Funding Account after
giving effect to the purchase of all Subsequent Receivables, including any such
purchase on such Redemption Date.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his 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 maybe
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 Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in
2
<PAGE>
connection therewith, against (i) the Seller, the Servicer, the Indenture
Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a
beneficial interest in the Issuer or (iii) any owner, beneficiary, agent,
officer, director or employee of the Seller, the Servicer, the Indenture Trustee
or the Owner Trustee in its individual capacity, any holder of a beneficial
interest in the Issuer, the Seller, the Servicer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Seller, the Servicer, 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 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Depositor, or the Issuer or join in any institution
against the Depositor, or the Issuer 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, the Indenture or the Transaction
Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and the Insurer and any agent of the Issuer, the
Indenture Trustee or the Insurer may treat the Person in whose name this Note
(as of the day of determination or as of such other date as may be specified in
the Indenture) is registered as the owner hereof for all purposes, whether or
not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any
such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one of more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any
Notes issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such consent or waiver is made upon
this Note. The Indenture also permits the Indenture Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
3
<PAGE>
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the 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 and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Transaction Documents, neither Wilmington Trust
Company in its individual capacity, any owner of a beneficial interest in the
Issuer, nor any of their respective beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Issuer for the sole purposes of binding the interests of the Issuer in
the assets of the Issuer. The Holder of this Note by the acceptance hereof
agrees that except as expressly provided in the Indenture or the Transaction
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
4
<PAGE>
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.
1
<PAGE>
[TRUST AGREEMENT TO COME]
================================================================================
SALE AND SERVICING
AGREEMENT
among
NATIONAL AUTO FINANCE 1998-1 TRUST,
Issuer,
NATIONAL FINANCIAL AUTO FUNDING TRUST,
Seller,
NATIONAL AUTO FINANCE COMPANY, INC.,
Servicer
and
HARRIS TRUST AND SAVINGS BANK
Trust Collateral Agent and Backup Servicer
Dated as of December 15, 1997
================================================================================
<PAGE>
<TABLE>
TABLE OF CONTENTS
ARTICLE I
Definitions
<S> <C> <C>
SECTION 1.1. Definitions.............................................................................................1
SECTION 1.2. Other Definitional Provisions..........................................................................23
SECTION 1.3. Usage of Terms.........................................................................................24
SECTION 1.4. Certain References.....................................................................................24
SECTION 1.5. No Recourse............................................................................................24
SECTION 1.6. Action by or Consent of Noteholders....................................................................24
SECTION 1.7. Material Adverse Effect................................................................................25
SECTION 1.8. Calculations as to Principal and Interest in Respect of Receivables....................................25
ARTICLE II
Conveyance of Receivables
SECTION 2.1. Conveyance of Initial Receivables......................................................................25
SECTION 2.2. Conveyance of Subsequent Receivables...................................................................27
SECTION 2.3. Further Encumbrance of Trust Property..................................................................30
SECTION 2.4. Books and Records; Payments on Receivables.............................................................30
SECTION 2.5. Seller Repurchase of Receivables.......................................................................31
ARTICLE III
The Receivables
SECTION 3.1. Representations and Warranties of Seller...............................................................32
SECTION 3.2. Repurchase upon Breach.................................................................................32
SECTION 3.3. Custody of Receivables Files...........................................................................33
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.1. Duties of the Servicer.................................................................................33
SECTION 4.2. Sub-Servicing Agreements between Servicer and the Sub-Servicers........................................36
SECTION 4.3. Obligations of the Servicer............................................................................37
SECTION 4.4. No Contractual Relationship between a Sub-Servicer and Trust Collateral Agent or
Noteholders............................................................................................37
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 4.5. Assumption or Termination of Sub-Servicing Agreement by Trust Collateral Agent.........................37
SECTION 4.6. Collection of Receivable Payments......................................................................38
SECTION 4.7. Maintenance of Insurance...............................................................................40
SECTION 4.8. Realization upon Defaulted Receivables.................................................................41
SECTION 4.9. Total Servicing Fee; Payment of Certain Expenses by Servicer...........................................41
SECTION 4.10. [Reserved].............................................................................................42
SECTION 4.11. Reports................................................................................................42
SECTION 4.12. Annual Statement as to Compliance, Notice of Servicer Termination Event................................43
SECTION 4.13. Annual Independent Accountants' Report.................................................................43
SECTION 4.14. Access to Certain Documentation and Information Regarding Receivables..................................44
SECTION 4.15. Monthly Tape...........................................................................................44
SECTION 4.16. Retention and Termination of Servicer..................................................................44
SECTION 4.17. Custodial Arrangement..................................................................................44
ARTICLE V
Trust Accounts; Distributions; Statements to Noteholders
SECTION 5.1. Establishment of Trust Accounts........................................................................45
SECTION 5.2. Pre-Funding Period Reserve Account.....................................................................49
SECTION 5.3. Certain Reimbursements to the Servicer.................................................................50
SECTION 5.4. Application of Collections.............................................................................50
SECTION 5.5. Withdrawals from Series 1998-1 Spread Account..........................................................51
SECTION 5.6. Additional Deposits....................................................................................51
SECTION 5.7. Distributions..........................................................................................51
SECTION 5.8. Note Distribution Account..............................................................................54
SECTION 5.9. Pre-Funding Account....................................................................................55
SECTION 5.10. Statements to Noteholders..............................................................................56
SECTION 5.11. Optional Deposits by the Insurer.......................................................................56
ARTICLE VI
The Note Policy
SECTION 6.1. Claims Under Note Policy...............................................................................56
SECTION 6.2. Preference Claims......................................................................................57
SECTION 6.3. Surrender of Policy....................................................................................58
SECTION 6.4. Spread Account.........................................................................................58
</TABLE>
ii
<PAGE>
<TABLE>
ARTICLE VII
RESERVED
ARTICLE VIII
The Seller
<S> <C> <C>
SECTION 8.1. Representations, Warranties and Covenants of the Seller................................................59
SECTION 8.2. Corporate Existence....................................................................................61
SECTION 8.3. Liability of Seller; Indemnities.......................................................................62
SECTION 8.4. Merger or Consolidation of, or Assumption of the Obligations of, Seller................................63
SECTION 8.5. Limitation on Liability of Seller and Others...........................................................63
SECTION 8.6. Seller May Own Notes...................................................................................63
ARTICLE IX
The Servicer
SECTION 9.1. Representations, Warranties and Covenants of the Servicer..............................................64
SECTION 9.2. Liability of Servicer; Indemnities.....................................................................66
SECTION 9.3. Merger or Consolidation of, or Assumption of the Obligations of the Servicer or the
Trust Collateral Agent.................................................................................67
SECTION 9.4. Limitation on Liability of Servicer, Trust Collateral Agent and Others.................................68
SECTION 9.5. Delegation of Duties...................................................................................70
SECTION 9.6. Servicer Not to Resign.................................................................................71
ARTICLE X
Default
SECTION 10.1. Servicer Termination Event.............................................................................71
SECTION 10.2. Consequences of a Servicer Termination Event...........................................................73
SECTION 10.3. Additional Consequences of a Servicer Termination Event................................................74
SECTION 10.4. Appointment of Successor...............................................................................74
SECTION 10.5. [RESERVED].............................................................................................72
SECTION 10.6. Notification to Noteholders and Rating Agencies........................................................76
SECTION 10.7. Waiver of Past Defaults................................................................................76
SECTION 10.8. Termination of Trust Collateral Agent..................................................................76
SECTION 10.9. Successor to Servicer..................................................................................77
</TABLE>
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<TABLE>
ARTICLE XI
Termination
<S> <C> <C>
SECTION 11.1. Optional Purchase of All Receivables...................................................................78
ARTICLE XII
Administrative Duties of the Servicer
SECTION 12.1. Administrative Duties..................................................................................79
SECTION 12.2. Records................................................................................................81
SECTION 12.3. Additional Information to be Furnished to the Issuer...................................................81
ARTICLE XIII
Miscellaneous Provisions
SECTION 13.1. Amendment..............................................................................................81
SECTION 13.2. Protection of Title to Trust...........................................................................83
SECTION 13.3. Notices................................................................................................85
SECTION 13.4. Assignment.............................................................................................86
SECTION 13.5. Limitations on Rights of Others........................................................................86
SECTION 13.6. Severability...........................................................................................86
SECTION 13.7. Separate Counterparts..................................................................................86
SECTION 13.8. Headings...............................................................................................86
SECTION 13.9. Governing Law..........................................................................................86
SECTION 13.10. Assignment to Trustee..................................................................................87
SECTION 13.11. Nonpetition Covenants..................................................................................87
SECTION 13.12. Limitation of Liability of Owner Trustee and Trustee...................................................87
SECTION 13.13. Independence of the Servicer...........................................................................88
SECTION 13.14. No Joint Venture.......................................................................................88
SECTION 13.14. Insurer as Controlling Party...........................................................................84
</TABLE>
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SALE AND SERVICING AGREEMENT dated as of December 15, 1997, among NATIONAL
AUTO FINANCE 1998-1 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 Backup Servicer.
WHEREAS the Issuer desires to purchase a portfolio of receivables arising
in connection with motor vehicle retail installment sale contracts acquired by
National Auto Finance Company, Inc. directly or indirectly through motor vehicle
dealers and motor vehicle finance companies;
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 4.13.
"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
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Date and the aggregate Principal Balance of the Subsequent Receivables to be
transferred on such Subsequent Transfer Date.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a Liquidated Receivable during the related Due
Period and (ii) any Receivable that became a Purchased Receivable during the
related Due Period) as of the date of determination.
"Agreement" means this Sale and Servicing Agreement, as the same may be
amended and supplemented from time to time in accordance with the terms hereof.
"Amount Financed" means, with respect to a Receivable, the original
principal balance of such Receivable reduced by the portion of each payment
received thereon before the applicable Cut-off Date that would represent
principal if such payments were allocated to the principal of and interest on
such Receivable based on the amortization method provided in such Receivable.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
percentage rate of finance charges or service charges, as stated in the related
Contract.
"Assignment Agreement" means the agreement, dated as of December 15, 1997,
between Bankers Trust Company, not in its individual capacity but solely as
Trustee of the National Financial Auto Receivables Master Trust, and National
Financial Auto Funding Trust II, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
"Available Amount" means, with respect to any Distribution Date, an amount
equal to the sum of (i) the amount on deposit in the Distribution Account on the
preceding Distribution Date after giving effect to all withdrawals therefrom on
such preceding Distribution Date, (ii) the amount, if any, to be transferred by
the Trust Collateral Agent to the 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 Reporting Date, the
arithmetic average of the Default Rates for each of the three Due Periods
immediately preceding the Due Period in which such Reporting Date occurs.
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"Average Delinquency Ratio" means, with respect to any Reporting Date, the
arithmetic average of the Delinquency Ratios for each of the three Due Periods
immediately preceding the Due Period in which such Reporting Date occurs.
"Average Extension Ratio" has the meaning specified in Section 4.6(a).
"Average Net Loss Rate" means, with respect to any Reporting Date, the
arithmetic average of the Net Loss Rates for each of the three Due Periods
immediately preceding the Due Period in which such Reporting Date occurs.
"Backup Servicer" means, Harris Trust and Savings Bank, as the Backup
Servicer hereunder, including in its capacity as Servicer, in the event NAFI
resigns or is removed as Servicer.
"Bankruptcy Loss" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
the scheduled payments to be made on a Receivable, an amount equal to the excess
of the principal balance of such Receivable immediately prior to such order over
the principal balance of such Receivable as so reduced or the net present value
(using as the discount rate the higher of the APR on such Receivable or the rate
of interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A "Bankruptcy Loss" shall be deemed to
have occurred on the date of issuance of such order.
"Base Servicing Fee" means, with respect to any Due Period, the fee payable
to the Servicer for services rendered during such Due Period, which shall be
equal to one-twelfth of the Servicing Fee Rate multiplied by the Pool Balance as
of the close of business on the last day of the preceding Due Period.
"Business Day" means a day other than a Saturday, a Sunday or other day on
which commercial banks located in New York, Illinois, Delaware or Florida are
authorized or obligated to be closed.
"Certificateholder" or "Certificateholders" means a Person in whose name a
Trust Certificate is registered in the Certificate Register maintained pursuant
to the Trust Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"Closing Date" means January 20, 1998.
"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.
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"Collection Records" means all manually prepared or computer generated
records relating to collection efforts or payment histories with respect to the
Receivables.
"Computer Tape" means the computer tapes or other electronic media
furnished by the Seller to the Issuer and its assigns describing certain
characteristics of the Initial Receivables as of the Initial Cut-off Date and of
the Subsequent Receivables as of the related Subsequent Cut-off Date.
"Contract" means a motor vehicle retail installment sale contract.
"Controlling Party" means the Insurer, so long as no Insurer Default shall
have occurred and be continuing, and, in the event the Insurer Default shall
have occurred and be continuing, the Trust Collateral Agent for the benefit of
the Noteholders.
"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 any 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 Custodial Agreement and any amendments,
supplements or modifications thereto shall be acceptable to the Controlling
Party (the Custodial Agreement which is effective on the Closing Date is
acceptable to the Insurer).
"Custodian" means any Person named from time to time as custodian of the
Receivable Files in any Custodial Agreement and 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).
"Cut-off Date" means the Initial Cut-off Date or any Subsequent Cut-off
Date, as applicable.
"Dealer" means a dealer who sold a Financed Vehicle and who originated and
assigned the respective Receivable to NAFI or an Originator under a Dealer
Agreement.
"Dealer Agreement" means any agreement between NAFI or an Originator and a
Dealer relating to the acquisition of Receivables from a Dealer by NAFI or an
Originator.
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"Dealer Assignment" means, with respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to an Originator.
"Dealer Underwriting Guide" means either, (i) the underwriting guidelines
used by or on behalf of NAFI in the origination and purchase of Receivables as
amended from time to time or (ii) the underwriting guidelines used in the
origination of Receivables as reviewed by NAFI prior to the purchase of
Receivables by NAFI.
"Default Rate" means, with respect to any Due Period, the product of (i)
twelve and (ii) the quotient, expressed as a percentage, obtained by dividing
(a) the sum of (x) the aggregate outstanding Principal Balance of all Defaulted
Receivables which became Defaulted Receivables during such Due Period and (y)
the aggregate outstanding Principal Balance of all Receivables that became
Purchased Receivables during such Due Period and were 30 days or more past due
as of the date such Receivables were retransferred hereunder by (b) the
arithmetic average of the Pool Balance as of the end of such Due Period and the
Pool Balance as of the end of the preceding Due Period.
"Defaulted Receivable" means, with respect to any Due Period, a Receivable
with respect to which any of the following has occurred during such Due Period:
(i) all or a part of any Scheduled Payment is 90 days or more delinquent as of
the end of such Due 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
such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of
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<PAGE>
any such Trust Account Property to the Trust Collateral Agent free and
clear of any adverse claims, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to a certificated security (as defined in Section
8-102(a)(4) of the UCC) transfer thereof (i) by physical delivery of such
certificated security to the Trust Collateral Agent, provided that if the
certificated security is in registered form, it shall be endorsed to, or
registered in the name of, the Trust Collateral Agent or endorsed in blank,
or (ii) by physical delivery thereof to a "securities intermediary" (as
defined in Section 8-102(a)(14) of the UCC) acting on behalf of the Trust
Collateral Agent if the certificated security has been specially endorsed
to the Trust Collateral Agent by an effective endorsement; 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;
(c) 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 securities intermediary
which is also a "depository" pursuant to applicable Federal regulations and
issuance by such securities intermediary of a deposit advice or other
written confirmation of such book-entry registration to the Trust
Collateral Agent of the purchase by the securities intermediary on behalf
of the Trust Collateral Agent of such book-entry securities; the making by
such securities 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 and indicating that such securities intermediary holds
such Trust Account Property solely as agent for the Trust Collateral Agent;
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
(d) 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 (c) above, (i) the Trust Collateral Agent or its agent (other
than a securities intermediary) becomes the registered owner of such
uncertificated security or the registered owner acknowledges that it holds
for the Trust Collateral Agent; or (ii) the issuer of such uncertificated
security agrees that it will comply with the instructions of the Trust
Collateral Agent without further consent of the registered owner thereof.
(e) 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
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records of its nominees, indicating that such securities are held in trust
pursuant to and as provided in this Agreement.
(f) with respect to a "security entitlement" (as defined in Section
8-102(a)(17) of the UCC (i) of a securities intermediary (A) indicates by
book entry that a "financial asset" (as defined in Section 8-102(a)(9) of
the UCC) has been credited to the Trust Collateral Agent's "securities
account" (as defined in Section 8-501(a) of the UCC), (B) receives a
financial asset (as so defined) from the Trust Collateral Agent or acquires
a financial asset for the Trust Collateral Agent, and in either case,
accepts it for credit to the Trust Collateral Agent's securities account
(as so defined), (C) becomes obligated under other law, regulation or rule
to credit a financial asset to the Trust Collateral Agent's securities
account, or (D) has agreed that it will comply with "entitlement orders"
(as defined in Section 8-102(a)(8) of the UCC) originated by the Trust
Collateral Agent without further consent by the "entitlement holder" (as
defined in Section 8-102(a)(7) of the UCC), of a confirmation of the
purchase and the making by such securities intermediary of entries on its
books and records identifying as belonging to the Trust Collateral Agent of
(I) a specified certificated security in the securities intermediary's
possession, (II) a quantity of securities that constitute or are part of a
fungible bulk of certificates securities in the securities intermediary's
possession, or (III) a quantity of securities that constitute or are part
of a fungible bulk of securities shown on the account of the securities
intermediary on the books of another securities intermediary.
"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 January 21, 1998.
"Draw Date" means, with respect to any Distribution Date, the fourth
Business Day (as defined in the Note Policy) immediately preceding such
Distribution Date.
"Due Date" means, with respect to a Receivable, the date in each Due Period
on which a Scheduled Payment on such Receivable is due.
"Due Period" means, with respect to the first Distribution Date, the period
beginning on the close of business on the Initial Cut-off Date and ending on the
close of business on December 31, 1997. With respect to each subsequent
Distribution Date, the period from and including the first day of the calendar
month preceding the month in which such Distribution Date occurs to and
including the last day of the calendar month preceding the month of such
Distribution Date.
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"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.
"Eligible Deposit Account" means (i) a segregated trust account that is
maintained with the corporate trust department of a depository institution or
trust company acceptable to the Insurer (unless a Insurer Default has occurred
and is continuing, in which case such institution shall be one subject to
regulations regarding fiduciary funds on deposit substantially similar to 12 CFR
Section 9.10(b)), or (ii) a segregated demand 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;
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(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;
(f) repurchase obligations pursuant to a written agreement (i) with
respect to any obligation described in clause (a) above, where the Trustee
has taken actual or constructive delivery of such obligation, and (ii)
entered into with the corporate trust department of a depository
institution or trust company organized under the laws of the United States
or any State thereof, the deposits of which are insured by the Federal
Deposit Insurance Corporation and the short-term unsecured debt obligations
of which are rated "A-1+" by Standard & Poor's and "P-1" by Moody's
(including, if applicable, the Trustee or any agent of the Trustee acting
in its respective commercial capacities);
(g) any other investment which is consistent with the ratings of the
Notes and acceptable to the Rating Agencies and which, so long as no
Insurer Default shall have occurred and be continuing, has been approved by
the Insurer.
Any of the foregoing Eligible Investments may be purchased by or through
the Owner Trustee or the Trust Collateral Agent or any of their respective
Affiliates.
"Eligible Servicer" means the Servicer, the Backup Servicer or another
Person that, at the time of its appointment as Servicer, (i) is servicing a
portfolio of motor vehicle retail installment sales contracts and/or motor
vehicle installment loans, (ii) is legally qualified and has the capacity to
service the Receivables and (iii) has demonstrated the ability professionally
and competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care.
"Eligible Sub-Servicer" means 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
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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.
"Extension Ratio" has the meaning specified in Section 4.6(a).
"Final Scheduled Distribution Date" means the Distribution Date occurring
in May, 2004.
"Financed Vehicle" means an automobile or light-duty truck, van or minivan,
together with all accessions thereto, securing an Obligor's indebtedness under
the respective Receivable.
"Funding Trust II" means National Auto Funding Trust II, a Delaware
business trust.
"Governmental Authority" means (a) any federal, state, county, municipal or
foreign government or political subdivision thereof, (b) any governmental or
quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality or public body, (c) any court or administrative tribunal or (d)
with respect to any Person, any arbitration tribunal or other non-governmental
authority to the jurisdiction of which such Person has consented.
"Indenture" means the Indenture dated as of December 15, 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 December 15, 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 January 20, 1998, 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.
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"Insurer" means Financial Security Assurance Inc., a monoline insurance
company incorporated under the laws of the State of New York, or any successor
thereto, as issuer of the Note Policy.
"Insurer Default" means the occurrence and continuance of any of the
following events:
(a) the Insurer shall have failed to make a payment required under the
Note Policy in accordance with its terms;
(b) the Insurer shall have (i) filed a petition or commenced any case
or proceeding under any provision or chapter of the United States
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
made a general assignment for the benefit of its creditors, or (iii) had an
order for relief entered against it under the United States Bankruptcy Code
or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization which is final
and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent or receiver for the Insurer or for all or any
material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent or receiver of the Insurer (or
the taking of possession of all or any material portion of the property of
the Insurer).
"Insurer Optional Deposit" means, with respect to any Distribution Date, an
amount delivered by the Insurer pursuant to Section 5.11, at its sole option,
other than amounts in respect of a Note Policy Claim Amount to the Trust
Collateral Agent for deposit into the Collection Account for any of the
following purposes: (i) to provide funds in respect of the 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 Available
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 5.88% 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 1998-1 Trust.
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind.
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"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% or more of any Scheduled Payment on such Receivable is 120 days or
more (or, if the related Obligor is a debtor under Chapter 13 of the U.S.
Bankruptcy Code, 180 days or more) delinquent as of the end of such Due Period.
"Liquidation Expenses" means, reasonable out-of-pocket expenses which are
incurred by the Servicer or any Sub-Servicer in connection with the liquidation
of any Defaulted Receivable. Such expenses shall include, without limitation,
legal fees and expenses, any unreimbursed amount expended by the Servicer or any
Sub-Servicer pursuant to Section 4.8 (to the extent such amount is reimbursable
under the terms of Section 4.8) respecting the related Receivable, and any
related and unreimbursed expenditures for property restoration or preservation.
"Liquidation Proceeds" means, with respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable (other than amounts withdrawn
from the Series 1998-1 Spread Account and drawings under the Note Policy),
including any proceeds from any Insurance Policies, net of amounts that are
required to be refunded to the Obligor on such Receivable; provided, however,
that the Liquidation Proceeds with respect to any Receivable shall in no event
be less than zero.
"Lockbox Account" means any bank account maintained at a Lockbox Bank into
which collections under the Receivables are deposited in accordance with Section
4.6.
"Lockbox Agreement" means a letter agreement among a Lockbox Bank, the
Seller, the Trust Collateral Agent, the Servicer and, if applicable, any
Sub-Servicer, relating to one or more Lockbox Accounts, as the same may be
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with the terms thereof. So long as no Insurer Default shall
have occurred and be continuing, any Lockbox Agreement is also required to be
acceptable to the Insurer.
"Lockbox Bank" means any bank at which a Lockbox Account is maintained from
time to time and whose short-term debt securities are rated A-1+ by S&P and P-1
by Moody's. So long as no Insurer Default shall have occurred and be continuing,
any Lockbox Bank is also required to be acceptable to the Insurer.
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"Lockbox Processor" means the Person appointed as lockbox processor
pursuant to the Lockbox Agreement and its successors thereunder.
"Mandatory Redemption Date" means the Distribution Date relating to the
Reporting Date next succeeding the last day of the Pre-Funding Period.
"Master Trust" means National Financial Auto Receivables Master Trust.
"Monthly Pre-Funding Period Reserve Amount" means, with respect to any
Distribution Date occurring on or prior to the Distribution Date next succeeding
termination of the Pre-Funding Period, an amount equal to the excess, if any, of
(i) the product of (a) 1/12th, (b) the Interest Rate and (c) the average daily
balance of funds on deposit in the Pre-Funding Account from and including the
preceding Distribution Date (or, in the case of the first Distribution Date, the
Closing Date) to but not including the current Distribution Date, over (ii) the
amount of interest accrued on Eligible 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 (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 all Liquidation Expenses.
"Net Loss Rate" means, with respect to any Due Period, the product,
expressed as a percentage, of (i) twelve and (ii) a fraction, the numerator of
which equals the excess of (A) the sum of (1) the aggregate Principal Balance of
all Receivables that became Liquidated Receivables in such Due Period and (2)
accrued and unpaid interest on such Principal Balance through the end of such
Due Period and (3) the amount of any Bankruptcy Losses, over (B) the Net
Liquidation Proceeds received by the Trust during such Due Period with respect
to all Liquidated Receivables in the Trust (including Liquidated Receivables
that became Liquidated Receivables in a prior Due Period) and the denominator of
which equals the arithmetic average of the Pool Balance as of the end of such
Due Period and the Pool Balance as of the end of the preceding Due Period.
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"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 the holders of a majority by aggregate outstanding
principal balance of the Notes so long as the Notes are outstanding.
"Note Policy" means the financial guaranty insurance policy number 50661-N
issued by the Insurer to the Trust Collateral Agent, as agent for the Trustee,
for the benefit of the Noteholders, including any endorsements thereto.
"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 Note
Policy) for such Distribution Date and (ii) the excess, if any, of (x) the
amount required to be distributed pursuant to clauses (i) through (iii) of
Section 5.7(b) hereof (other than any Note Prepayment Amount) over (y) the sum
of the Available Amount and Deficiency Claim Amount with respect to such
Distribution Date.
"Note Pool Factor" for the Notes as of the close of business on a
Distribution Date means a seven-digit decimal figure equal to the outstanding
principal amount of such Notes (after giving effect to any distributions
reducing the Note Balance of the Notes on such Distribution Date) divided by the
original outstanding principal amount of such Class of Notes on the Closing
Date.
"Note Prepayment Amount" means, as of the Distribution Date on or
immediately following the last day of the Pre-Funding Period, after giving
effect to any transfer of Subsequent Receivables on such date, an amount equal
to the remaining Pre-Funded Amount on deposit in the Pre-Funding Account.
"Noteholders" and "Holders" have the meaning assigned to the term
"Noteholders" in the Indenture.
"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.
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"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 (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 (i) a Co-Trustee of
the Seller or Funding Trust II, as the case may be, (ii) the Chairman of the
Board, President, Executive Vice President, Senior Vice President, Vice
President, or Assistant Vice President of the Custodian or NAFI, as the case may
be, or (iii) by a Servicing Official in the case of the Servicer, and in each
case delivered to the Trust Collateral Agent as required by this Agreement.
"Opinion of Counsel" means a written opinion in form reasonably
satisfactory to the Trust Collateral Agent (and the Insurer if such opinion is
addressed to the Insurer) of counsel reasonably satisfactory to the Trust
Collateral Agent (and the Insurer if such opinion is addressed to the Insurer).
Any such counsel may be counsel to the Seller.
"Original Pool Balance" means the sum, as of any date, of the Pool Balance
as of the Initial Cut-off Date.
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"Originator" means consumer finance companies, depository institutions and
other financial institutions engaged in the financing of motor vehicle retail
installment sale contracts from whom NAFI acquired Receivables; provided,
however, that "Originators" shall not include Dealers.
"Originator Agreement" means an agreement pursuant to which NAFI acquired
Receivables from an Originator, as any of such agreements has been and may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof.
"Other Conveyed Property" means all property conveyed by the Seller to the
Trust pursuant to Section 2.1(b) through (h) and Section 2.2(a)(ii) through
(viii) of this Agreement.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, its successors
in interest or any successor Owner Trustee under the Trust Agreement.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof or any other entity.
"Physical Property" has the meaning assigned to such term in the definition
of "Delivery" above.
"Pool Balance" means, as of any date of determination, the Original Pool
Balance, plus the aggregate Principal Balance of the Subsequent Receivables, if
any, sold to the Trust, reduced by any principal amounts previously paid
(excluding Purchased Receivables and Liquidated Receivables).
"Post-Office Box" means the separate post-office box established and
maintained for the benefit of the Noteholders and the Insurer pursuant to
Section 4.6.
"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 $16,490,982.64. "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.
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"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 April 30, 1998.
"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 $154,832.00
deposited on the Closing Date.
"Principal Balance" means, with respect to any Receivable, as of any date,
the Amount Financed minus (i) the principal portion of each payment applied to
such Receivable on or after the applicable Cut-off Date in accordance with the
terms of such Receivable and processed by the Servicer or a Sub-Servicer on or
before such date and (ii) any Bankruptcy Loss in respect of such Receivable;
provided, however, that for any date following the Due Period in which the
remaining principal balance of such Receivable was included in the Principal
Distributable Amount as a Liquidated Receivable or was subject to a principal
prepayment in full (including a repurchase pursuant to Sections 2.2, 2.5, 3.2 or
4.1), the Principal Balance for such Receivable shall be zero.
"Principal Distributable Amount" means, with respect to any Distribution
Date (other than the Final Scheduled Distribution Date), the sum of (i) that
portion of all collections on the Receivables (other than Liquidated Receivables
and Purchased Receivables and, to the extent included in clause (iv) below, the
Principal Balance of all Purchased 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 Purchased Default Receivables), (iii) the portion of the Purchase
Amount allocable to principal of all Receivables that became Purchased
Receivables on or prior to the related Reporting Date and subsequent to the
preceding Reporting Date, (iv) in the sole discretion of the Insurer, the
Principal Balance as of the related Reporting Date of all or any part of the
Purchased Default Receivables, 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 December 15, 1997, as such Agreement may be
amended from time to time.
"Purchase Amount" means, with respect to any Receivable required to be
retransferred pursuant to Sections 2.2, 2.5, 3.2 or 4.1 (or as to which the
Seller has exercised the purchase option in Section 11.1(a)), 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
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which interest was last paid by the Obligor to the due Date in the Due Period in
which such retransfer occurs. For purposes of determining the Purchase Amount of
any Receivable, the Principal Balance thereof on the date of retransfer shall
not be reduced to zero as a result of its classification as a Liquidated
Receivable.
"Purchased 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 Sections 2.2, 2.5, 3.2 or 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.
"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
4.1(b) or repurchased by the Seller pursuant to Sections 2.2, 2.5, 3.2 or
11.1(a).
"Rating Agency" means Moody's and Standard & Poor's. If no such
organization or successor maintains a rating on the Notes, "Rating Agency" shall
be a nationally recognized statistical rating organization or other comparable
Person designated by the Insurer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Insurer, the
Owner Trustee and the Trust Collateral Agent in writing that such action will
not result in a reduction or withdrawal of the then current rating of the Notes.
"Receivable" means each motor vehicle retail installment sale contract and
security agreement (including any and all rights to receive payments thereunder
on and after 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 Receivables Schedule attached to a
Subsequent Transfer Agreement.
"Receivable Documents" means, with respect to a Receivable, all papers and
documents (including those contained in the Receivable File) and all other
papers and records (including computerized data) of whatever kind or
description, whether developed or originated by NAFI, a Dealer, an Originator,
the Servicer or another Person, required to document the Receivable or to
service the Receivable.
"Receivable Files" means with respect to a Receivable, the fully executed
original of such Receivable; the assignment of such Receivable by a Dealer or
Originator to NAFI, the original Title Document or UCC financing statement
evidencing that the security interest in a Financed Vehicle granted to NAFI
under such Receivable has been perfected under applicable state law (except for
any Title Documents or UCC financing statements not returned from the applicable
public records office, in which case NAFI will deliver to the Seller, on the
Closing Date or the Subsequent Transfer Date, as the case may be, an Officer's
Certificate of NAFI
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indicating that the original of such Title Document has been applied for at, or
the original of such UCC financing statement was delivered to, such public
office and shows NAFI as the lienholder or secured party and that NAFI will
deliver the originals thereof when returned from such office); the original of
any assumption agreement or any modification, extension or refinancing
agreement; and the original application of the related Obligor to obtain the
financing extended by such Receivable.
"Receivable Rate" means the annual percentage rate (as such term is used
with respect to the federal Truth-in-Lending Act) of interest borne by, and
indicated on, a Contract.
"Receivables Schedule" means the schedule of Receivables attached hereto as
Schedule A and, with respect to Subsequent Receivables delivered concurrently
with the execution and delivery of a Subsequent Transfer Agreement to the Trust
Collateral Agent, the schedule of Receivables attached to such Subsequent
Transfer Agreement as Schedule 1, each such schedule identifying each Receivable
being transferred and assigned to the Trust pursuant to this Agreement or the
related Subsequent Transfer Agreement by the name of the Obligor and setting
forth as to each such Receivable its Principal Balance as of the applicable
Cut-off Date, loan number, Receivable Rate, scheduled monthly payment of
principal and interest, final maturity date and original principal amount.
"Record Date" with respect to each Distribution Date means the Business Day
immediately preceding such Distribution Date, unless otherwise specified in the
Agreement.
"Registrar of Titles" means, with respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
"Reporting Date" means, with respect to a Distribution Date, the earlier of
(i) the 15th day of the calendar month in which such Distribution Date occurs,
and (ii) the fourth Business Day preceding such Distribution Date.
"Repossession" means any action taken or to be taken pursuant to the UCC or
other applicable laws in connection with recovery on a Defaulted Receivable
(including any Liquidated Receivable), including repossession of the related
Financed Vehicle with or without judicial proceedings, sale of such Financed
Vehicle at public or private sale, retention of such Financed Vehicle in
satisfaction of the Obligor's obligations under such Defaulted Receivable, or a
levy on and sheriff's sale of the related Financed Vehicle in enforcement of a
judgment on such Defaulted Receivable or by voluntary surrender or otherwise.
"Required Reserve Amount" means, with respect to any Distribution Date, an
amount equal to the product of (i) a per annum rate equal to the Interest Rate
less 250 basis points (2.5%), (ii) the amount of funds on deposit in the
Pre-Funding Account after giving effect to any withdrawals therefrom on such
Distribution Date and (iii) a fraction, the numerator of which is the number of
days from and including such Distribution Date to (but excluding) the
Distribution Date immediately following the end of the Pre-Funding Period, and
the denominator of which is 360.
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"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.
"Sale Agreement" means the Sale Agreement, dated as of even date herewith,
between Funding Trust II and the Seller, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
"Schedule of Representations" means the Schedule of Representations and
Warranties attached hereto as Schedule B.
"Scheduled Payment" means, with respect to any Due Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Due Period. If after the Closing Date, the Obligor's
obligation under a Receivable with respect to a Collection Period has been
modified so as to differ from the amount specified in such Receivable as a
result of (i) the order of a court in an insolvency proceeding involving the
Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended, or (iii) modifications or extensions of the Receivable permitted by
Sections 4.1(a) and (b), the Scheduled Payment with respect to such Due Period
shall refer to the Obligor's payment obligation with respect to such Due Period
as so modified.
"Seller" means National Financial Auto Funding Trust, a Delaware business
trust, and its successors in interest to the extent permitted hereunder.
"Series 1998-1 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 10.4.
"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
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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 4.11(a), 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
January 20, 1998 among the Insurer, the Seller, the Trust Collateral Agent and
the Collateral Agent, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc., or its successor.
"Subsequent Cut-off Date" means, with respect to any Subsequent Transfer
Date, the third Business Day prior thereto.
"Subsequent Purchase Agreement" means an agreement by and between the
Seller and NAFI pursuant to which the Seller will acquire Subsequent
Receivables.
"Subsequent Receivables" means the Receivables transferred to the Issuer
pursuant to Section 2.2, which shall be listed on the Receivables Schedule 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.
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"Sub-Servicer Account" means an account maintained by a Sub-Servicer to
which Obligors have been or will be instructed to remit payments in respect of
the Receivables, maintained in accordance with Section 4.6(c).
"Sub-Servicing Agreement" means the written contract between NAFI and any
Sub-Servicer relating to servicing and/or administration of the Receivables as
permitted by Section 4.2 hereof.
"Supplemental Servicing Fee" means, with respect to any Due Period, any
payments received from an Obligor or a Dealer in connection with any application
fees, tax processing fees, wire transfer fees, express mail fees, insurance
premiums, late charges, taxes, fees or other charges imposed by any Governmental
Authority (other than any extension fees).
"Term of the Note Policy" has the meaning specified for "Term of This
Policy" in the Note Policy.
"Title Documents" means, with respect to any Financed Vehicle, the actual
motor vehicle title or certificate of title for such Financed Vehicle issued by
the Registrar of Titles or other government agency in the jurisdiction in which
such Financed Vehicle is registered; alternatively, in those certain
jurisdictions whose law requires that the original of the actual motor vehicle
title or certificate of title be possessed by the Obligor, then, in lieu of the
actual title or certificate of title, Title Documents shall mean such duplicate
titles, certificates or other documents as are permitted, required and/or
contemplated to be possessed by the secured party under the laws of such
jurisdiction.
"Transaction Documents" shall have the meaning assigned thereto in the
Insurance Agreement.
"Trigger Event" has the meaning assigned thereto in the Spread Account
Agreement.
"Trust" means the Issuer.
"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 December 15, 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.
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"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 1998-1
Spread Account to the Trust Collateral Agent and the Insurer pursuant to the
Spread Account Agreement, the Series 1998-1 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 Receivable, the amount
of the add-on finance charge that, under the term of such Receivable, would be
required to be refunded or credited to the related Obligor in accordance with
such Receivable if such Receivable were then prepaid in full.
SECTION 1.2. Other Definitional Provisions
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture, or, if not defined therein, in the
Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement, in any instrument governed hereby and in any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Agreement or in any such instrument,
certificate or other document, and accounting terms partly defined in this
Agreement or in any such instrument, certificate or other document to the extent
not defined, shall have the respective meanings given to them under generally
accepted accounting principles as in effect on the date of this Agreement or any
such
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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 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
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circumstances could or would have a material adverse effect
on the Noteholders (or any similar or analogous determination), such
determination shall be made without taking into account the insurance provided
by the Note Policy.
SECTION 1.8. Calculations as to Principal and Interest in Respect of
Receivables. For all purposes of this Agreement the allocation of a payment on a
Receivable between principal and interest shall be made based upon the
amortization method provided in such Receivable. For purposes of allocating a
pay-ahead payment on a Receivable between principal and interest, the pay-ahead
shall be deemed to have been received on the date it was actually due. For all
purposes of this Agreement, no amount shall be treated as collected under a
Receivable until such amount has been deposited into the Collection Account.
ARTICLE II
Conveyance of Receivables
SECTION 2.1. Conveyance of Initial Receivables. In consideration of the
Issuer's delivery to or upon the order of the Seller on the Closing Date of the
net proceeds from the sale of the Notes and the other amounts to be distributed
from time to time to the Seller in accordance with the terms of this Agreement,
the Seller does hereby sell, transfer, assign, set over and otherwise convey to
the Issuer, without recourse (subject to the obligations set forth herein), all
right, title and interest of the Seller in and to the following, whether now
owned or hereafter acquired:
(a) the Initial Receivables and all monies received thereon on or
after the Initial Cut-off Date (including amounts due on or before the
Initial Cut-off Date but received by NAFI, the Seller or the Issuer on or
after the Initial Cut-off Date);
(b) any proceeds and the right to receive proceeds with respect to the
Initial Receivables from claims on any physical damage, credit life,
disability insurance or other policies covering the related 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 or the Seller 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;
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(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) its 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.
The Seller intends that the transfer and assignment by the Seller to the
Trust contemplated by this Agreement constitute a sale to the Trust of all the
Seller's right, title, and interest in and to the Receivables and the remainder
of the Trust Property (other than the Note Policy) 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; 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 as set forth below. By the transfer, assignment and set-over
contemplated by this Section 2.1 and Section 2.2, the Seller further grants and
transfers to the Trust Collateral Agent, for the benefit of all Noteholders and
the Insurer, a first priority, perfected security interest, as their respective
interests appear in Section 5.7, in all of the Seller's right, title and
interest in, to and under the Receivables and the remainder of the Trust
Property, whether now existing or hereafter acquired, and agrees that this
Agreement shall also constitute a security agreement under applicable law. On or
prior to the Closing Date, the Seller shall have filed a UCC financing statement
or statements, appropriate under the applicable UCC, to reflect the assignment
of the Receivables and the remainder of the Trust Property (other than the Note
Policy) by the Seller to the Trust Collateral Agent and the Insurer and to
protect the Noteholders' and the Insurer's interest in the Receivables, their
proceeds and the Financed Vehicles, against all other Persons and shall
thereafter file any appropriate continuation statements in respect thereof.
During the term of this Agreement, the Seller shall not change its name,
identity or structure or relocate its chief executive office or principal place
of business without first giving at least 30 days' advance written notice to the
Trust Collateral Agent, the Servicer and the Insurer; provided however, that the
Trust Collateral Agent, the Servicer and the Insurer shall, subject to the last
sentence of this paragraph, have no right or power to prohibit a change in the
Seller's name, identity or structure or a relocation of, its chief executive
office or principal place of business. If any change in the Seller's name,
identity or structure or the relocation of its chief executive office or
principal place of business would make any financing or continuation statement
or notice of 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
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change, shall file such amendments or take such other actions as may be required
to preserve and protect the Trust Collateral Agent's interest in the Receivables
and proceeds thereof and the Financed Vehicles and the remainder of the Trust
Property. Promptly after filing such amendments or taking such other action, the
Seller shall deliver to the Trust Collateral Agent and the Insurer an Opinion of
Counsel stating that all financing statements, continuation statements or
amendments thereto necessary to continue the perfection of the interest of the
Trust Collateral Agent in the Trust Property have been filed and reciting the
details thereof.
SECTION 2.2. Conveyance of Subsequent Receivables
(a) Subject to the conditions set forth in paragraph (b) below, in
consideration of the Issuer's delivery on each related Subsequent Transfer Date
to or upon the order of the Seller of the amount described in Section 5.9(a) to
be delivered to the Seller, the Seller does hereby sell, transfer, assign, set
over and otherwise convey to the Issuer without recourse (subject to the
obligations set forth herein), all right, title and interest of the Seller in
and to the following whether then owned or thereafter acquired:
(i) the Subsequent Receivables listed on Schedule 1 to the related
Subsequent Transfer Agreement and all monies received thereon on or after
the related Subsequent Cut-off Date (including amounts due on or before the
Subsequent Cut-off Date but received by NAFI, the Seller or the Issuer on
or after the Subsequent Cut-off Date);
(ii) any proceeds and the right to receive proceeds with respect to
such Subsequent Receivables from claims on any physical damage, credit
life, disability or other insurance policies covering the related Financed
Vehicles or Obligors, including rebating of insurance premiums relating to
the Receivables, and any proceeds from the liquidation of the Subsequent
Receivables;
(iii) all rights of the Seller against the Dealers pursuant to Dealer
Agreements or against Originators pursuant to Originator Agreements;
(iv) the related Receivables Files and any and all other documents
that NAFI or the Seller keeps on file in accordance with its customary
procedures relating to the Receivables, the Obligors or the Financed
Vehicles;
(v) property (including the right to receive future Liquidation
Proceeds) that secures a Receivable and that has been acquired by or on
behalf of the Trust pursuant to liquidation of such Receivable;
(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) 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
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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 with respect to the Subsequent Receivables being
transferred on such 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 such Subsequent Receivables;
(ii) the Seller shall have delivered the Receivables Schedule for such
Subsequent Receivables 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 not 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 the Receivables Schedule for such Subsequent Receivables and
a copy thereof to the Insurer;
(iv) the Seller shall, to the extent required by Section 2.4(b), 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 the transfer of such Subsequent
Receivables on such 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
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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 April 21, 2003;
(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 such
Subsequent Receivables 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 and shall
have been reimbursed for any fees and expenses incurred by the Insurer in
connection with the granting of such approval;
(ix) on or before such Subsequent Transfer Date, the Seller shall
deliver to the Trust Collateral Agent (with copies to the Insurer) (A) an
Officer's Certificate of NAFI substantially in the form attached hereto as
Exhibit 2.2A, (b) an Officer's Certificate of the Seller substantially in
the form attached hereto as Exhibit 2.2B, and (C) a Subsequent Transfer
Agreement executed by the Seller and including, as an attachment thereto, a
Receivables Schedule identifying such Subsequent Receivables; and
(x) on or before such Subsequent Transfer Date, the Seller shall have
provided any information reasonably requested by the Rating Agencies, the
Insurer or the Trust Collateral Agent with respect to such Additional
Contracts.
The Seller covenants that in the event any of the foregoing conditions
precedent are not satisfied with respect to any Subsequent Receivable on the
date required as specified above, the Seller will immediately repurchase such
Subsequent Receivable from the Trust, at a price equal to the Purchase Amount
thereof, in the manner specified in Section 2.5.
(c) Within ten Business Days after the last day of the Pre-Funding Period,
the Seller shall, at its cost and expense, cause KPMG Peat Marwick or such other
nationally recognized firm of public accountants as may be acceptable to the
Insurer to deliver to the Insurer a report covering the Receivables then in the
Trust and addressing such procedures as the Seller and the Insurer may agree
upon.
SECTION 2.3. Further Encumbrance of Trust Property. (a) Immediately upon
the conveyance to the Trust by the Seller of any item of the Trust Property
pursuant to Section 2.1 or 2.2, all right, title and interest of the Seller in
and to such item of Trust Property shall terminate, and all such right, title
and interest shall vest in the Trust, in accordance with the Trust Agreement and
Sections 3802 and 3805 of the Business Trust Statute (as defined in the Trust
Agreement).
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(b) Immediately upon the vesting of the Trust Property in the Trust, the
Trust shall have the sole right to pledge or otherwise encumber such Trust
Property. Pursuant to the Indenture and contemporaneously with such property
vesting in the Trust pursuant to clause (a) above, the Trust shall grant a
security interest to the Trust Collateral Agent (on behalf of the Noteholders
and the Insurer) in the Trust Property to secure the repayment of the Notes. The
Trust Certificates shall represent the beneficial ownership interest in the
Trust Property, and the Certificateholders shall be entitled to receive
distributions with respect thereto as set forth herein.
(c) Prior to the payment in full on the Notes, the payment of all amounts
due to the Insurer under the Insurance Agreement, the end of the Term of the
Note Policy and the surrender of the Note Policy by the Collateral Agent to the
Insurer, the Trust Collateral Agent shall hold the Trust Property for the
exclusive benefit of the Trustee on behalf of the Noteholders and the Insurer.
Following the payment in full of the Notes and the release and discharge of the
Indenture, all covenants of the Trust contained in Article III of the Indenture
shall, until payment in full of the Trust Certificates, remain as covenants of
the Trust for the benefit of the Certificateholders, enforceable by the
Certificateholders to the same extent that such covenants were enforceable by
the Noteholders prior to the discharge of the Indenture. Any rights of the Trust
Collateral Agent under Article IV of the Indenture following discharge of the
Indenture shall thereupon vest in Certificateholders.
(d) The Trust Collateral Agent shall, at such time as there are no Notes
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. Books and Records; Payments on Receivables. (a) The Servicer
shall be responsible for maintaining, and shall maintain and cause the
respective Sub-Servicers, if any, to maintain, a complete set of books and
records (including tapes and disks for computer use) for each Receivable to the
extent that such books and records were delivered to the Servicer or such
Sub-Servicer or were developed by it during the course of servicing such
Receivable. The Servicer shall, and shall cause the respective Sub-Servicers to,
maintain such books of account and other records as will enable the Trust
Collateral Agent to determine the ownership status of each Receivable; provided
however, that neither the Servicer nor any Sub-Servicer shall be required to
physically mark or segregate any Receivables or other Receivable Documents to
indicate such ownership status. On or before 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. The Servicer hereby
warrants, represents and covenants to and with the Trust Collateral Agent and
the Insurer that recordation of the name of the Servicer as lienholder in the
Title Documents respecting any Financed Vehicle as well as such lien itself is
maintained by the Servicer as agent for the Trust Collateral Agent for the
benefit of the Trust and the Servicer has no equitable ownership in the
Receivables, except as it may have by virtue of ownership of a Trust Certificate
or an equity
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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 Property held by it, in trust for the
benefit of the Trust Collateral Agent (on behalf of the Noteholders and the
Insurer).
(b) On the Closing Date, the Seller shall deliver to the Trust Collateral
Agent for deposit in the Collection Account, or to the extent received by the
Servicer or any Sub-Servicer, cause the Servicer to deliver or cause to be
delivered to the Trust Collateral Agent for deposit in the Collection Account,
all payments received on the Receivables on or after the Initial Cut-off Date
and on or before the second Business Day preceding the Closing Date. Within two
Business Days after a Subsequent Transfer Date, the Seller shall deliver to the
Trust Collateral Agent for deposit in the Collection Account, or to the extent
received by the Servicer or any Sub-Servicer, cause the Servicer to deliver or
cause to be delivered to the Trust Collateral Agent for deposit in the
Collection Account, all payments received on the Receivables on or after the
applicable Cut-off Date and on or before such Subsequent Transfer Date.
SECTION 2.5. Seller Repurchase of Receivables. 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 the Custodian makes no representation as to the contents of any
Receivable File. If the Servicer or any such Sub-Servicer subsequently finds any
document or documents constituting a part of a Receivable File to be missing or
defective in any material respect, the Servicer or such Sub-Servicer shall
promptly so notify the Trust Collateral Agent, the Insurer and the Seller in
writing, and the Servicer shall add such item to the exceptions list. The Seller
shall use best efforts to cure each such omission or defect on the exceptions
list. If the Seller does not correct or cure any such omission or defect within
sixty (60) days from the date the Trust Collateral Agent was notified of such
omission or defect, then the Seller shall promptly accept a retransfer of the
related Receivable from the Trust Collateral Agent. The Purchase Amount for the
retransferred Receivable shall be delivered by the Seller to the Trust
Collateral Agent for deposit in the Collection Account and upon receipt of the
Purchase Amount by the Trust Collateral Agent and its receipt of written notice
thereof, the Trust Collateral Agent shall cause the Custodian to release to the
Seller the related Receivable File and the Trust Collateral Agent shall execute
and deliver such instruments of transfer or assignment, in each case without
recourse, as shall be reasonably necessary to vest in the Seller or its designee
any Receivable released pursuant hereto. It is understood and agreed that the
obligation of the Seller to accept a retransfer of any Receivable as to which a
material defect in or omission of a constituent document exists shall constitute
the sole remedy respecting such defect or omission available to Noteholders or
the Trust Collateral Agent on behalf of Noteholders.
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ARTICLE III
The Receivables
SECTION 3.1. Representations and Warranties of Seller. The Seller makes the
representations and warranties set forth on the Schedule of Representations
attached hereto as Schedule B 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. Such
representations and warranties shall survive assignment of the Receivables to
the Trust Collateral Agent and shall survive as long as any Note is outstanding
or this Agreement has not been terminated.
SECTION 3.2. Repurchase upon Breach
(a) The Seller, the Servicer, any Sub-Servicer, the Insurer, any Trust
Officer of the Trust Collateral Agent or the Owner Trustee, as the case may be,
shall promptly inform each of the other parties and the Insurer, in writing,
upon the discovery of any breach of the Seller's representations and warranties
made pursuant to Section 3.1 which materially and adversely affects the
interests of the Noteholders or the Insurer in the related Receivable (any
Sub-Servicer being so obligated under the related Sub-Servicing Agreement);
provided, however, that the failure to give any such notice shall not derogate
from any obligations of the Seller under this Section 3.2. In addition, with
respect to any Receivables in respect of which the Title Documents were being
applied for on the Closing Date or the relevant Subsequent Transfer Date, as
applicable, if such Title Documents have not been received by the Servicer
within 180 days after the Closing Date or such Subsequent Transfer Date, as
applicable, the Servicer shall give the Trust Collateral Agent, the Insurer and
Seller written notice of such fact. If the Seller does not correct or cure such
breach (including delivery of such Title Documents, if applicable) by the
Reporting Date occurring during the second full calendar month following the
calendar month in which the Trust Collateral Agent was notified or the Seller,
any Sub-Servicer or the Servicer became aware, if earlier, of such breach
(including failure to deliver such Title Documents), then the Seller shall
promptly repurchase such Receivables from the Issuer. Any such repurchase by the
Seller shall be in exchange for the delivery by the Seller to the Issuer of the
Purchase Amount and shall be accomplished in the manner set forth in Section 5.6
and the Trust shall execute such assignments and other documents reasonably
requested by such Person in order to effect such repurchase. It is understood
and agreed that the obligation of the Seller to repurchase any Receivable as to
which such a breach has occurred and is continuing as described above shall,
except as described in the following paragraph, 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.
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In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by the Seller or by the Servicer pursuant
to Section 4.1, 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 with respect to 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
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pursuant to an order from a court of competent jurisdiction, release an Obligor
from payment of any unpaid amount under any Receivable or waive the right to
collect the unpaid balance of any Receivable from the Obligor, except that the
Servicer may forego collection efforts if the amount subject to collection is de
minimis and if it would forego collection in accordance with its customary
procedures. If any Receivable contains a "due-on-sale" provision allowing the
holder thereof to accelerate the Receivable upon sale of the Financed Vehicle
financed thereunder, the Servicer shall take reasonable steps under the
circumstances to enforce such due on sale provision if a Financed Vehicle is
sold as soon as practicable after determining that such Financed Vehicle has
been sold; provided however, that the Servicer shall not be obligated to take
any legal action to enforce such provision.
(b) The Servicer shall service and administer the Receivables by employing
procedures (including collection procedures) and a degree of care consistent
with prudent industry standards and as are customarily employed by servicers in
servicing and administering comparable motor vehicle retail installment sales
contracts and, to the extent more exacting, the degree of skill and attention
that the Servicer exercises from time to time with respect to all comparable
motor vehicle receivables that it services for itself or others. The Servicer
shall take all actions (in addition to those required to be taken by the Seller
pursuant to this Agreement) that are necessary or desirable to maintain
continuous perfection and first priority of security interests of NAFI in the
Financed Vehicles and to maintain continuous perfection of the security interest
created by each Receivable in the related Financed Vehicle on behalf of the
Trust Collateral Agent, including, but not limited to, using reasonable efforts
to obtain execution by the Obligors and the recording, registering, filing,
re-recording, re-registering and refiling of all Title Documents (it being
understood that Title Documents have not been and need not be endorsed or
delivered to the Trust Collateral Agent and do not and need not identify the
Trust Collateral Agent as the secured party or lienholder with respect to the
Receivables), security agreements, financing statements, continuation statements
or other instruments as are necessary to maintain the security interests granted
by the Obligors under the respective Receivables on behalf of the Trust
Collateral Agent; provided however, that the Servicer is not required to expend
any of its own funds to remove any security interest, lien or other encumbrance
on any Financed Vehicle. The Servicer shall not take any action to impair the
Trust's rights in any Receivable, except to the extent allowed pursuant to this
Agreement or required by law. The Financed Vehicle securing each Receivable
shall not be released in whole or in part from the security interest granted by
the Receivable, except upon payment in full of the Receivable or as otherwise
contemplated herein. The Servicer shall not extend or otherwise amend the terms
of any Receivable, except in accordance with Section 4.1(a). Upon discovery by
either the Servicer or any Sub-Servicer by a Trust Officer of the Trust
Collateral Agent of a default by the Servicer in the performance of its
obligations under this Section 4.1(b) which materially and adversely affects the
interests of the Noteholders or the Insurer in the related Receivable, the party
discovering such breach shall give prompt written notice thereof to the other
parties and the Insurer. If the Servicer does not correct or cure such default
by the Reporting Date occurring during the second full calendar month following
the calendar month in which the Trust Collateral Agent was notified, or the
Servicer, the Trust Collateral Agent or the Sub-Servicer became aware, if
earlier, of such default, then the Servicer shall promptly purchase such
Receivable from the Trust. Any such purchase by the Servicer shall be in
exchange for the delivery by the
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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 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) of the Insurance Agreement, 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 and be continuing,
upon the occurrence of a Servicer Termination Event, the Trust Collateral Agent
and the Servicer shall take or cause to be taken such action as may, in the
opinion of counsel to the Controlling Party, be necessary to perfect or
re-perfect the security interests in the Financed Vehicles securing the
Receivables in the name of the Trust by amending the title documents of such
Financed Vehicles or by such other reasonable means as may, in the opinion of
counsel to the Controlling Party, be necessary or prudent. NAFI hereby makes,
constitutes, and appoints, the Trust Collateral Agent acting through its duly
appointed officers or any of them, its true and lawful attorney, for it and in
its name and on its behalf, for the sole and exclusive purpose of authorizing
said attorney to execute and deliver 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 show the Trust Collateral Agent as lienholder
or secured party on the related Lien Certificates relating to a Financed
Vehicle. 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) Subject to Section 9.5, 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
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time be updated by the Servicer as additional officers and employees of the
Servicer become involved, or responsible for, the administration and servicing
of the Receivables or officers or employees of the Servicer previously
identified on any such list become disassociated with the administration and
servicing of the Receivables.
(f) The Servicer may take such actions as are necessary to discharge its
duties as Servicer in accordance with this Agreement, including the power to
execute and deliver on behalf of the Trust such instruments and documents as may
be customary, necessary or desirable in connection with the performance of the
Servicer's duties under this Agreement (including consents, waivers and
discharges relating to the Receivables and the Financed Vehicles and such
instruments or documents as may be necessary to effect foreclosure or other
conversion of the ownership of any Financed Vehicle). In furtherance thereof,
the Trust Collateral Agent hereby irrevocably appoints the Servicer as its
attorney-in-fact, such appointment being coupled with an interest, to execute on
its behalf such documents or instruments as are necessary to effect the
Repossession of Financed Vehicles, to deliver applicable Receivable Files,
Receivable Documents and Title Documents to the Seller upon the sale of a
Receivable to the Seller under this Agreement and to deliver applicable
Receivable Files, Receivable Documents and Title Documents upon liquidation or
final payment of a Receivable. The Trust Collateral Agent, upon receipt of a
certificate of a Servicing Official requesting the same be accepted by the Trust
Collateral Agent and certifying as to the reasons such documents are required,
shall furnish the Servicer with any other powers of attorney or other documents
reasonably necessary or appropriate which the Trust Collateral Agent may legally
execute to enable the Servicer to carry out its servicing and administrative
duties hereunder. Neither the Servicer nor any of its directors, officers,
employees or agents will be under any liability to the Trust, the Trust
Collateral Agent, the Insurer, any Noteholder, or the Seller for the
consequences of any delay resulting from having to obtain such documents from
the Trust Collateral Agent, provided that the Servicer furnished such
certificate to the Trust Collateral Agent reasonably promptly after determining
the necessity therefor in the particular instance.
SECTION 4.2. Sub-Servicing Agreements between Servicer and the Sub
Servicers. Subject to Section 9.5, the Servicer may enter into Sub-Servicing
Agreements with one or more Sub-Servicers for the servicing and administration
of certain of the Receivables with 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. The Servicer shall notify each
Rating Agency, the Trust Collateral Agent, the Backup Servicer and the Insurer
promptly after entering into any Sub-Servicing Agreement. 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 Trust Collateral Agent (on behalf 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
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and not violate the provisions of this Agreement and provided further that the
Servicer shall not amend any Sub-Servicing Agreement without (i) with respect to
a material amendment, the prior written consent of the Insurer and (ii) with
respect to all other amendments, upon five (5) days prior written notice of such
amendment.
SECTION 4.3. Obligations of the Servicer. Notwithstanding any Sub-Servicing
Agreement, any of the provisions of this Agreement relating to agreements or
arrangements between the Servicer or a Sub-Servicer or reference to actions
taken through a Sub-Servicer or otherwise, the Servicer shall remain obligated
for the servicing and administering of the Receivables in accordance with the
provisions of Section 4.1 of this Agreement without diminution of such
obligation or liability by virtue of such Sub-Servicing Agreements or
arrangements or by virtue of indemnification from a Sub-Servicer and to the same
extent and under the same terms and conditions as if the Servicer alone were
servicing and administering the Receivables. The Servicer shall be entitled to
enter into any agreement with a Sub-Servicer for indemnification of the
Servicer, and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.
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 Trustee, the Backup Servicer, 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. The Servicer shall promptly provide to the Trust Collateral
Agent, the Backup Servicer 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 Backup Servicer or other successor Servicer or its designee will
thereupon assume all of the rights and obligations of the Servicer under any
Sub-Servicing Agreements that may have been entered into by the Servicer by
giving notice of such assumption to the relevant 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 successor Servicer or its
designee 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 a successor Servicer or its designee.
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The Servicer shall, upon request of the Trust Collateral Agent but at the
expense of the Servicer, deliver to the assuming party all documents and records
relating to the Sub-Servicing Agreement and the Receivables then being serviced
and an accounting of amounts collected and held by it and otherwise use its
reasonable efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreement to the assuming party.
SECTION 4.6. Collection of Receivable Payments
(a) The Servicer shall proceed diligently to collect all payments called
for under the terms and provisions of the Receivables, and shall service the
Receivables in a manner consistent with the servicing standards and procedures
generally accepted in the financial services industry for similar Receivables,
and as otherwise expressly provided by this Agreement, including Section 4.1(a).
Consistent with the foregoing, the Servicer may in its discretion (i) waive any
late payment charge and (ii) extend the then current maturity date of a
Receivable by two months, once during each calendar year at the request of the
related Obligor on account of the Obligor's adverse financial circumstances that
affect the Obligor's ability to make payments under such Receivable; provided
however, that the Servicer may not so extend the then current maturity date of
Receivable more than twice during the life of such Receivable; provided further,
that the Average Extension Ratio for any calendar month, commencing January
1998, shall not exceed 2.5% for each January, August, September and December and
2.0% for any other calendar month. The "Average Extension Ratio" for any
calendar month shall equal the arithmetic average of the Extension Ratios for
such calendar month and the two preceding calendar months (for example, the
Average Extension Ratio for January 1998 will equal the arithmetic average of
the Extension Ratios for the months November 1997, December 1997 and January
1998 and will be included in the report delivered by the Servicer pursuant to
Section 4.11 on or before the February 1998 Reporting Date). The "Extension
Ratio" for any calendar month shall equal the percentage equivalent of a
fraction the numerator of which is the aggregate number of Receivables that have
been extended during such calendar month and the denominator of which is the
aggregate number of Receivables outstanding as of the first day of such calendar
month.
(b) Except as provided in subsection (c) below, the Servicer shall provide
Obligors with a monthly statement in order to enable such Obligors to make
payments with respect to the Receivables, whether by check mailed directly to
the Post-Office Box or by direct debit of the Obligor's bank account. On each
Business Day, pursuant to the Lockbox Agreement, the Lockbox Processor shall
transfer any payments from Obligors received in the Post-Office Box to the
Lockbox Account. The Servicer shall cause all amounts credited to the Lockbox
Account on account of such payments to be transferred to the Collection Account
no later than the next Business Day after receipt of such payments. The Lockbox
Account shall be a demand deposit account held by the Lockbox Bank, or at the
request of the Controlling Party, an Eligible Bank.
The Servicer shall have notified each Obligor that makes its payments on
the Receivables by check to make any such payments after the applicable Cutoff
Date directly to the Post-Office Box (except in the case of Obligors that have
already been making such payments to
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the Post-Office Box), and shall have provided each such Obligor with remittance
invoices in order to enable such Obligors to make such payments directly to the
Post-Office Box for deposit into the Lockbox Account, and the Servicer will
continue, not less often than every three months, to so notify those Obligors
who have failed to may payments to the Post-Office Box. The Servicer on behalf
of the Trust Collateral Agent shall establish and maintain the Post-Office Box
at a United States Post Office branch for the benefit of the Noteholders and the
Insurer.
(c) In the event that a Sub-Servicer is appointed in accordance with
Section 9.5, the Servicer shall cause the Sub-Servicer to maintain a
Sub-Servicer Account to which Obligors shall have been directed to remit
payments in respect of the Receivables. 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 a Sub-Servicer Account is terminated for any reason prior to the
establishment of, and notification to Obligors to remit payments to, a
replacement servicing account comparable to such 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 Lockbox Account pursuant
to a Lockbox Agreement and notify all Obligors to remit payments in respect of
the Receivables in accordance with subsection (b) above.
(d) 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.
(e) Notwithstanding any Lockbox Agreement, or any of the provisions of this
Agreement relating to a Lockbox Agreement, a Lockbox Bank or a Lockbox Account,
the Servicer shall remain obligated and liable to the Trust Collateral Agent and
the Noteholders for servicing and administering the Receivables and the rest of
the Trust Property in accordance with the provisions of this Agreement without
diminution of such obligations or liability by virtue thereof, provided,
however, that the foregoing shall not apply to any Backup Servicer for so long
as a Lockbox Bank is performing its obligations pursuant to the terms of a
Lockbox Agreement.
In the event of a termination of the Servicer, the Backup Servicer or other
successor Servicer shall assume all of the rights and obligations of the
outgoing Servicer under
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the Lockbox Agreement subject to the terms hereof. In such event, the Backup
Servicer or the successor Servicer shall be deemed to have assumed all of the
outgoing Servicer's interest therein and to have replaced the outgoing Servicer
as a party to each such Lockbox Agreement to the same extent as if such Lockbox
Agreement had been assigned to the successor Servicer, except that the outgoing
Servicer shall not thereby be relieved of any liability or obligations on the
part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement.
The outgoing Servicer shall, upon request of the Trust Collateral Agent, but at
the expense of the outgoing Servicer, deliver to the successor Servicer all
documents and records relating to each such Lockbox Agreement and an accounting
of amounts collected and held by the Lockbox Bank and otherwise use its best
efforts to effect the orderly and efficient transfer of any Lockbox Agreement to
the successor Servicer. In the event that 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) elects to change the
identity of the Lockbox Bank, the outgoing Servicer, at its expense, shall cause
the Lockbox Bank to deliver, at the direction of the Insurer (so long as an
Insurer Default shall not have occurred and be continuing) or a Security
Majority (if an Insurer Default shall have occurred and be continuing) to the
Trust Collateral Agent or a successor Lockbox Bank, all documents and records
relating to the Receivables and all amounts held (or thereafter received) by the
Lockbox Bank (together with an accounting of such amounts) and shall otherwise
use its best efforts to effect the orderly and efficient transfer of the lockbox
arrangements and the Servicer shall notify the Obligors to make payments to the
Lockbox established by the successor.
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 relevant Sub-Servicer and its
successors and assigns. Servicer shall maintain and keep in place a vendor's
single interest insurance policy.
SECTION 4.8. Realization upon Defaulted Receivables
(a) 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 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
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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 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.
(b) In the event the Servicer delivers any Repossessed Financed Vehicle for
sale to a Dealer, it agrees that prior to such delivery, it shall make such
filings and effect such notices as are necessary under Section 9-114(1) of the
New York UCC (or comparable section of the UCC of any applicable state) to
preserve its ownership interest (or security interest, as the case may be) in
any such Repossessed Financed Vehicle. The Servicer agrees that at any time
after 45 days from the Closing Date the aggregate number of unliquidated
Repossessed Financed Vehicles delivered for sale to all Dealers with respect to
which the actions referred to in the prior sentence have not been effected shall
not exceed the lesser of (i) 35 Repossessed Financed Vehicles or (ii) 20% of the
aggregate number of unliquidated Repossessed Financed Vehicles. The Servicer
further agrees that the number of unliquidated Repossessed Financed Vehicles
delivered for sale to any individual Dealer shall at no time exceed 35.
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
(together, the "Servicing Fee") for the related Due Period pursuant to Section
5.7. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities under this Agreement (including taxes imposed on
the Servicer, fees and expenses of any Sub-Servicer, expenses incurred in
connection with distributions and reports made by the Servicer to Noteholders or
the Insurer and all other fees and expenses of the Owner Trustee, the Trust
Collateral Agent or the Trustee, except taxes levied or assessed against the
Trust, and claims against the Trust in respect of indemnification, which taxes
and claims in respect of indemnification against the Trust are expressly stated
to be for the account of NAFI) and shall not be entitled to reimbursement
therefor except as specifically provided herein. The Servicer shall be liable
for the fees, charges and expenses of the Owner Trustee, the Trust Collateral
Agent, the Trustee, the Custodian, the Collateral Agent, the Lockbox Bank, any
Sub-Servicer and their respective agents (and any fees under the Lockbox
Agreement).
SECTION 4.10. [Reserved]
SECTION 4.11. Reports
(a) Not later than the Reporting Date, the Servicer shall forward to the
Trust Collateral Agent, the Trustee, the Backup Servicer, each Rating Agency,
the Insurer and the Seller a statement substantially in the form attached hereto
as Exhibit B (as such form may be
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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 B,
the Servicer shall include in the copy of such statement delivered to the
Insurer (i) the Delinquency Ratio, Average Delinquency Ratio, Default Rate,
Average Default Rate, Net Loss Rate, Average Net Loss Rate, Average Extension
Ratio and Extension Ratio for such Reporting Date, (ii) whether any Trigger
Event has occurred as of such Reporting Date, (iii) whether any Trigger Event
that may have occurred as of a prior Reporting Date is deemed cured as of such
Reporting Date, and (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 and based on information set forth by the Servicer in the
statement substantially in the form of Exhibit B hereto. Not later than five
days after each Determination Date, the Trust Collateral Agent shall forward to
the Servicer, the Insurer and the Seller a statement showing, for the previous
Distribution Date, the aggregate of withdrawals from the Distribution Account
and the withdrawals and deposits to the Spread Account.
SECTION 4.12. Annual Statement as to Compliance, Notice of Servicer
Termination Event
(a) The Servicer shall deliver or cause to be delivered to each Rating
Agency, the Trustee, the Owner Trustee, the Trust Collateral Agent, the Backup
Servicer and the Insurer on or before April 30 (or 120 days after the end of the
Servicer's fiscal year, if other than December 31) of each year, beginning on
April 30, 1998, an Officer's Certificate signed by any responsible officer of
the Servicer, or such Eligible Sub-Servicer who is performing the servicing
duties of the Servicer, dated as of December 31 (or other applicable date) of
the immediately preceding year, stating that (i) a review of the activities of
the Servicer during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision, (ii) to the best of
such officer's knowledge, based on such review, the Servicer has fulfilled all
its obligations under this Agreement throughout such year, or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof and (iii) to the
best of such officer's knowledge, each Sub-Servicer has fulfilled its
obligations under its Sub-Servicing Agreement in all material respects, or if
there has been a material default in the fulfillment of such obligations,
specifying such default known to such employee and the nature and status
thereof.
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(b) The Servicer shall deliver to the Trust Collateral Agent, the Insurer,
the Backup Servicer, 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 Backup Servicer and the Insurer, on or before March 30 (or 90 days
after the end of the Servicer's fiscal year, if other than December 31) of each
year, beginning on March 30, 1998, with respect to the twelve months ended the
immediately preceding December 31 (or other applicable date) (or such other
period as shall have elapsed from the Closing Date to the date of such
certificate), a statement (the "Accountants' Report") addressed to the Board of
Directors of the Servicer, to the Trustee, the Owner Trustee, the Trust
Collateral Agent and to the Insurer, to the effect that such firm has audited
the books and records of the Servicer and that such audit (1) was made in
accordance with generally accepted auditing standards, and accordingly included
such tests of the accounting records and such other auditing procedures as such
firm considered necessary in the circumstances; (2) included an examination of
documents and records relating to the servicing of automobile installment sales
contracts under pooling and servicing agreements substantially similar one to
another (such statement to have attached thereto a schedule setting forth the
servicing agreements covered thereby, including this Agreement); (3) included an
examination of the delinquency and loss statistics relating to the Servicer's
portfolio of automobile installment sales contracts; and (4) except as described
in the statement, disclosed no exceptions or errors in the records relating to
automobile and light truck loans serviced for others that, in the firm's
opinion, generally accepted auditing standards requires such firm to report. The
Accountants' Report shall further state that (1) a review in accordance with
agreed upon procedures was made of three randomly selected Servicer's
Certificates for the Trust; (2) except as disclosed in the Report, no exceptions
or errors in the Servicer's Certificates so examined were found; and (3) the
delinquency and loss information relating to the Receivables contained in the
Servicer Certificates were found to be accurate.
(b) The Accountants' Report shall also indicate that the firm is
independent of the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
(c) A copy of the Accountant's Report may be obtained by any Noteholder by
a request in writing to the Trust Collateral Agent addressed to its Corporate
Trust Office.
SECTION 4.14. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Trust
Collateral Agent, the Backup Servicer and the Insurer reasonable access to the
documentation regarding the Receivables. Each of the Seller and Servicer will
permit any authorized representative or agent
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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. (a) On or before the fourth Business Day, but
in no event later than the fifth calendar day, of each month, the Servicer will
deliver to the Trust Collateral Agent, the Insurer and the Backup Servicer a
computer tape and a diskette (or any other electronic transmission acceptable to
the Trust Collateral Agent, the Insurer and the Backup Servicer) in a format
acceptable to the Trust Collateral Agent and the Backup Servicer 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 March 31, 1998, 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 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.
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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 and the
Insurer, 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.
(b) The Trust Collateral Agent shall deposit the following amounts into the
Collection Account upon receipt: (i) all amounts withdrawn by the Servicer from
the Lockbox Account or by a Sub-Servicer from the Sub-Servicer Account and all
amounts received by the Servicer, the Seller, NAFI or any Sub-Servicer and
transferred to the Trustee pursuant to Section 4.6(d); (ii) the Purchase Amount
received in respect of any Purchased Receivables pursuant to Sections 2,2, 2.5,
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.
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(c) On each Distribution Date, the Trust Collateral Agent shall, at the
written direction of the Servicer, withdraw from the Collection Account and
deposit in the Distribution Account the amount on deposit in the Collection
Account as of the close of business on the related Determination Date (other
than any pay-ahead amounts, as provided in Section 5.4) and any amount deposited
to the Collection Account in respect of Purchased Receivables on or prior to the
related Reporting Date and subsequent to the preceding Reporting Date, less the
sum of (i) the Supplemental Servicing Fee collected with respect to the
Receivables on deposit in the Collection Account as of such Determination Date,
(ii) any income and gain on investments of deposits in the Collection Account as
of such Determination Date, (iii) any collection or other amounts deposited to
the Collection Account in respect of Purchased Receivables other than the
Purchase Amounts. In addition, on each Distribution Date, the Trust Collateral
Agent shall, in accordance with the written direction of the Servicer, withdraw
from the Collection Account and shall pay (i) to the Seller any income and gain
on investments then on deposit in the Collection Account and all late payment
fees then on deposit in the Collection Account and (ii) to pay to the Seller
with respect to each Purchased Receivable or property acquired in respect
thereof, all amounts received thereon and not distributed as of, or received
after, the date on which the related Principal Balance or Purchase Amount (or,
in the case of a retransfer pursuant to Section 11.1, the purchase amount
required therein) is determined. In the event the Servicer, any Sub-Servicer or
the Trust Collateral Agent shall deposit in the Collection Account any amount in
error and such amount is not required to be deposited therein, the Trust
Collateral Agent may withdraw at any time, on its own behalf if the erroneous
deposit was made by the Trust Collateral Agent and on behalf of the Servicer or
Sub-Servicer if the erroneous deposit was made by the Servicer or Sub-Servicer
promptly after receipt of an Officer's Certificate setting forth the reason for
such withdrawal of such amount from the Collection Account, any provision herein
to the contrary notwithstanding.
(d) Funds on deposit in the Collection Account, the Pre-Funding Account,
the Note Distribution Account, the Distribution Account and the Pre-Funding
Period Reserve Account (collectively, the "Trust Accounts") shall be invested by
the Trust Collateral Agent (or any custodian with respect to funds on deposit in
any such account) in Eligible Investments selected in writing by the Servicer
(pursuant to standing instructions or otherwise) which, absent any instruction
shall be the investments specified in clause (d) of the definition of Eligible
Investments set forth herein. Other than as permitted by the Rating Agencies and
the Insurer, funds on deposit in any Trust Account other than the Pre-Funding
Period Reserve Account shall be invested in Eligible Investments that will
mature so that such funds will be available at the close of business on the
Business Day immediately preceding the following Distribution Date. Funds
deposited in the Pre-Funding Account shall be invested by the Trust Collateral
Agent pursuant to written instructions from the Seller in Eligible Investments
that mature no later than the Business Day next preceding the earlier of the
date on which such funds are expected to be needed and the Distribution Date
next succeeding the date of such investment (or on such date or such
Distribution Date, as the case may be, if such Eligible Investment is an
obligation of the institution maintaining the Pre-Funding Account), and no such
investment shall be sold prior to its maturity. Funds deposited in a Trust
Account on the day immediately preceding a Distribution Date upon the maturity
of any Eligible Investments are not required to be invested overnight. All
Eligible Investments will be held to maturity.
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(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 and amounts collected or
receivable from the Trust Property are being applied as if there had not been
such a declaration; then the Trust Collateral Agent shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Eligible Investments pursuant to paragraph (d) above.
(h) (i) The Trust Collateral Agent shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts and in
all proceeds thereof (excluding all Investment Earnings on the Collection
Account) and all such funds, investments, proceeds and income shall be part of
the Owner Trust Estate. Except as otherwise provided herein, the Trust Accounts
shall be under the sole dominion and control of the Trust Collateral Agent for
the benefit of the Noteholders and the Insurer. If, at any time, any of the
Trust Accounts ceases to be an Eligible Deposit Account, the Trust Collateral
Agent (or the Servicer on its behalf) shall within five Business Days (or such
longer period as to which each Rating Agency and the Insurer may consent)
establish a new Trust Account as an Eligible Deposit Account and shall transfer
any cash and/or any investments to such new Trust Account. In connection with
the foregoing, the Servicer agrees that, in the event that any of the Trust
Accounts are not accounts with the Trust Collateral Agent, the Servicer shall
notify the Trust Collateral Agent in writing promptly upon any of such Trust
Accounts ceasing to be an Eligible Deposit Account.
(ii) With respect to the Trust Account Property:
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(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 an instrument
within the meaning of Section 9-105(1)(I) of the UCC and are
susceptible of physical delivery 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 its nominee or custodian acting
solely for the Trust Collateral Agent;
(C) any Trust Account Property that constitutes a certificated
security (as defined in Section 8-102(a)(4) of the UCC) shall be
delivered to the Trust Collateral Agent in accordance with paragraph
(b) of the definition of "Delivery" and shall be held, pending
maturity or disposition, solely by the Trust Collateral Agent or by a
securities intermediary (as defined in Section 8-102(a)(14) of the
UCC) acting on behalf of the Trust Collateral Agent;
(D) 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 (c) 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
(E) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by
clause (D) above shall be delivered to the Trust Collateral Agent in
accordance with paragraph (d) 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 or the agreement
of the issuer thereof to comply with the instructions of the Trust
Collateral Agent as described in such clause (D) pending maturity or
disposition;
(F) any Trust Account Property that is a "security entitlement"
(as defined in Section 8-102(a)(17) of the UCC), a securities
intermediary (i) credits, accepts for credit or is required to credit
a "financial asset" (as defined in Section 8-102(a)(9) of the UCC) to
the Trust Collateral Agent's securities account, (ii) has agreed that
it will comply with the entitlement orders described in clause (f) of
the definition of "Delivery" or (iii) confirms the purchase of such
Trust Account Property, and makes such entries on its books and
records, in the manner and as described in such clause (f), and such
credit, agreement or entries are maintained pending maturity or
disposition.
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SECTION 5.2. Pre-Funding Period Reserve Account
(a) The Servicer shall cause the Trust Collateral Agent to establish and
maintain an Eligible Deposit Account (the "Pre-Funding Period Reserve Account")
with the Trust Collateral Agent, bearing a designation clearly indicating that
the funds deposited therein are held in trust for the benefit of the Noteholders
and the Insurer.
On or prior to the Closing Date, the Seller shall deposit an amount equal
to the Pre-Funding Period Reserve Account Initial Deposit into the Pre-Funding
Period Reserve Account.
(b) (i) On the Distribution Dates occurring on or prior to the
Distribution Date next succeeding termination of the Pre-Funding
Period, the Trust Collateral Agent shall, in accordance with the
Servicer's Certificate, withdraw from the Pre-Funding Period Reserve
Account the Monthly Pre-Funding Period Reserve Amount for such
Distribution Date and deposit such amount in the Collection Account as
further provided in Section 5.7.
(ii) On the Distribution Dates occurring on or prior to the
Distribution Date next succeeding termination of the Pre-Funding
Period, Servicer shall instruct the Trust Collateral Agent in writing
to withdraw from the Pre-Funding Period Reserve Account and pay to the
Seller on such Distribution Date an amount equal to the amount of
funds on deposit in the Pre-Funding Period Reserve Account (after
giving effect to any required transfer pursuant to the preceding
clause (i) on such Distribution Date) in excess of the Required
Reserve Amount for such Distribution Date. Upon any such distributions
to the Seller, the Noteholders and the Insurer will have no further
rights in, or claims to, such amounts.
(iii) Any amounts remaining in the Pre-Funding Period Reserve
Account on the Distribution Date next succeeding termination of the
Pre-Funding Period after taking into account the transfer pursuant to
Section 5.7(a)(i) or (ii) 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
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Servicer in respect of such amount pursuant to Section 5.7, or if the Servicer
prior thereto has been reimbursed pursuant to Section 5.7, the Trust Collateral
Agent shall withhold such amounts from amounts otherwise distributable to the
Servicer on the next succeeding Distribution Date.
SECTION 5.4. Application of Collections. For all purposes of this Agreement
the allocation of a payment on a Receivable between principal and interest shall
be made based upon the amortization method provided in the related Contract. For
purposes of allocating a pay-ahead payment on a Receivable between principal and
interest, the pay-ahead shall be deemed to have been received on the date it was
actually due. For all purposes of this Agreement, no amount shall be treated as
collected under a Receivable until such amount has been deposited into the
Collection Account.
SECTION 5.5. Withhdrawals from Series 1998-1 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) Any Insolvency Proceeds shall be deposited in the Collection Account
pursuant to Section 11.1(b).
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SECTION 5.7. Distributions
(a) On each Distribution Date, the Trust Collateral Agent shall (based
solely on the information contained in the Servicer's Certificate delivered
pursuant to Section 4.11 on the related Reporting Date unless the Insurer shall
have notified the Trust Collateral Agent of any errors or deficiencies with
respect thereto) cause to be made the following transfers and distributions in
the amounts set forth in such report for such Distribution Date:
(i) During the Pre-Funding Period, from the Pre-Funding Period Reserve
Account to the Note Distribution Account, in immediately available funds,
the Monthly Pre-Funding Period Reserve Amount for such Distribution Date;
and
(ii) If such Distribution Date is the Mandatory Redemption Date, from
the Pre-Funding Account to the Note Distribution Account, in immediately
available funds, 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 (any amount of which was deposited to the
Distribution Account pursuant to Section 5.11 to be applied only as directed by
the Insurer) together with funds withdrawn from the Spread Account, if any, 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 only) in the
following order of priority:
(i) from the Distribution Account 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) from the Distribution Account to each of the Trust Collateral
Agent, the 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) from the Distribution Account to the Note Distribution Account,
the Noteholders' Distributable Amount (other than the amount to be
transferred from the Pre-Funding Account to the Note Distribution Account
in accordance with Section 5.7(a)(ii));
(iv) from the Distribution Account 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) from the Distribution Account to the Collateral Agent for deposit
to the Spread Account, all Available Amounts remaining after distribution
pursuant to clause (i) through (iv) above;
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(vi) from amounts, if any, released from the Spread Account on such
Distribution Date, to the Pre-Funding Period Reserve Account, the amount by
which the Required Reserve Amount exceeds the amount of funds on deposit
therein after giving effect to any withdrawals from the Pre-Funding Period
Reserve Account on such Distribution Date;
(vii) from amounts (as reduced by the distributions pursuant to clause
(vi) above), if any, release from the Spread Account on such Distribution
Date, to the Trustee and the Owner Trustee for any unreimbursed expenses
and to pay any indemnities owed by the Seller to the Trustee under the
Indenture or to the Owner Trustee under the Trust Agreement;
(viii) from amounts (as reduced by the distribution pursuant to
clauses (vi) and (vii) above), if any, released from the Spread Account on
such Distribution Date, 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) from amounts (as reduced by the distribution pursuant to clauses
(vi), (vii) and (viii) above), if any released from the Spread Account on
such Distribution Date, 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) from amounts (as reduced by the distribution pursuant to clauses
(vi), (vii), (viii) and (ix) above), if any released from the Spread
Account on such Distribution Date, to reimburse the Seller for expenses
incurred by and reimbursable to the Seller pursuant to the Indenture and
this Agreement; and
(xi) from amounts (as reduced by the distribution pursuant to clauses
(vi), (vii), (viii), (ix) and (x) above), if any released from the Spread
Account on such Distribution Date, to the holder(s) of the Trust
Certificates, any remaining funds.
provided, however, that, (A) following an acceleration of the Notes or, (B) if
an Insurer Default shall have occurred and be continuing and an Event of Default
pursuant to Section 5.1(i), 5.1(ii), 5.1(iv), 5.1(v) or 5.1(vi) of the Indenture
shall have occurred and be continuing, in each case, to the extent actually
known by a Trust Officer of the Trust Collateral Agent, or (C) the receipt of
Insolvency Proceeds pursuant to Section 11.1(b), amounts deposited in the Note
Distribution Account (including any such Insolvency Proceeds) and the
Distribution Account shall be paid to the Noteholders and the Certificateholders
pursuant to Section 5.6 of the Indenture.
(c) Each Certificateholder, by its acceptance of its Trust Certificate,
will be deemed to have consented to the provisions of paragraph (b) above
relating to the priority of distributions and will be further deemed to have
acknowledged that no property rights in any amount of funds or the proceeds of
any such amount shall vest in such Certificateholder until such amount has been
distributed to such Certificateholder pursuant to such provisions; provided,
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that the foregoing shall not restrict the right of any Certificateholder, upon
compliance with the provisions hereof, from seeking to compel the performance of
the provisions hereof by the parties hereto.
(d) In furtherance of and not in limitation of the foregoing, each
Certificateholder, by acceptance of its Trust Certificate, specifically
acknowledges that no amounts shall be received by it, nor shall it have any
right to receive any amounts, unless and until such amounts have been
distributed pursuant to clause (xi) above to such Certificateholder. Each
Certificateholder, by acceptance of its Trust Certificate, further specifically
acknowledges that it has no right to or interest in any monies at any time held
pursuant to the Spread Account Agreement or pursuant hereto prior to the release
of such monies as aforesaid, 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 this Agreement and the Spread
Account Agreement shall be considered to constitute a security agreement and the
Seller and the Certificateholders hereby grant to the Collateral Agent for the
benefit of the Trustee and the Insurer a first priority perfected security
interest in such amounts, to be applied as set forth in Section 3.03 of the
Spread Account Agreement. In addition, each Certificateholder, by acceptance of
its Trust Certificate, hereby appoints the Seller as its agent to pledge a first
priority perfected security interest in the Spread Account, and any amounts held
therein from time to time to the Collateral Agent for the benefit of the Trustee
and the Insurer pursuant to the Spread Account Agreement and agrees to execute
and deliver such instruments of conveyance, assignment, grant, confirmation,
etc., as well as any financing statements, in each case as the Insurer shall
consider reasonably necessary in order to perfect the Collateral Agent's
Security Interest in the Collateral (as such terms are defined in the Spread
Account Agreement).
(e) In the event that the Collection Account is maintained with an
institution other than the Trust Collateral Agent, the Servicer shall instruct
and cause such institution to make all deposits and distributions pursuant to
Section 5.7(b) on the related Distribution Date.
SECTION 5.8. Note Distribution Account.
(a) On each Distribution Date, the Trust Collateral Agent shall distribute
all amounts on deposit in the Note Distribution Account, as such amounts on
deposit in the Note Distribution Account are specified on the monthly Servicer's
Certificate, to Noteholders in respect of the Notes to the extent of amounts due
and unpaid on the Notes for principal and interest in the following amounts and
in the following order of priority:
(i) accrued and unpaid interest on the Notes; provided that if there
are not sufficient funds in the Note Distribution Account to pay the entire
amount of accrued and unpaid interest then due on the Notes, the amount in
the Note Distribution Account shall be applied to the payment of such
interest on the Notes pro rata on the basis of the amount of accrued and
unpaid interest due on the Notes; and
(ii) to the Noteholders, the Noteholders' Principal Distributable
Amount until the outstanding principal balance of the Notes is reduced to
zero.
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(b) On each Distribution Date, the Trust Collateral Agent shall send to
each Noteholder, in accordance with Section 5.10, the statement provided to the
Trust Collateral Agent by the Servicer pursuant to Section 4.11(b) hereof for
distribution 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
Noteholder 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 2.12 of the Indenture,
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), distributions
will be made by wire transfer in immediately available funds to the account
designated by such nominee. Notwithstanding the foregoing, the final
distribution in respect of any Note (whether on the Final Scheduled Distribution
Date or otherwise) will be payable only upon presentation and surrender of such
Note at the office or agency maintained for that purpose by the Note Registrar
pursuant to Section 2.4 of the Indenture.
SECTION 5.9. Pre-Funding Account.
(a) On the Closing Date, the Trust Collateral Agent will deposit, on behalf
of the Seller, in the Pre-Funding Account $16,490,982.64 from the proceeds of
the sale of the Notes. On each Subsequent Transfer Date, the Servicer shall
instruct the Trust Collateral Agent
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to withdraw from the Pre-Funding Account an amount equal to 91% of the Principal
Balance of the Subsequent Receivables transferred to the Issuer on such
Subsequent Transfer Date and to distribute such amount to or upon the order of
the Seller upon satisfaction of the conditions set forth in this Agreement with
respect to such transfer. The Trust Collateral Agent shall also deposit into the
Pre-Funding Account any income or gain earned from the investment of amounts on
deposit in the Pre-Funding Account as received. On each Distribution Date, any
income and gain earned from the investment of amounts on deposit in the
Pre-Funding Account since the previous Distribution Date (or the Closing Date,
in the case of the first Distribution Date) shall be deposited into the Note
Distribution Account.
(b) If the Pre-Funded Amount has not been reduced to zero on the date on
which the Pre-Funding Period ends after giving effect to any reductions in the
Pre-Funded Amount on such date, the Servicer shall instruct the Trust Collateral
Agent to withdraw from the Pre-Funding Account on the Mandatory Redemption Date
the Pre-Funded Amount (exclusive of any Pre-Funding Earnings) and deposit an
amount equal to the Note Prepayment Amount in the Note Distribution Account.
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
Distribution Account for any of the following purposes: (i) to provide funds in
respect of the payment of fees or expenses of any provider of services to the
Trust with respect to such Distribution Date, or (ii) to include such amount to
the extent that without such amount a draw would be required to be made on the
Note Policy.
ARTICLE VI
The Note Policy
SECTION 6.1. Claims Under Note Policy.
(a) In the event that the Trust Collateral Agent has delivered a Deficiency
Notice with respect to any Determination Date pursuant to Section 5.5 hereof,
the Trust Collateral Agent shall on the related Draw Date determine the Note
Policy Claim Amount for the related Distribution Date. If the Note Policy Claim
Amount specified on the Deficiency Notice for such Distribution Date is greater
than zero, the Trust Collateral Agent shall furnish to the Insurer no later than
12:00 noon New York City time on the related Draw Date, a completed Notice of
Claim (as defined in (b) below) in the amount of the Note Policy Claim Amount.
Amounts paid by the Insurer pursuant to a claim submitted under this Section 6.1
shall be
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deposited by the Trust Collateral Agent into the Note Distribution Account for
payment pursuant to paragraph (b) below to Noteholders on the related
Distribution Date.
(b) Any notice delivered by the Trust Collateral Agent to the Insurer
pursuant to subsection 6.1(a) shall specify the Note Policy Claim Amount claimed
under the Note Policy and shall constitute a "Notice of Claim" under the Note
Policy. In accordance with the provisions of the Note Policy, the Insurer is
required to pay to the Trust Collateral Agent the Note Policy Claim Amount
properly claimed thereunder by 12:00 noon, New York City time, on the later of
(i) the third Business Day (as defined in the Note Policy) following receipt on
a Business Day (as defined in the Note Policy) of the Notice of Claim, and (ii)
the applicable Distribution Date. Any payment made by the Insurer under the Note
Policy shall be applied solely to the payment of the Notes, and for no other
purpose.
(c) The Trust Collateral Agent shall (i) receive as attorney-in-fact of
each Noteholder any Note Policy Claim Amount from the Insurer and (ii) deposit
the same in the Note Distribution Account for distribution to Noteholders. Any
and all Note Policy Claim Amounts disbursed by the Trust Collateral Agent from
claims made under the Note Policy shall not be considered payment by the Trust
or from the Spread Account with respect to such Notes, and shall not discharge
the obligations of the Trust with respect thereto. The Insurer shall, to the
extent it makes any payment with respect to the Notes, become subrogated to the
rights of the recipients of such payment, to the extent of such payments.
Subject to and conditioned upon any payment with respect to the Notes by or on
behalf of the Insurer, the Trust Collateral Agent shall assign to the Insurer
all rights to the payment of interest or principal with respect to the Notes
which are then due for payment to the extent of all payments made by the
Insurer, and the Insurer may exercise any option, vote, right, power or the like
with respect to the Notes to the extent that it has made payment pursuant to the
Note Policy. To evidence such subrogation, the Note Registrar (as defined in the
Indenture) shall note the Insurer's rights as subrogee upon the Note Register
upon receipt from the Insurer of proof of payment by the Insurer of any
Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount. The foregoing subrogation shall in all cases be subject to
the rights of the Noteholders to receive all Scheduled Payments (as defined in
the Note Policy) in respect of the Notes.
(d) The Trust Collateral Agent shall keep a complete and accurate record of
all funds deposited by the Insurer into the Note Distribution Account and
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 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
Noteholder, 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.
SECTION 6.4. Spread Account. The Seller agrees, simultaneously with the
execution and delivery of this Agreement, to execute and deliver the Spread
Account Agreement, and pursuant to the terms thereof, to deposit the Initial
Spread Account Deposit in the Spread Account.
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ARTICLE VII
RESERVED
ARTICLE VIII
The Seller
SECTION 8.1. Representations, Warranties and Covenants of the Seller. The
Seller hereby represents, warrants and covenants to the Trust Collateral Agent,
the Insurer and the Servicer, which representations, warranties and covenants
shall survive as long as any Note shall be outstanding or this Agreement has not
been terminated, that as of the Closing Date and each Subsequent Transfer Date:
(a) the Seller is a Delaware business trust duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has
all licenses and approvals necessary to carry on its business as now being
conducted and shall appoint and employ agents or attorneys in each jurisdiction
where it shall be necessary to take action under this Agreement and the other
Transaction Documents; the Seller has the full power and authority to own its
property, to carry on its business as presently conducted, and to execute,
deliver and perform 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 Seller
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 obligations of the
Seller (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 action has been taken by the
Seller to make each of the Transaction Documents to which it is a party 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 Document to which it
is a party;
(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,
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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
(including, without limitation, any bulk transfer or similar law), rule,
regulation, order, judgment or decree to which the Seller or its property or the
Receivables are subject;
(d) no statement, report or other document furnished or to be furnished
pursuant to this Agreement or in connection with the transaction contemplated
hereby contains or will, when furnished, contain any untrue statement of a
material fact or omits or will, when furnished, omit to state a material fact
necessary to make the statements contained therein not misleading, in light of
the circumstances under which they were made;
(e) neither the Seller nor any of its subsidiaries or Affiliates is a party
to, bound by or in breach or violation of any indenture or other agreement or
instrument, or subject to or in violation of any statute, order or regulation of
any court, regulatory body, administrative agency or governmental body having
jurisdiction over it, which materially and adversely affects, or may in the
future materially and adversely affect, the ability of the Seller to perform its
obligations under this Agreement or any other Transaction Document;
(f) this Agreement and each Conveyance 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 actions, suits, 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 (v) 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 Noteholders 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;
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(k) since the date of its organization, the Seller has maintained its chief
executive office in the State of Florida or the State of Delaware, and there
have been no other locations of the Seller's principal office during the four
(4) months preceding the Closing Date;
(l) Seller is solvent and will not become insolvent after giving effect to
the transactions contemplated hereunder; Seller is paying its debts as they
become due; Seller, after giving effect to the contemplated transactions, will
have adequate capital to conduct its business;
(m) since February 1995, "National Financial Auto Funding Trust" is the
only trade name under which the Seller has operated its business and, prior to
such date, NAFCO Funding Trust was the only trade name under which the Seller
operated its business;
(n) the Seller shall not engage in any business or activity other than in
connection with or relating to the purchase of auto loan receivables and the
issuance of securities secured by, or evidencing beneficial interests in, such
auto loan receivables;
(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 or a
corporation under the laws of
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Delaware and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, any Subsequent Transfer
Agreement, the Transaction Documents and each other instrument or agreement
necessary or appropriate to the proper administration of this Agreement and such
other agreements and the transactions contemplated hereby and thereby and the
performance of its obligations hereunder and thereunder.
(b) During the term of this Agreement, the Seller shall observe the
applicable legal requirements for the recognition of the Seller as a legal
entity separate and apart from its Affiliates, including as follows:
(i) the Seller shall maintain business records and books of account
separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the Seller shall
not commingle its assets and funds with those of its Affiliates;
(iii) the Seller shall at all times hold itself out to the public
under the Seller's own name as a legal entity separate and distinct from
its Affiliates; and
(iv) all transactions and dealings between the Seller and its
Affiliates will be conducted on an arm's-length basis.
SECTION 8.3. Liability of Seller; Indemnities. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken under this Agreement by the Seller and the representations made by
the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Trust, the Insurer, the Trustee, the Trust Collateral Agent
and their respective officers, directors, agents and employees from and against
any taxes that may at any time be asserted against any such Person with respect
to the transactions contemplated in this Agreement and any of the Transaction
Documents (except any income taxes arising out of fees paid to the Owner
Trustee, the Trust Collateral Agent, the Trustee and the Insurer and except any
taxes to which the Owner Trustee, the Trust Collateral Agent or the Trustee may
otherwise be subject to), including any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes (but, in the
case of the Issuer, not including any taxes asserted with respect to, federal or
other income taxes arising out of distributions on the Notes) and costs and
expenses in defending against the same.
(b) The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Trustee, the Trust Collateral Agent, the Insurer, their
respective officers, directors, agents and employees and the Noteholders from
and against any loss, liability or expense incurred by reason of (i) the
Seller's willful misfeasance, bad faith or negligence in the performance of its
duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement and (ii) the Seller's or the
Issuer's violation of Federal or state securities laws in connection with the
offering and sale of the Notes.
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(c) The Seller shall indemnify, defend and hold harmless the Owner Trustee,
Trustee and the Trust Collateral Agent and their respective officers, directors,
employees and agents from and against any and all costs, expenses, losses,
claims, damages and liabilities arising out of, or incurred in connection with
the acceptance or performance of the trusts and duties set forth herein and in
the Transaction Documents except to the extent that such cost, expense, loss,
claim, damage or liability shall be due to the willful misfeasance, bad faith or
negligence (except for errors in judgment) of the Owner Trustee.
Indemnification under this Section shall survive the resignation or removal
of the Owner Trustee, the Trustee or the Trust Collateral Agent and the
termination of this Agreement or the Indenture or the Trust Agreement or the
Custodial Agreement, as applicable, and shall include reasonable fees and
expenses of counsel and other expenses of litigation. If the Seller shall have
made any indemnity payments pursuant to this Section and the Person to or on
behalf of whom such payments are made thereafter shall collect any of such
amounts from others, such Person shall promptly repay such amounts to the
Seller, without interest.
SECTION 8.4. Merger or Consolidation of, or Assumption of the Obligations
of, Seller. The Seller may not be merged or consolidated with or into any person
or transfer substantially all of its assets to any Person.
SECTION 8.5. Limitation on Liability of Seller and Others. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the written advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising under any Transaction Document. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under this Agreement, and that in its opinion may
involve it in any expense or liability.
SECTION 8.6. Seller May Own Notes. The Seller and any Affiliate thereof may
in its individual or any other capacity become the owner or pledgee of Notes
with the same rights as it would have if it were not the Seller or an Affiliate
thereof, except as expressly provided herein or in any Transaction Document.
Notes so owned by the Seller or such Affiliate shall have an equal and
proportionate benefit under the provisions of the Transaction Documents, without
preference, priority, or distinction as among all of the Notes; provided,
however, that any Notes owned by the Seller or any Affiliate thereof, during the
time such Notes are owned by them, shall be without voting rights for any
purpose set forth in the Documents and will not be entitled to the benefits of
the Note Policy. The Seller shall notify the Owner Trustee, the Trustee, the
Trust Collateral Agent and the Insurer promptly after it or any of its
Affiliates become the owner or pledgee of a Note.
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ARTICLE IX
The Servicer
SECTION 9.1. Representations, Warranties and Covenants of the Servicer. The
Servicer hereby represents, warrants and covenants to the Trust Collateral Agent
and the Insurer that as of the Closing Date and each Subsequent Transfer Date:
(a) the Servicer is duly organized, validly existing and in good standing
under the laws of the state of its organization and is qualified to transact
business in and is in good standing under the laws of each state in which it is
necessary for it to be so qualified in order to carry on its business as now
being conducted and has all licenses necessary to carry on its business as now
being conducted; the Servicer has the full power and authority to own its
property, to carry on its business as presently conducted, and to execute,
deliver and perform each of the Transaction Documents to which it is a party;
the execution, delivery and performance of each of the Transaction Documents to
which it is a party (including all instruments of transfer to be delivered
pursuant to any such Transaction Documents to which it is a party) by the
Servicer and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized; each of the Transaction Documents
to which it is a party evidences the valid, binding and enforceable obligation
of the Servicer (subject to applicable bankruptcy and insolvency laws and other
similar laws affecting the enforcement of creditors' rights generally and to
general principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law) and all requisite partnership action has been
taken by the Servicer to make each of the Transaction Documents to which it is a
party valid and binding upon the Servicer (subject as aforesaid in the preceding
clause);
(b) the Servicer is not required to obtain the consent of any other party
or obtain the consent, license, approval or authorization of, or make any
registration or declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any other 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
certificate of incorporation or by-laws of the Servicer or result in the breach
of any term or provision of, or conflict with or constitute a default (with or
without notice, lapse of time or both) under or result in the acceleration of
any obligation under, any agreement, indenture or loan or credit agreement or
other instrument to which the Servicer or its property is subject, or result in
the creation or imposition of any Lien upon any of its 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
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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 having jurisdiction over the Servicer or any of 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 other
Transaction Documents, (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement or any
of the Transaction Documents, (iv) involving the Servicer and which might
adversely affect the federal income tax or other federal, state or local tax
attributes of the Notes, or (v) that could have a material adverse effect on the
Receivables. To the Servicer's knowledge, there are no proceedings or
investigations pending or threatened against the Servicer, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Servicer or its properties relating
to the Servicer which might adversely affect the federal income tax or other
federal, state or local tax attributes of the Notes;
(f) the principal office of the Servicer is located at One Park Place, 621
NW 53rd Street, Suite 200, Boca Raton, Florida 33487; and
(g) the Sub-Servicing Agreement is enforceable against the Servicer and has
been duly authorized by all necessary corporate action of the Servicer and has
been duly executed and delivered by the Servicer.
It is understood and agreed that the representations and warranties set
forth in this Section 9.1 shall survive delivery of the respective Receivable
Files to the Custodian and the Sub-Servicers, if any, on behalf of the Trust
Collateral Agent and shall survive as long as any Note shall be outstanding or
this Agreement has not been terminated. Upon discovery by the Seller, the
Servicer or a Responsible Officer of the Trust Collateral Agent of a breach of
any of the representations and warranties set forth in this Section 9.1 which
materially and adversely affects the interests of the Noteholders or the Insurer
in any Receivable, the party 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.
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(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 Backup Servicer, 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, any Affiliate thereof, or any Sub-Servicer of any
Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold harmless the Trustee, the
Trust Collateral Agent, the Backup Servicer 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 willful 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 Backup Servicer, 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 Notes or asserted with respect to ownership of the
Receivables, or federal or other income taxes arising out of distributions on
the Notes) and costs and expenses in defending against the same.
(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 Backup Servicer, 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 Notes or asserted with respect to ownership of the
Receivables, or federal or other income taxes arising out of distributions on
the Notes) and costs and expenses in defending against the same.
(f) The Servicer shall indemnify, defend and hold harmless the Trust, the
Trustee, the Trust Collateral Agent, the Backup Servicer, the Owner Trustee, the
Insurer, their
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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, 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 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 Backup Servicer, 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 Notes.
(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 or
corporation 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
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representations and warranties set forth in Section 9.1 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 or the Backup
Servicer may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Trust Collateral Agent or the Backup Servicer shall
be a party, (iii) which acquires by conveyance, transfer or lease substantially
all of the assets of the Trust Collateral Agent or the Backup Servicer, or (iv)
succeeding to the business of the Trust Collateral Agent or the Backup Servicer,
in any of the foregoing cases shall execute an agreement of assumption to
perform every obligation of the Trust Collateral Agent or the Backup Servicer,
as the case may be, under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Trust Collateral Agent or
the Backup Servicer, as the case may be, 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. The Trust Collateral Agent or the Backup Servicer, as the case
may be, or its successor hereunder shall provide the Servicer and the Insurer
with prompt notice of any such transaction. In the case of the Trust Collateral
Agent, 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 or the Backup
Servicer, as the case may be, from any obligation.
SECTION 9.4. Limitation on Liability of Servicer, Trust Collateral Agent
and Others
(a) In addition to the indemnities provided pursuant to Section 9.2, the
Servicer will defend and indemnify the Trust Collateral Agent, the Backup
Servicer, the Insurer and their respective officers, directors, employees and
agents and the Noteholders against any and all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel and
expenses of litigation, arising from a breach of its obligations to service the
Receivables in accordance with this Agreement; provided however, that the
Servicer shall not be liable for any such costs, expenses, losses, damages,
claims or liabilities to the extent that any thereof resulted from the
negligence or willful misconduct of the Trust Collateral Agent or the Backup
Servicer, or their 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
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or agents shall repay such amounts collected to the Servicer or Seller who made
such indemnity payment. These indemnities of the Servicer and the Seller will
survive any transfer of the respective rights, duties and obligations of the
Servicer or the Seller hereunder to another Person, the termination of this
Agreement, any Servicer Termination Event, the termination of the Trust Property
or the resignation or replacement of the Trust Collateral Agent for acts
accruing prior to the transfer, termination of the Trust Property or the
resignation or replacement of the Trust Collateral Agent, but will not cover
actions or omissions of any successor Servicer after a Servicer Termination
Event. Neither the Servicer nor any of its directors, officers, employees or
agents shall be under any liability to the Trust Property, the 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, the Backup Servicer and any director, officer,
employee or agent of the Seller, the Servicer or the Backup Servicer may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder.
(b) The Seller, the Servicer and any director, officer, employee or agent
of the Seller or the Servicer shall be indemnified by the Trust Property and
held harmless against any loss, liability or expense incurred in connection with
any legal action relating to this Agreement or the Notes, other than any loss,
liability or expense for which the Seller or Servicer provides an indemnity as
provided in Sections 8.3 and 9.2, respectively, and 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 Backup Servicer shall not be required to expend or risk its own
funds or otherwise incur financing liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if the
repayment of such funds or adequate written indemnity against such risk or
liability is not reasonably assured to it in writing prior to the expenditure or
risk of such funds or incurrence of financial liability. Notwithstanding
anything herein to the contrary, neither the Trust Collateral Agent nor the
Backup Servicer shall 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. The
Backup Servicer shall perform such duties and only such duties as are
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specifically set forth in the Transaction Documents, and no implied covenants or
obligations shall be read into the Transaction Documents against the Backup
Servicer.
(d) The parties expressly acknowledge and consent to Harris Trust and
Savings Bank acting in the dual capacity of Backup Servicer or 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.
(e) Neither the Backup Servicer nor any of its directors, officers,
employees or agents shall be under any liability of any kind or type to any
Person arising from the incomplete or inaccurate contents of any computer tape
provided by the Servicer in accordance with Section 4.15 hereof. The Backup
Servicer shall not be under any obligations to appear in, prosecute or defend
any legal motion that is not incidental to its duties hereunder and that in its
reasonable opinion may involve it in any expense or liability; provided,
however, that the Backup Servicer may, but shall not be obligated to, take any
such action that is reasonable and that may be necessary or desirable in respect
of this Agreement and the rights and duties of the parties hereto. If any such
proposed action is commenced, the legal expenses and costs of such action and
any liabilities resulting therefrom shall be expenses, costs and liabilities of
the Servicer and the Backup Servicer shall be entitled to be reimbursed therefor
by the Servicer.
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.
The Servicer also may at any time perform through sub-contractors the specific
duties of (i) repossession of Financed Vehicles, (ii) tracking Financed
Vehicles' insurance and (iii) pursuing the collection of deficiency balances on
certain Liquidated Receivables, in each case, without the written consent of the
Insurer and may perform other specific duties through such sub-contractors in
accordance with Servicer's customary servicing policies and procedures, with the
prior consent of the Insurer; provided, however, that no such delegation or
sub-contracting duties by the Servicer shall relieve the Servicer of its
responsibility with respect to such duties. So long as no Insurer Default shall
have occurred and be continuing neither NAFI or any party acting as Servicer
hereunder shall appoint any Sub-Servicer hereunder without the prior written
consent of the Insurer and the Trust Collateral Agent.
SECTION 9.6. Servicer Not to Resign. Subject to the provisions of Section
9.3, the Servicer shall not resign from the obligations and duties imposed on it
by this Agreement as 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
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Insurer (so long as an Insurer Default shall not have occurred and be
continuing) or a Note Majority (if an Insurer Default shall have occurred and be
continuing) does not elect to waive the obligations of the Servicer to perform
the duties which render it legally unable to act or to delegate those duties to
another Person. Any such determination permitting the resignation of the
Servicer shall be evidenced by an Opinion of Counsel to such effect delivered
and acceptable to the Trust Collateral Agent, the Owner Trustee and the Insurer
(unless an Insurer Default shall have occurred and be continuing). No
resignation of the Servicer shall become effective until, so long as no Insurer
Default shall have occurred and be continuing, the Backup Servicer or an entity
acceptable to the Insurer shall have assumed the responsibilities and
obligations of the Servicer or, if an Insurer Default shall have occurred and be
continuing, a successor Servicer that is an Eligible Servicer shall have assumed
the responsibilities and obligations of the Servicer. Upon the resignation of
the Servicer, the Servicer shall give prompt written notice thereof to the
Rating Agencies.
ARTICLE X
Default
SECTION 10.1. Servicer Termination Event. For purposes of this Agreement,
each of the following shall constitute a "Servicer Termination Event" (whatever
the reason for such Servicer Termination Event and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) Any failure by the Servicer to deliver, or cause to be delivered by any
Sub-Servicer, to the Trust Collateral Agent for distribution to Noteholders or
deposit in the Spread Account any proceeds or payment required to be so
delivered by the Servicer or Sub-Servicer under the terms of this Agreement
(including deposits of the Purchase Amount) that continues unremedied for a
period of two Business Days (one Business Day with respect to payment of
Purchase Amounts) after written notice is received by the Servicer from the
Trust Collateral Agent or (unless an Insurer Default shall have occurred and be
continuing) the Insurer or after discovery of such failure by a Responsible
Officer of the Servicer (but in no event later than five Business Days after the
Servicer is required to make such delivery or deposit); or
(b) Any failure by the Servicer to observe or perform any other of the
covenants or agreements on the part of the Servicer in this Agreement, which
failure (i) materially and adversely affects the rights of Noteholders
(determined without regard to the availability of 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
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(c) The entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Servicer in an involuntary case
under the federal bankruptcy laws, as now or hereafter in effect, or another
present or future, federal bankruptcy, insolvency or similar law, or appointing
a receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or of any substantial part of its property or
ordering the winding up or liquidation of the affairs of the Servicer or the
commencement of an involuntary case under the federal bankruptcy laws, as now or
hereinafter in effect, or another present or future federal or state bankruptcy,
insolvency or similar law and such case is not dismissed within 60 days; or
(d) The commencement by the Servicer of a voluntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future,
federal or state, bankruptcy, insolvency or similar law, or the consent by the
Servicer to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Servicer or of any substantial part of its property or the making by the
Servicer of an assignment for the benefit of creditors or the failure by the
Servicer generally to pay its debts as such debts become due or the taking of
corporate action by the Servicer in furtherance of any of the foregoing; or
(e) Any representation, warranty or statement of the Servicer made in this
Agreement or any certificate, report or other writing delivered pursuant hereto
shall prove to be incorrect in any material respect as of the time when the same
shall have been made, and the incorrectness of such representation, warranty or
statement has a material adverse effect on the interests of the Trust, the
Insurer or the Noteholders (or of the Seller if NAFI is the Servicer) in the
Receivables (determined without regard to the availability of funds under the
Note Policy) and, within 30 days after written notice thereof shall have been
given to the Servicer by the Trust Collateral Agent or the Insurer (or, if an
Insurer Default shall have occurred and be continuing, a Noteholder), the
circumstances or condition in respect of which such representation, warranty or
statement was incorrect shall not have been eliminated or otherwise cured; or (
f) There shall have occurred an Insurance Agreement Event of Default or an
event of default under any other insurance agreement to which the Insurer and
NAFI and/or the Seller or any other affiliate of NAFI are party; or
(g) The Servicer fails to deliver the report required to be delivered by
the Servicer pursuant to Section 4.11 and such failure remains unremedied for a
period of five days;
(h) A claim is made under the Note Policy; or
(i) so long as an Insurer Default shall not have occurred and be
continuing, the Insurer shall not have delivered a Servicer Extension Notice
pursuant to Section 4.16.
SECTION 10.2. Consequences of a Servicer Termination Event. If a Servicer
Termination Event shall occur, then, and in each and every such case, so long as
such Servicer Termination Event shall not have been remedied, the Trust
Collateral Agent may, with the written consent of the Insurer (unless an Insurer
Default has occurred and is continuing), and at
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the written direction of the Insurer (or, if an Insurer Default has occurred and
is continuing, a Note Majority), the Trust Collateral Agent shall, by notice in
writing to the Servicer, the Seller and the Backup Servicer, (i) terminate all
of the rights and obligations of the Servicer under this Agreement and in and to
any Receivables and the proceeds thereof, subject to compensation, rights of
reimbursement, indemnity and limitation on liability to which the Servicer is
then entitled and the rights of indemnity to which the Trust Collateral Agent
and the Insurer are then entitled pursuant to Sections 9.2 and 9.4 hereof, and
(ii) subject to Section 10.4, appoint the Backup Servicer as the successor
Servicer. Such notice shall specify, to the extent possible, the timing and
method of transition of the servicing of the Receivables from the Servicer to
the Backup Servicer or another successor Servicer appointed pursuant to Section
10.4. On and after the receipt by the Servicer of such written notice and upon
the effective date of the transfer to the Backup Servicer or such other
successor Servicer specified in such notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Notes or the
Receivables or otherwise, shall pass to and be vested in the Backup Servicer or
such other successor Servicer, pursuant to and under this Section; and, without
limitation, such Person is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, an attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Receivables and related documents, or otherwise. The Servicer agrees to
cooperate with such Person in effecting the termination of the Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to such party for administration by is of all cash amounts which shall
thereafter be received with respect to the Receivables.
The Trust Collateral Agent shall not be charged with knowledge of any event
referred to in clauses (a) through (f) above unless a Responsible Officer of the
Trust Collateral Agent at the Corporate Trust Office obtains actual knowledge of
such event or receives written notice of such event from the Servicer, the
Insurer or from a Noteholder. The Trust Collateral Agent promptly shall send
written notice to each Rating Agency and the Insurer of each Servicer
Termination Event of which it is charged with knowledge in accordance with the
preceding sentence.
If the Servicer is terminated pursuant to this Section 10.2, then the
Servicer shall bear all of the costs and expenses of transferring the duties and
obligations of the Servicer to a successor Servicer and except as otherwise
agreed by the Insurer such costs and expenses shall not be reimbursable from the
Trust Property nor payable by the Seller or the Trust Collateral Agent. To the
extent not borne by the Servicer as described above, such costs and expenses
(including attorney's fees and expenses) shall be borne by the Trust Property in
accordance with Section 5.7(b)(ix).
SECTION 10.3. Additional Consequences of a Servicer Termination Event. The
successor Servicer is authorized and empowered by this Agreement to execute and
deliver, on behalf of the terminated Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and
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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.
(a) On and after (i) the time the Servicer receives a notice of termination
pursuant to Section 10.2, (ii) upon non-extension of the servicing term as
referred to in Section 4.16, or (iii) upon the resignation of the Servicer
pursuant to Section 9.6, the Backup Servicer (unless an alternate successor
Servicer shall have been appointed pursuant to Section 10.4(b)) shall be the
successor in all respects to the Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for in this Agreement, and
shall be subject to all the rights, responsibilities, restrictions, duties,
liabilities and termination provisions relating thereto placed on the Servicer
by the terms and provisions of this Agreement except as otherwise stated herein.
The Trust Collateral Agent and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession. If
a successor Servicer is acting as Servicer hereunder, it shall be subject to
term-to-term servicing as referred to in Section 4.16 and to termination under
Section 10.2 upon the occurrence of any Servicer Termination Event applicable to
it as Servicer.
(b) The Insurer, or in the event that an Insurer Default shall have
occurred and be continuing a Note Majority, may exercise at any time its right
to appoint as successor to the Servicer a Person other than the Person serving
as Backup Servicer at the time, and (in the case of the Insurer, 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 Backup
Servicer, any Noteholders or any other Person if it does so.
(c) If, pursuant to Section 10.4(a) and (b) hereof (i) the Backup Servicer
would become successor Servicer and (ii) at such time the Backup Servicer shall
be legally unable or unwilling to act as Servicer, the Backup Servicer may, if
it shall be unwilling to so act,
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or shall, if it is unable to so act, appoint, subject to the prior written
consent of the Insurer (unless an Insurer Default has occurred and is
continuing), or, if an Insurer Default has occurred and is continuing, the
Backup Servicer, the Trust Collateral Agent or the Note Majority may 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. Pending appointment of a successor Servicer pursuant to the preceding
sentence, the Backup Servicer shall act as successor Servicer unless it is
legally unable to do so, in which event the outgoing Servicer shall continue to
act as Servicer until a successor has been appointed and accepted such
appointment.
(d) Subject to Section 9.6, no provision of this Agreement shall be
construed as relieving the Backup Servicer of its obligation to succeed as
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, a Person other than the Backup Servicer is
appointed as successor Servicer pursuant to subsection (b) or (c) above, the
Backup Servicer shall not be relieved of its duties as Backup Servicer
hereunder. If the Backup Servicer becomes the successor Servicer at a time when
it is also serving as Trust Collateral Agent, it may seek to have a successor to
it appointed as Servicer.
(e) In connection with any appointment of a successor Servicer, the Trust
Collateral Agent may make such arrangements for the compensation of such
successor Servicer 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, a Note Majority) agree in writing to a larger Servicing Fee and (B)
each Rating Agency delivers a letter to the Trust Collateral Agent to the effect
that such larger Servicing Fee will not result in a reduction or the withdrawal
of the rating assigned by such Rating Agency to the Notes; and provided further,
however, that the Servicing Fee to a successor Servicer, including the Backup
Servicer, 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%).
(f) The Seller, the Backup Servicer, the Trust Collateral Agent, any
Sub-Servicer and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
(g) If the Backup Servicer 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 Backup Servicer 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 10.8 and the Seller shall, with
the written consent of the Insurer (unless an Insurer Default shall have
occurred and be continuing),
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appoint, or petition a court to appoint, a successor trust collateral agent. To
the extent a successor Servicer is appointed, the Backup Servicer shall not be
liable for the acts or omissions of such successor Servicer.
SECTION 10.5. [RESERVED]
SECTION 10.6. Notification to Noteholders and Rating Agencies. Upon any
termination of, or appointment of a successor to, the Servicer, the Trust
Collateral Agent shall give prompt written notice thereof to each Noteholder and
Rating Agency.
SECTION 10.7. Waiver of Past Defaults. So long as no Insurer Default shall
have occurred and be continuing, the Insurer (or, if an Insurer Default shall
have occurred and be continuing, the Note Majority) may, on behalf of all
Noteholders, waive any default by the Servicer in the performance of its
obligations hereunder and its consequences. Upon any such waiver of a past
default, such default shall cease to exist, and any Servicer Termination Event
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto. Written notice of such waiver shall be
given promptly to each Rating Agency.
SECTION 10.8. Termination of Trust Collateral Agent. The Trust Collateral
Agent may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Seller and Insurer. Upon receiving such
notice of resignation, the Seller shall, with the written consent of the Insurer
(unless an Insurer Default has occurred and is continuing), promptly appoint a
successor trust collateral agent by written instrument, in triplicate, one copy
of which instrument shall be delivered to the resigning Trust Collateral Agent,
one copy to the Insurer and one copy to the successor trust collateral agent. If
no successor shall have been so appointed and have accepted appointment within
thirty (30) days after the giving of such notice of resignation, the resigning
Trust Collateral Agent may petition any court of competent jurisdiction for the
appointment of a successor trust collateral agent. If the Trust Collateral Agent
shall resign voluntarily, for any reason, except lack of eligibility, then the
Trust Collateral Agent shall bear all of its costs and expenses (including
without limitation its attorney's fees) of transferring the trusteeship to a
successor trustee and such costs and expenses shall not be reimbursable from the
Trust Property nor payable by the Seller or the Servicer.
If any of the following events occur and shall be continuing, the Insurer
(so long as an Insurer Default shall not have occurred and be continuing), or,
in the event that an Insurer Default has occurred and is continuing, the Note
Majority, upon notice to the Noteholders, may terminate all of the duties of the
Trust Collateral Agent under this Agreement:
(i) the Trust Collateral Agent shall cease to meet the eligibility
requirements for the 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
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Trust Collateral Agent or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation or
(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
Noteholders, 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. Succeessor to Servicer.
(a) The Backup Servicer, 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 Backup Servicer.
(b) In the absence of bad faith or negligence on its part, the Backup
Servicer may conclusively rely as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Backup Servicer and conforming to the requirements of this
Agreement; but in the ease of any such certificates or opinions, which by any
provision hereof are specifically required to be furnished to the Backup
Servicer, the Backup Servicer 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 Backup Servicer shall have no liability for any actions taken or
omitted by the Servicer.
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ARTICLE XI
Termination
SECTION 11.1. Optional Purchase of All Receivables.
(a) On the last day of any Due Period as of which the Pool Balance shall be
less than or equal to 10% of the Original Pool Balance plus the aggregate
Principal Balance of the Subsequent Receivables, if any, sold to the Trust, as
of their respective Cut-off Dates, the Seller or the Servicer shall have the
option to purchase the Owner Trust Estate, other than the Trust Accounts (with
the consent of the Insurer if such purchase would result in a claim on either
Policy or would result in any amount owing to any Noteholder or the Insurer
under the Insurance Agreement remaining unpaid); provided, however, that the
amount to be paid for such purchase (as set forth in the following sentence)
shall be sufficient to pay the full amount of principal, premium, if any, and
interest then due and payable on the Notes. To exercise such option, the Seller
shall (i) deliver written notice of such purchase to the Trust Collateral Agent
and the Servicer not later than the fifteenth day of the month next preceding
the month in which such purchase will occur, and (ii) deposit pursuant to
Section 5.6 in the Collection Account an amount equal to the aggregate Purchase
Amount for the Receivables (including Liquidated Receivables), plus the
appraised value of any other property held by the Trust, such value to be
determined by an appraiser mutually agreed upon by the Servicer, the Insurer and
the Trust Collateral Agent, and shall succeed to all interests in and to the
Trust. Written notice of the exercise of the option to purchase described in
this Section 11.1(a) shall be given to each Rating Agency by the Seller.
(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 Backup
Servicer, the Insurer and the Rating Agencies as soon as practicable after the
Servicer has received notice thereof. Such notice shall state (i) the
Distribution Date upon or with respect to which final payment of the Notes shall
be made upon presentation and surrender of the Notes at the office of the Trust
Collateral Agent herein designated, (ii) the amount of any such final payment,
(iii) that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Notes at the office of the Trust Collateral Agent therein specified and (iv) no
amounts will thereafter be payable under the Notes.
ARTICLE XII
Administrative Duties of the Servicer
SECTION 12.1. Administrative Duties
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(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, 7.3, 8.3, 9.2,
9.3, 11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in this
Agreement or any of the Transaction Documents, the Servicer shall perform
such calculations and shall prepare for execution by the Issuer or the
Owner Trustee or shall cause the preparation by other appropriate Persons
of all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Issuer or the Owner Trustee to
prepare, file or deliver pursuant to this Agreement or any of the
Transaction Documents or under state and federal tax and securities laws,
and at the request of the Owner Trustee shall take all appropriate action
that it is the duty of the Issuer to take pursuant to this Agreement or any
of the Transaction Documents, including, without limitation, pursuant to
Sections 2.6 and 2.11 of the Trust Agreement. In accordance with the
directions of the Issuer or the Owner Trustee, the Servicer shall
administer, perform or supervise the performance of such other activities
in connection with the Collateral (including the Transaction Documents) as
are not covered by any of the foregoing provisions and as are expressly
requested by the Issuer or the Owner Trustee and are reasonably within the
capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Transaction Documents to the contrary, the Servicer shall be responsible
for promptly notifying the Owner Trustee and the Trust Collateral Agent in
the event that any withholding tax is 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).
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(iv) The Servicer shall perform the duties of the Servicer specified
in Section 10.2 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee, and any
other duties expressly required to be performed by the Servicer under this
Agreement or any of the Transaction Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into transactions
with or otherwise deal with any of its Affiliates; provided, however, that
the terms of any such transactions or dealings shall be in accordance with
any directions received from the Issuer and shall be, in the Servicer's
opinion, no less favorable to the Issuer in any material respect.
(c) Tax Matters. The Servicer shall prepare and file, on behalf of the
Seller, all tax returns, tax elections, financial statements and such annual or
other reports of the Issuer as are necessary for preparation of tax reports as
provided in Article V of the Trust Agreement, including without limitation forms
1099 and 1066. All tax returns will be signed by the Seller.
(d) Non-Ministerial Matters. With respect to matters that in the reasonable
judgment of the Servicer are non-ministerial, the Servicer shall not take any
action pursuant to this Article XII unless within a reasonable time before the
taking of such action, the Servicer shall have notified the Owner Trustee, Trust
Collateral Agent and the Insurer of the proposed action and the Owner Trustee
and, with respect to items (A), (B), (C) and (D) below, the Insurer shall not
have withheld consent or provided an alternative direction. For the purpose of
the preceding sentence, "non-ministerial matters" shall include:
(A) the amendment of or any supplement to the Indenture;
(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 5.4 of the Indenture, (3)
take any other action that the Issuer directs the Servicer not to
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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
Backup Servicer 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.
ARTICLE XIII
Miscellaneous Provisions
SECTION 13.1. Amendment.
(a) This Agreement may be amended from time to time by the parties hereto,
with the consent of the Trustee (which consent may not be unreasonably
withheld), with the prior written consent of the Insurer (so long as no Insurer
Default has occurred and is continuing) but without the consent of any of the
Noteholders, to cure any ambiguity, to correct or supplement any provisions in
this Agreement, to comply with any changes in the Code, or to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement or the
Insurance Agreement; provided, however, that such action shall not adversely
affect in any material respect the interests of any Noteholder or the Insurer.
This Agreement may also be amended from time to time by the parties hereto,
with the consent of the Insurer, the consent of the Trustee and the consent of
the Holders of Notes evidencing not less than a majority of the outstanding
principal amount of the Notes (which consent of such Holders of Notes given
pursuant to this Section 13.1 or pursuant to any other provision of this
Agreement shall be conclusive and binding on such Holder and on all future
Holders of such securities and of any Security issued upon the transfer thereof
or in exchange thereof or in lieu thereof whether or not notation of such
consent is made upon the security) for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Noteholders; provided, however,
that no such amendment shall (a) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on Receivables or
distributions that shall be required to be made for the benefit of the
Noteholders,
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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.
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 1998-1 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 1998-1 Spread
Account or uses of funds on deposit in the Series 1998-1 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
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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.
(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
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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:
(A) simultaneously with the execution and delivery of the Agreement
and, if required pursuant to Section 13.1, of each amendment, an Opinion of
Counsel stating that, in the opinion of such Counsel, in form and substance
reasonably satisfactory to the Insurer, either (A) all financing statements
and continuation statements have been executed and filed that are necessary
fully to preserve and protect the interest of the Trust and the Trustee in
the Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no such
action shall be necessary to preserve and protect such interest or (C) any
action which is necessary to preserve and protect such interest during the
following 12-month period; and
(B) 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
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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 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 Noteholder 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 Noteholders holding
not less than 66% of the principal amount of the outstanding Notes).
SECTION 13.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,
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appoint, consent to, approve of, or take any action under this Agreement, shall
be a right exercised by the Insurer in its sole and absolute discretion. The
Insurer may disclaim any of its rights and powers under this Agreement (but not
its duties and obligations under the Note Policy) upon delivery of a written
notice to the Owner Trustee. Nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 13.6. Serverability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 13.7. Separate Counterparts.This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 13.8. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 13.9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 13.10. Assignment to Trustee. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to 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
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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, Trustee, Trust
Collateral Agent and Backup Servicer
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII, VIII and X 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 Backup
Servicer 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
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Trustee in any way and shall not otherwise be deemed an agent of the Issuer or
the Owner Trustee.
SECTION 13.14. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 13.15. Insurer as Controlling Party. Each Noteholder by purchase of
the Notes held by it acknowledges that as partial consideration of the issuance
of the Note Policy, the Insurer shall have certain rights hereunder for so long
as no Insurer Default shall have occurred and be continuing. So long as an
Insurer Default has occurred and is continuing, any provision giving the Insurer
the right to direct, appoint or consent to, approve of, or take any action under
this Agreement shall be inoperative during the period of such Insurer Default
and such right shall instead vest in the Trust Collateral Agent acting at the
written direction of the Noteholders 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 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 1998-1 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 and Backup Servicer
By: ____________________________________
Name:
Title:
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SCHEDULE A
SCHEDULE OF RECEIVABLES
A-1
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SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Trust Collateral Agent on
behalf of the Noteholders and the Insurer as of the Closing Date with respect to
the Initial Receivables transferred to the Trust on the Closing Date and as of
each Subsequent Transfer Date with respect to the Subsequent Receivables
transferred to the Trust on such Subsequent Transfer Date (unless another date
or time period is otherwise specified or indicated in the particular
representation or warranty):
1. immediately prior to the Closing Date or the Subsequent Transfer Date,
as the case may be, the Seller had a valid and enforceable security interest in
the related Financed Vehicle, and such security interest had been duly perfected
and was prior to all other present and future liens and security interests
(except future tax liens and liens that, by statute, may be granted priority
over previously perfected security interests) that now exist or may hereafter
arise, and the Seller had the full right to assign such security interest to the
Trust Collateral Agent;
2. on and after the Closing Date or the Subsequent Transfer Date, as the
case may be, there shall exist under the Receivable a valid, subsisting and
enforceable first priority perfected security interest in the Financed Vehicle
securing such Receivable (other than, as to the priority of such security
interest, any statutory lien arising by operation of law after the Closing Date
or the Subsequent Transfer Date, as the case may be, which is prior to such
interest) and at such time as enforcement of such security interest is sought
there shall exist a valid, subsisting and enforceable first priority perfected
security interest in such Financed Vehicle in favor of the Trust Collateral
Agent (other than, as to the priority of such security interest, any statutory
lien arising by operation of law after the Closing Date or the Subsequent
Transfer Date, as the case may be, which is prior to such interest);
3. no Receivable has been sold, assigned or pledged to any other Person
other than an endorsement to the Servicer for purposes of servicing or any such
pledge has been released; immediately prior to the transfer and assignment
herein contemplated, the Seller has good and marketable title thereto free and
clear of any lien, encumbrance, equity, pledge, charge, claim or security
interest and is the sole owner thereof and has full right to transfer such
Receivable to the Trust Collateral Agent. No Dealer has a participation in, or
other right to receive, proceeds of any Receivable. None of NAFI, the Master
Trust, Funding Trust II nor the Seller has taken any action to convey any right
to any Person that would result in such Person having a right to payments
received under the related insurance policies, Dealer Agreements or Originator
Agreements or to payments due under such Receivable;
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
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each such Receivable by NAFI from a Dealer or Originator was not an extension of
financing to such Dealer or Originator;
5. no such Receivable is delinquent for more than thirty days in payment as
to any scheduled payment;
6. there is no lien against any related Financed Vehicle for delinquent
taxes;
7. there is no right of rescission, offset, defense or counterclaim to the
obligation of the related Obligor to pay the unpaid principal or interest due
under such Receivable; the operation of the terms of such Receivable or the
exercise of any right thereunder will not render such Receivable unenforceable
in whole or in part or subject to any right of rescission, offset, defense or
counterclaim, and no such right of rescission, offset, defense or counterclaim
has been asserted;
8. no Receivable is assumable by another Person in a manner which would
release the Obligor thereon from such Obligor's obligations to the Seller with
respect to such Receivable;
9. there are no prior liens or claims for work, labor or material affecting
any related Financed Vehicle which are or may become a lien prior to or equal
with the security interest granted by such Receivable;
10. each such Receivable, and the sale of the Financed Vehicle securing
such Receivable, where applicable, complied, at the time it was made and as of
the Closing Date or related Subsequent Transfer Date, as applicable, in all
material respects with applicable state and federal laws (and regulations
thereunder), including, without limitation, usury, disclosure and consumer
protection laws, equal credit opportunity, fair credit reporting,
truth-in-lending or other similar law, the Federal Trade Commission Act, and
applicable state laws regulating retail installment sales contracts and loans in
general and motor vehicle retail installment sales contracts and loans in
particular, and the transfer of such Receivable to the Trust will not violate
any such laws;
11. each such Receivable is a legal, valid and binding obligation of the
Obligor thereunder and is enforceable in accordance with its terms, except only
as such enforcement may be limited by laws affecting the enforcement of
creditors' rights generally whether enforcement is sought in a proceeding in
equity or at law, and all parties to such Receivable 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;
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13. at the time of origination of each such Receivable, the proceeds of
such Receivable were fully disbursed, there is no requirement for future
advances thereunder, and all fees and expenses in connection with the
origination of such Receivable have been paid;
14. there is no default, breach, violation or event of acceleration
existing under any such Receivable (except payment delinquencies permitted by
paragraph 5 above) and no event which, with the passage of time or with notice
or with both, would constitute a default, breach, violation or event of
acceleration under any such Receivable or would otherwise affect the value or
marketability of such contract; NAFI and the Seller have not waived any such
default, breach, violation or event of acceleration; and as of the applicable
Cut-off Date, the related Financed Vehicle has not been repossessed;
15. at the origination date of each such Receivable, the related Financed
Vehicle was covered by a comprehensive and collision insurance policy (a) in an
amount at least equal to the lesser of (i) the actual cash value of the related
Financed Vehicle or (ii) the unpaid balance owing of such Receivable, less the
related Unearned Finance Charge, (b) naming NAFI as a loss payee and (c)
insuring against loss and damage due to fire, theft, transportation, collision
and other risks generally covered by comprehensive and collision coverage; each
Receivable requires the Obligor to maintain physical loss and damage insurance,
naming NAFI as an additional insured party;
16. each such Receivable was acquired by NAFI from either a Dealer with
which it ordinarily does business or from an Originator; such Dealer or
Originator, as applicable, had full right to assign to NAFI such Receivable and
the security interest in the related Financed Vehicle (and the Dealer that
assigned any such Receivable to any such Originator had full right to assign to
such Originator such Receivable and the security interest in the related
Financed Vehicle) and the Dealer's or Originator's assignment thereof to NAFI is
legal, valid and binding (and any assignment by an Dealer to any Originator is
legal, valid and binding) and NAFI had full right to assign to the Seller such
Receivable and the respective security interest in the related Financed Vehicle
and NAFI's respective assignment thereof to the Seller is legal, valid and
binding;
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
Receivables 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;
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19. the collection practices used with respect to each such Receivable have
been in all material respects legal, proper, prudent and customary in the
automobile installment sales contract or installment loan servicing business;
20. there is only one original of each such Receivable, the Servicer or a
Sub-Servicer is currently in possession of the Receivable Documents for such
Receivable and there are no custodial agreements in effect adversely affecting
the rights of the Seller to make the deliveries required hereunder on the
Closing Date or the Subsequent Transfer Date, as the case may be;
21. as of the Cut-off Date or Subsequent Cut-off Date, as applicable, no
Obligor was the subject of a current bankruptcy proceeding;
22. with respect to each Due Period, the aggregate of the interest due on
all the Receivables in such Due Period from scheduled payments is in excess of
the sum of (i) the Servicing Fee due and any fees due to the Trust Collateral
Agent and the Insurer, each with respect to such Due Period and (ii) the amount
of interest payable on the Notes with respect to such Due Period, in each case
assuming that each scheduled payment is made on its Due Date;
23. the Receivables constitute "chattel paper" within the meaning of the
UCC as in effect in the applicable jurisdiction and all filings (including
without limitation, UCC filings) required to be made and all actions required to
be taken or performed by any Person in any jurisdiction to give the Trust
Collateral Agent a first priority perfected lien on, or ownership interest in,
the Receivables and the proceeds thereof and the remaining Trust Property have
been made, taken or performed;
24. the information regarding such Receivables set forth in the applicable
Receivables 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
Receivables 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
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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 19.19% and the weighted average remaining scheduled maturity on
the Initial Receivables was approximately 51.82 months and the percentage of the
aggregate outstanding balance of the Initial Receivables relating to the
financing of used Financed Vehicles was 77.38%. The final scheduled payment date
on the Initial Receivable with the latest maturity is December 15, 2002. Each
Receivable amortizes based on a Simple Interest Method or Actuarial Method; and
30. no Receivable provides for a prepayment penalty.
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EXHIBIT 5.10
FORM OF STATEMENT TO NOTEHOLDERS
1
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EXHIBIT 2.2A
OFFICER'S CERTIFICATE OF NATIONAL AUTO FINANCE COMPANY, INC.
The undersigned, a duly authorized officer of National Auto Finance
Company, Inc. (the "Company"), hereby certifies that:
1. Capitalized terms used but not defined herein have the meanings set
forth in the Sale and Servicing Agreement (the "Sale and Servicing Agreement"),
dated as of December [__], 1997, among National Financial Auto Funding Trust
(the "Seller"), the Company, as the Servicer, National Auto Finance 1998-1 Trust
and Harris Trust and Savings Bank, not in its individual capacity but solely as
Trust Collateral Agent and Backup Servicer. This certificate is being delivered
pursuant to Section 2.2(b)(ix)(A) of the Sale and Servicing Agreement.
2. The sale and transfer of the Subsequent Receivables by the Company to
the Seller on the date hereof pursuant to the Purchase and Contribution
Agreement and the related Conveyance (which Conveyance is dated as of the date
hereof) was made in good faith for legitimate business purposes and was not made
with intent to hinder, delay or defraud any Person to which the Company has
been, is or will become, on or after the date hereof, indebted.
3. The Company did not receive less than a reasonably equivalent value in
exchange for the sale of the Subsequent Receivables by the Company to the Seller
on the date hereof pursuant to the Purchase and Contribution Agreement and the
related Conveyance.
4. The Company is not insolvent on the date hereof and will not become
insolvent as a result of the sale of Subsequent Receivables by the Company to
the Seller on the date hereof pursuant to the Purchase and Contribution
Agreement and the related Conveyance.
5. The Company is not engaged in a business or transaction, and is not
about to engage in a business or transaction, for which any property remaining
with the Company after such business or transaction would be an unreasonably
small capital.
6. The Company has not incurred, and does not believe that it will incur,
debts that are beyond the Company's ability to pay as such debts mature.
7. No Servicer Termination Event has occurred and is continuing.
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be
duly executed this ____ day of ________, 199_.
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NATIONAL AUTO FINANCE COMPANY, INC.,
in its individual capacity and as Servicer,
By: ____________________________________
Name:
Title:
2
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EXHIBIT 2.2B
OFFICER'S CERTIFICATE OF NATIONAL FINANCIAL AUTO FUNDING TRUST
The undersigned, a duly authorized officer of National Financial Auto
Funding Trust (the "Seller"), hereby certifies that:
1. Capitalized terms used but not defined herein have the meanings set
forth in the Sale and Servicing Agreement (the "Sale and Servicing Agreement"),
dated as of December [__], 1997, among the Seller, National Auto Finance
Company, Inc. (the "Company"), as the Servicer, National Auto Finance 1998-1
Trust (the "1998-1 Trust") and Harris Trust and Savings Bank, not in its
individual capacity but solely as Trust Collateral Agent and Backup Servicer.
This certificate is being delivered pursuant to Section 2.2(b)(ix)(B) of the
Sale and Servicing Agreement.
2. The sale and transfer of the Subsequent Receivables by the Seller to the
1998-1 Trust on the date hereof pursuant to the Sale and Servicing Agreement and
the related Subsequent Transfer Agreement (which Subsequent Transfer Agreement
is dated as of the date hereof) was made in good faith for legitimate business
purposes and was not made with intent to hinder, delay or defraud any Person to
which the Funding Trust has been, is or will become, on or after the date
hereof, indebted.
3. The Funding Trust did not receive less than a reasonably equivalent
value in exchange for the sale of the Subsequent Receivables by the Funding
Trust to the 1998-1 Trust on the date hereof pursuant to the Sale and Servicing
Agreement and the related Subsequent Transfer Agreement.
4. The Funding Trust is not insolvent on the date hereof and will not
become insolvent as a result of the sale of Subsequent Receivables by the
Funding Trust to the 1998-1 Trust on the date hereof pursuant to the Sale and
Servicing Agreement and the related Subsequent Transfer Agreement..
5. The Funding Trust is not engaged in a business or transaction, and is
not about to engage in a business or transaction, for which any property
remaining with the Funding Trust after such business or transaction would be an
unreasonably small capital.
6. The Funding Trust has not incurred, and does not believe that it will
incur, debts that are beyond the Funding Trust's ability to pay as such debts
mature.
7. No Servicer Termination Event has occurred and is continuing.
IN WITNESS WHEREOF, the Funding Trust has caused this Officer's Certificate
to be duly executed this ____ day of ________, 199_.
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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:
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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 1998-1 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 and Backup Servicer
(the "Trust Collateral Agent").
W I T N E S S E T H:
WHEREAS pursuant to the Sale and Servicing Agreement, the Seller wishes to
convey the Subsequent Receivables to the Issuer; and
WHEREAS, the Issuer is willing to accept such conveyance subject to the
terms and conditions hereof.
NOW, THEREFORE, the Issuer, the Seller, the Servicer and the Trust
Collateral Agent hereby agree as follows:
1. Defined Terms. Capitalized terms used herein shall have the meanings
ascribed to them in the Sale and Servicing Agreement unless otherwise defined
herein.
"Subsequent Cut-off Date" shall mean, with respect to the Subsequent
Receivables conveyed hereby, _______________, 199_.
"Subsequent Transfer Date" shall mean. with respect to the Subsequent
Receivables conveyed hereby, _____________, 199_.
2. Receivables Schedule. Annexed hereto is a supplement to Schedule A to
the Sale and Servicing Agreement listing the Receivables that constitute the
Subsequent Receivables to be conveyed pursuant to this Agreement on the
Subsequent Transfer Date. Such Receivables Schedule is marked as Schedule 1 to
this Subsequent Transfer Agreement and is hereby incorporated in and made a part
of this Subsequent Transfer Agreement and the Sale and Servicing Agreement.
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 Trust Collateral Agent, in trust for
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exclusive use and benefit of all present and future Noteholders and the Insurer,
all right, title and interest of the Seller in and to the following, whether now
owned or hereafter acquired:
(a) the Subsequent Receivables and all moneys received thereon, on and
after the related Subsequent Cut-off Date (including amounts due on or
before the Subsequent Cut-off Date but received by NAFI, the Seller or the
Issuer on or after the Subsequent Cut-off Date);
(b) any proceeds and the right to receive proceeds with respect to the
Subsequent Receivables from claim and the right to receive proceeds on any
physical damage, credit life or disability insurance policies or other
policies covering Financed Vehicles or Obligors, including rebating of
insurance premiums relating to the Receivables, and any proceeds from the
liquidation of the Subsequent Receivables;
(c) all rights of the Seller against the Dealers pursuant to Dealer
Agreements or against Originators pursuant to Originator Agreements;
(d) the related Receivables Files and any and all other documents that
NAFI keeps on file in accordance with its customary procedures relating to
the Receivables, the Obligors or the Financed Vehicles;
(e) property (including the right to receive future Liquidation
Proceeds) that secures a Receivable and that has been acquired by or on
behalf of the Trust pursuant to liquidation of such Receivable;
(f) all funds on deposit from time to time in the Trust Accounts (less
all investments and proceeds thereof), and all rights of the Issuer
therein;
(g) all of the Seller's right, title and interest in its rights and
benefits, but none of its obligations or burdens, under each of the
Subsequent Purchase Agreements, including the delivery requirements,
representations and warranties and the cure and repurchase obligations of
NAFI under each of the Subsequent Purchase Agreements, on or after the
related Subsequent Cut-off Date; and
(h) the proceeds of any and all of the foregoing.
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
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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 Transaction Documents to which the Seller is a party.
(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
Transaction Documents to which the Seller is a party 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 Transaction Documents to which
the Seller is a party, 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 consummation of any of
the transactions
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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 Notes.
(h) Approvals. All approvals, authorizations, consents, order or other
actions of any person, corporation or other organization, or of any court,
governmental agency or body or official, required in connection with the
execution and delivery by the Seller of this Agreement and the consummation
of the transactions contemplated hereby have been or will be taken or
obtained on or prior to the Closing Date.
(i) No Consents. The Seller is not required to obtain the consent of
any other party or any consent, license, approval or authorization, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement which has not already been obtained.
(j) Chief Executive Office. The chief executive office of the Seller
is at One Park Place, 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 Receivables
Schedule.
5. Receivable File. The Seller does hereby deliver to the Custodian the
original motor vehicle retail installment sale contracts and Receivables Files
for each Receivable identified in the Receivables Schedule.
6. Conditions Precedent. The obligation of the Issuer to acquire the
Receivables hereunder is subject to the satisfaction, on or prior to the
Subsequent Transfer Date, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Seller in Section 4 of this Agreement and in Section
8.1 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
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representations and warranties set forth in Section 4 of this Agreement and
in Section 8.1 of the Sale and Servicing Agreement and (ii) the
satisfaction of the conditions set forth in this Section 6.
7. Ratification of Agreement. As supplemented by this Agreement, the Sale
and Servicing Agreement is in all respects ratified and confirmed and the Sale
and Servicing Agreement as so supplemented by this Agreement shall be read,
taken and construed as one and the same instrument.
8. Counterparts. This Agreement may be executed in two or more counterparts
(and by different parties in separate counterparts), each of which shall be an
original but all of which together shall constitute one and the same instrument.
9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
10. Third-Party Beneficiaries. This Agreement shall inure 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 10, 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.
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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 1998-1 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:
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:
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EXHIBIT B
FORM OF SERVICER'S CERTIFICATE
FINANCIAL GUARANTY
INSURANCE POLICY
Obligor: National Auto Finance 1998-1 Trust Policy No.: 50661-N
Obligations: $85,200,000 5.88% Automobile Receivables-Backed Notes
Date of Issuance: 1/20/98
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>
ENDORSEMENT NO. 1 TO FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY 350 Park Avenue
ASSURANCE INC. New York, New York 10022
OBLIGOR: NATIONAL AUTO FINANCE 1998-1 TRUST
OBLIGATIONS: $85,200,000 5.88% Automobile Receivables-Backed Notes
Policy No.: 50661-N
Date of Issuance: January 20, 1998
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 the City of 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 December 15, 1997, between
National Auto Finance 1998-1 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>
Policy No.: 50661-N Date of Issuance: January 20, 1998
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 December 15, 1997, among National Auto Finance 1998-1 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 Backup 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 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, (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
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Policy No.: 50661-N Date of Issuance: January 20, 1998
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 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
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Policy No.: 50661-N Date of Issuance: January 20, 1998
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 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.
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Policy No.: 50661-N Date of Issuance: January 20, 1998
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:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President - Surveillance
Re: National Auto Finance 1998-1 Trust, 5.88% 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
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Policy No.: 50661-N Date of Issuance: January 20, 1998
Exhibit A To Endorsement 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 1998-1 Trust
$85,200,000 5.88% 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. 50661-N dated January 20, 1998 (the "Policy") issued by Financial
Security in respect of the National Auto Finance 1998-1 Trust, 5.88% 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 amount] paid by Financial
A-1
<PAGE>
Policy No.: 50661-N Date of Issuance: January 20, 1998
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>
Policy No.: 50661-N Date of Issuance: January 20, 1998
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
================================================================================
PURCHASE AND CONTRIBUTION AGREEMENT
between
NATIONAL AUTO FINANCE COMPANY, INC.
and
NATIONAL FINANCIAL AUTO FUNDING TRUST
------------------------------
Dated as of December 15, 1997
====================================================================
<PAGE>
PURCHASE AND CONTRIBUTION AGREEMENT
PURCHASE AND CONTRIBUTION AGREEMENT, dated as of December 15, 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
SECTION 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 December 15, 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 1998-1 Trust (the "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").
SECTION 1.2. Other Definitions. When used in this Agreement, the following
words and phrases shall have the following meanings:
"Bankruptcy Event" means 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, reorganization, debt arrangement, dissolution or other similar law
now or hereafter in effect, or
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<PAGE>
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" means, with respect to a Receivable, the date in each Due
Period on which a scheduled payment on such Receivable is due.
"Conveyance" has the meaning given in Section 2.3(c).
"Cut-off Date" means, with respect to an Initial Receivable, the Initial
Cut-off Date, and with respect to any Subsequent Receivable, the applicable
Subsequent Cut-off Date.
"Individual Sold Balance" means, 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" means proceeds paid by any insurer pursuant to any
insurance policy covering a Financed Vehicle or the related Obligor.
"Liquidation Proceeds" means, 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" means the National Financial Auto Receivables Master Trust.
"Purchase Price" has the meaning given in Section 2.1(c).
"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 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 Receivables Schedule attached hereto as
Schedule 1 or a Receivables Schedule attached to a Subsequent Transfer
Agreement, as applicable.
"Receivable Assets" means 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 Receivables 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
Receivables
2
<PAGE>
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
Receivables; (iii) all rights against Dealers pursuant to Dealer Agreements or
against Originators pursuant to Originator Agreements; (iv) the related
Receivable 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" means, 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 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 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.
"Receivables Schedule" means 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" means, 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.
3
<PAGE>
ARTICLE II
PURCHASE SALE AND CONTRIBUTION
SECTION 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 December 15, 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 December 15, 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.
SECTION 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 Receivables 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 Subsequent Transfer Date and to protect National
Financial's interest
4
<PAGE>
in the Receivable Assets against all other Persons. NAFI shall thereafter file
any appropriate continuation statements in respect thereof.
SECTION 2.3. 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 Financial 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 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
5
<PAGE>
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.
SECTION 2.4. 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.
SECTION 2.5. 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.
SECTION 2.6. 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.
SECTION 2.7. 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.
SECTION 2.8. 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 forth in Section 4.1(b) or, if included in
the Trust Property, would result in a
6
<PAGE>
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.
SECTION 2.9. 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 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 Trust unless such Receivable has been paid in full or
repurchased by NAFI, National Financial or the Servicer.
(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.
7
<PAGE>
(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 Property, together with a reconciliation of such list to the
Receivables Schedules and to each of the Servicer's statements furnished before
such request indicating removal of Receivables from the Trust Property. The
Trust Collateral Agent shall hold any such list and Receivables 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
SECTION 3.1. National Financial's obligation to purchase Receivable Assets
hereunder on the Closing 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 the Trust 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
such Subsequent Transfer Date:
(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 such 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 2.3(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 2.3(c), as
applicable;
(iv) no Bankruptcy Event or Servicer Termination Event shall have
occurred and be continuing on and as of such Subsequent Transfer Date;
(v) as of such Subsequent Transfer Date, the Receivables then in the
Trust Property, 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
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<PAGE>
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
April 21, 2003; 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
SECTION 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 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; 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; the execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered pursuant
to this Agreement) by NAFI and the consummation of the transactions
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 to general principles of
equity, regardless of whether enforcement is sought in a proceeding in
equity or at law); and all requisite corporate action has been taken by
NAFI to make this Agreement valid and binding upon NAFI (subject as
aforesaid in the preceding clause);
(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 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;
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(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 Transaction 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 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):
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(i) the information regarding such Receivables set forth in the
applicable 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 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 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,
as the case may be, which is prior to such interest);
(iv) as of the Closing Date or such Subsequent Transfer Date, as the
case may be, no such Receivable has been sold, assigned or pledged to any
other Person other than an endorsement to the Servicer for purposes of
servicing or if any such Receivable has been pledged, 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 lien, 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
Receivable clear of any lien, encumbrance, equity, pledge, charge, claim,
security interest or rights of others; the purchase of each such Receivable
by NAFI from a Dealer or Originator was not an extension of financing to
such Dealer or Originator. No Dealer or Originator has a participation in,
or other right to receive, proceeds of any Receivable. None of NAFI,
Funding Trust II, the Master Trust, National Financial or the Originators
has taken any action to convey any right to any Person that would result in
such Person having a right to payments received under the related insurance
policies, Dealer Agreement or Originator Agreement or to payments due under
such Receivable;
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(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, no such Receivable is 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 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;
(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
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<PAGE>
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 Financed 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 (a) in an amount at least equal to the lesser of (1) and actual cash
value of the related Financed Vehicle or (2) the unpaid balance owing on
such Receivable, less the related Unearned Financing 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;
(xvi) each such Receivable was acquired by NAFI from either a Dealer
or an Originator with which it ordinarily does business; such Dealer or
Originator, as applicable, had full right to assign to NAFI such Receivable
and the security interest in the related Financed Vehicle (and the Dealer
that assigned any such Receivable to any such Originator had full right to
assign to such Originator such Receivable and the security interest in the
related Financed Vehicle) and the Dealer's or Originator's assignment
thereof to NAFI is legal, valid and binding (and any 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;
(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
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<PAGE>
Receivable) in substantially equal amounts to maturity (other than with
respect to those Receivables designated as balloon contracts on the related
Receivables 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
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 right of NAFI to make the deliveries required
hereunder on the Closing Date or such Subsequent Transfer Date, as the case
may be;
(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) the 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 be clearly and unambiguously marked
to show that the Receivables constitute part of the Trust Property and are
to be owned by the Trust in accordance with the terms of this Agreement;
(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
Receivables Schedule;
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(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 Receivable under this Agreement
or the Subsequent 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 19.19% and
the weighted average remaining scheduled maturity on the Initial
Receivables was approximately 51.82 months and the percentage of the
aggregate outstanding balance of the Initial Receivables relating to the
financing of used Financed Vehicles was 77.38%. The final scheduled payment
date on the Initial Receivable with the latest maturity is December 15,
2002. Each Receivable amortizes based on the Simple Interest Method or
Actuarial Method and no Receivable provides for a prepayment penalty.
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 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).
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<PAGE>
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
MISCELLANEOUS
SECTION 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 April 30,
1998.
SECTION 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
Chicago, Illinois 60606
Attention: Indenture Trust Division
Telecopy No.: (312) 461-3525
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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 1998-1 Trust,
5.88% Automobile Receivables-Backed
Notes
Telecopier No.: (212) 339-3518
(212) 339-3529
Confirmation: (212) 836-0100
SECTION 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.
SECTION 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.
SECTION 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).
SECTION 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.
SECTION 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, 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 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
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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.
SECTION 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.
SECTION 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.
SECTION 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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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:
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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 December 15, 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 Receivables Schedule. Originator does hereby deliver
National Financial herewith a Receivables Schedule containing a true and
complete list of each Subsequent Receivable being sold hereby as of the
Subsequent Transfer Date. Such Receivables 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 Receivables Schedule.
5. Acceptance and Acknowledgment. National Financial hereby acknowledges
its acceptance of all right, title and interest of Originator in, to and under
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the Receivables and the other Receivable Assets sold hereby. Originator further
acknowledges that, prior to or 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
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SALE AGREEMENT
between
NATIONAL FINANCIAL AUTO FUNDING TRUST II
and
NATIONAL FINANCIAL AUTO FUNDING TRUST
--------------
Dated as of December 15, 1997
- --------------------------------------------------------------------------------
<PAGE>
SALE AGREEMENT
SALE AGREEMENT, dated as of December 15, 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 December 15, 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 January 20, 1998.
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>
Related Security: 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 December 15, 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 December
15, 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 $63,979,266.49 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
2
<PAGE>
office or principal place of business without first giving 60 days prior written
notice to Funding Trust I and Financial 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 December 15, 1997 (the "Sale and Servicing Agreement"),
among National Auto Finance 1998-1 Trust, Funding Trust I, NAFI and Harris
Trust.
3
<PAGE>
ARTICLE III
MISCELLANEOUS
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) 984-4903
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) 984-4903
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 1998-1 Trust, 5.88%
Automobile Receivables-Backed Notes
Telecopier No: (212) 339-3518,
(212) 339-3529
Confirmation: (212) 826-0100
4
<PAGE>
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
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 1998-1 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
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<PAGE>
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.
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.
[Remainder of Page Intentionally Blank]
6
<PAGE>
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
EXECUTION COPY
================================================================================
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
NATIONAL FINANCIAL AUTO FUNDING TRUST
and
FIRST UNION CAPITAL MARKETS CORP.
Dated as of January 20, 1998
National Auto Finance 1998-1 Trust
5.88% Automobile Receivables-Backed Notes
$85,200,000
================================================================================
<PAGE>
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 ............................................ 6
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>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of January 20, 1998, 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.
"Indemnifying Party" means any party required to provide indemnification
pursuant to Section 4 hereof.
"Indenture" means the Indenture dated as of December 15, 1997, between
National Auto Finance 1998-1 Trust and Harris Trust
<PAGE>
and Savings Bank, as Indenture Trustee and Trust Collateral Agent.
"Insurance Agreement" means the Insurance and Indemnity Agreement, dated as
of January 20, 1998, 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 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
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<PAGE>
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) and Form S-3MEF (No. 333-44159) filed pursuant to Rule 462(b) of the
Securities Act 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 December 15, 1997, among the Trust, the Company, NAFI, as Servicer,
and Harris Trust and Savings Bank, not in its individual capacity but solely as
Backup Servicer and Trust Collateral Agent.
"Securities" means the National Auto Finance 1998-1 Trust $85,200,000 5.88%
Automobile Receivables-Backed Notes, described in the Offering Document and
issued pursuant to the Indenture and covered by the Policy.
"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 January 20, 1998, 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 1998-1 Trust, a Delaware business
trust.
"Underwriter Information" has the meaning provided in Section 3(c) hereof.
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<PAGE>
"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
January 15, 1998, 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 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,
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<PAGE>
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 September 30, 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 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
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<PAGE>
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 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.
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<PAGE>
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 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 of offer and sale of the Securities, is true and
correct in all material respects. In respect of the
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<PAGE>
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 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
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<PAGE>
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 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
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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
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.
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<PAGE>
(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:
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 1998-1 Trust,
5.88% 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.")
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If to the Company: National Financial Auto Funding Trust
c/o Chase Manhattan Bank Delaware
1201 Market Street
Wilmington, Delaware 19801
Attention: Corporate Trust Administration
Telecopy No.: (302) 984-4903
Confirmation: (302) 428-3375
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
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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 such counterparts shall constitute one and the same
instrument.
[Remainder of Page Intentionally Blank]
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<PAGE>
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>
EXHIBIT A
OPINION OF ASSISTANT GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. 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.
2. The Policy and the Financial Security Agreements have been duly
authorized, executed and delivered by Financial Security.
3. 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.
4. The Policy is exempt from registration under the Securities Act of 1933,
as amended (the "Act").
5. 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 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
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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 January 15, 1998, 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).
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